Blockchain in transport and logistics. VGM or how they do it in Kuehne + Nagel.

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Blockchain in transport and logistics. VGM or how they do it in Kuehne + Nagel.

Blockchain technology – a chain of blocks – is used to store and transmit information about transactions on the Internet, which are arranged in the form of successive blocks of data. Blockchain can be used to handle a variety of trade transactions, and all these transactions can take place outside a system that has been in operation for years, directly between the parties. This speeds up and automates the flow of documents. They know about it in Kuehne + Nagel, for example.

Martin Kolbe, IT Director at Kuehne + Nagel International AG, emphasizes that the list of promises related to the use of blockchain technology in the logistics industry is long, but its practical use is rare.

Kuehne + Nagel handles hundreds of thousands of transactions per month with blockchain, and this technology is used by users of the already known VGM (Verified Gross Mass) portal. All information entered through the portal is stored in a chain, which allows the use of internal blockchain interfaces to exchange data. Therefore, there is no need for additional communication channels. Everything is done in accordance with the principles of confidentiality and data privacy.

Digital accounting book immune to manipulation

Blockchain can change the functioning of companies, especially those where transparency of the supply chain is difficult to achieve (when the supply chain is very complex and such situations occur more and more often, it can be troublesome for suppliers, subcontractors and customers to obtain a full picture of their transactions). Therefore, the end user often has a problem with tracking the route taken by particular components of the final product. And this, with increasing competition and the technical advancement of products, often becomes necessary, if only because of the need to optimize delivery schedules or reduce costs.

Blockchain is based on a peer-to-peer network without central computers, management and transaction verification systems.

It is a kind of a collective accounting book of transactions, but in a digital form, scattered throughout the whole network. Any computer on the network can participate in the transmission and authentication of individual transactions. This transaction book is, on the one hand, open to all and, on the other hand, fully secured against unauthorized access (by means of cryptographic tools).

Specialists ensure that the chain of blocks acting as the accounting book of a transaction with the current technology and computing power of computers cannot be counterfeited, and the blockchain transactions recorded in the chain of blocks are irreversible. If someone tried to change one block, it would mean changing the whole chain following it.

In the event that someone tries to cheat, alter or enter an unauthorized transaction, blockchain nodes in the process of verification and reconciliation will discover that one copy of the book contains a transaction that is inconsistent with the network records and will refuse to include it in the chain of blocks. The data, transactions and their sequence are therefore immune to counterfeiting and manipulation of any kind.

In addition to the fact that transactions are only available under user access rights, their entire history, from the beginning of blockchain to the present, can be reviewed and verified.

VGM confirms the correct weight of containers

The first version of the now well known Verified Gross Mass portal was made available three years ago to enable shippers to conveniently complete the VGM declarations required for maritime shipments (requirement of the International Convention for the Safety of Life at Sea – SOLAS). The shipper must provide the carrier with a verified gross mass of the container (VGM) containing the weight of goods, all loading and stowage materials and the tare weight of the container, signed (may be an electronic signature) by a person authorized to give VGM by the shipper. This information must be provided to the carrier before the container is lodged in port. Two methods of weighing containers are permitted. The first one consists in weighing the whole loaded container by the shipper or on behalf of the shipper by a third party. The second method is that the shipper or someone on his behalf weighs the goods together with the packaging, including the weight of pallets, stowage and securing materials used to pack the container, adding the tare weight of the container and thus obtaining the gross weight of the container.

VGM was introduced for safety reasons to ensure that shippers give the exact and correct weight of containers to the carriers. There have been problems, to the detriment of people and property, caused by incorrect weights declared for containers.

Blockchain guarantees a secure exchange of information

The consignor is responsible for the verification of the cargo. For the purposes of these regulations, it is him who has been defined as the entity indicated in the bill of lading or other maritime transport document or on behalf of whom the contract of carriage with the maritime carrier was concluded. He is responsible for handing over VGM to the carrier and the terminal operator.

NVOCC (Non-Vessel Operating Common Carrier or virtual operator such as Kuehne + Nagel) is the shipper to the maritime carrier (VOCC), so it is responsible for handing over the VGM to the operator based on the VGM received from the shipper. The solution has recently been enriched with new functions, increasing the convenience of forwarders’ actions (including the degree of transparency of VGM statuses of all customer shipments and the history of stored information). Nowadays, the use of blockchain technology enables the exchange of data between different partners.

The VGM Portal, jointly designed by shipping experts and our IT team, allows us to gain practical experience in the use of blockchain technology in many transactions in an internal production environment. The technology is beneficial to our customers by providing a fully secure solution for exchanging information with third parties, with increased efficiency and greater transparency,” explains Martin Kolbe.

He points out that Kuehne + Nagel is involved in many blockchain projects with customers, suppliers and governmental bodies that address the requirements of the logistics industry. But the full potential of blockchain technology can only be used in cooperation with business partners.

Photo: Kuehne + Nagel

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