Air industry eyes £300m savings through blockchain for cargo efficiency

The air industry’s continued investigation into how blockchain can improve efficiency has unearthed more than £300m of potential savings by using the technology to track and record cargo as it changes hands on its journey from producer to customer.

A collaboration of air transport companies, known as the Global Blockchain Alliance, spearheaded by industry-owned IT supplier SITA, is currently looking at various applications for blockchain in the sector. The alliance was formed to initially investigate the use of blockchain to manage the logistics associated with aircraft parts.

The latest idea to digitally track cargo containers stems from work between air logistics trade association ULD Care and SITA. Unit load devices (ULDs) are pallets or containers that carry cargo on aircraft. About 800 million of them are used by airlines across the world, but current tracking systems are only partially digitised. 

The plan is to use blockchain to track these ULDs and record which organisation has taken custody of them through their entire journey. The current digital platform used by airlines has limits to visibility because it does not enable third parties such as handling companies access, but this will change on the blockchain platform through the use of application programming interfaces (APIs).

Data will be input to a blockchain-based platform at different points on the cargo’s journey. This will give all trusted stakeholders real-time visibility of where it is. The plan will reduce costs and manual processes. The platform will be able to identify where damage or loss occurred, which will reduce the time and cost associated with disputes between different companies in the logistics chain.

Air cargo represents only 1% of all global trade in terms of volume, but accounts for 35% of the total trade value and the inefficiency is significant, according to Bob Rogers, vice-president at ULD Care, who said cargo takes longer because it is slowed down by manual back-office processes.  

“A container traveling from Shanghai to Long Beach could take up to 30 days to finish its journey, but the true travel time on sea or road is only around 15 days, with the remaining time spent on back-office and paperwork,” he said. “Blockchain could revolutionise that process.”

SITA said in a statement: “For any given shipment, there can be up to 12 custodian companies monitoring and tracking the cargo, with many relying on paper documents, making the process cumbersome and undermined by trust and transparency issues. Blockchain presents a near-perfect solution to address these industry pain points with huge time and cost-saving potential.”

Matthys Serfontein, president of air travel solutions at SITA, said: “Beyond cargo and across the air transport industry, we see huge potential for blockchain to address common challenges. The biggest obstacles standing in the way of a seamless passenger journey and truly efficient air travel are the siloed processes across the many stakeholders, including airlines, airports, ground handlers and control authorities. They act as significant speed bumps at every step of the way.”

Although blockchain is best known in the financial services sector for its role in enabling bitcoin to become a reality, the distributed ledger technology is also being used to improve logistics in multiple sectors. It can track and trace the chain of custody between different parts of a supply chain, and because everyone in the supply chain can view and trust the transactions posted, blockchain can reduce the time required for reconciliation and enable faster processes.

For example, IBM and Danish shipping giant Maersk are using blockchain to digitise transactions in the global shipping industry, which is a huge market, with about 90% of the world’s trade carried by sea.

They have applied the technology to enable transparent and real-time exchange of supply chain events and documents. Each participant in the trade can view the progress of goods through the supply chain – including the status of customs documents, bills and other data – but no one can modify or delete records without the consensus of others in the network.

And in 2018, DHL and Accenture completed a proof of concept for blockchain’s use in the pharmaceutical supplies sector.

The project saw the companies apply the technology to track pharmaceuticals from their manufacture through to their prescription to patients. This is important because, according to Interpol, about one million people die each year because of counterfeit medication, which makes up an estimated 30% of pharmaceutical products sold in emerging markets.