A recent U.S. Congressional Hearing and a feature article in The Economist shed new light on the woeful inefficiencies of global supply chains and the potential that blockchain offersIn his testimony before a U.S. Congressional committee last week, Michael White, head of global trade digitalization at Maersk — the global shipping giant — summed up the collective headaches that supply chain entities around the world grapple with on a daily basis.“Everyone agrees that there must be a better way,” he explained to the House of Representatives Committee on Science and Technology during a hearing exploring the use of blockchain technology for supply chains and combating counterfeit goods.Sweetbridge couldn’t agree more with that sentiment, and that notion is the impetus behind our CEO Scott Nelson’s vision for the company.Global Problem by NatureWhile highlighting the unique aspects of blockchain that make the technology appropriately-suited to the supply chain use case, such as the ability to produce immutable transaction records that facilitate better tracking of critical information and greater trust among counterparties, the hearing also highlighted many of the underlying problems and inefficiencies in supply chains.These networks currently comprise two-thirds of the world economy and employ the majority of the world’s population. As such, the productivity gains and quality of life increases that could be unleashed should these problems be resolved are potentially quite large.via Wikimedia CommonsAs the world economy becomes more globalized, cross-border trade and supply chains are becoming more prominent. The Economist noted in a recent article that between 1985 and 2007, global container trade grew at a rate of two times that of global gross domestic product. After a slow down following the 2008 financial crisis, container trade has grown by 3.7 percent per year over the past five years.Further, while cargo ships of the 1990s could transport as many as 5,000 shipping containers on a single voyage, contemporary freighters can carry as many as 20,000 containers.These supply chain networks involve countless intermediaries — from importers, exporters and freight forwarders to customs brokers, governments and carriers — all of whom collect different pieces of data and then broadcast that data to counterparties using outdated and obsolete methods. This lack of synchrony is exacerbated by the rapidly growing trade volumes.“[T]hough the flows and the pipes have got bigger, the principles of the industry’s plumbing have changed little since they took their modern form in the 1950s and 1960s,” The Economist wrote.These breakdowns in data flows are an enormous drain on efficiency, Maersk’s White explained in his testimony to Congress, “but through a collective, complexity driven inertia, supply chain participants persist in their outdated practices.”He added that the supply chain industry has seen no new fundamental innovation since the advent of the shipping container in the 1950s, and added that the industry still functions in essentially the same manner as it did then — complete with manual paper-based processes, transactions being made via fax machine, etc.The Economist concurred with that assessment:“The industry’s backwardness can be seen in its thrall to paperwork … half of air cargo still travels with paper “bills of lading” rather than e-tickets. In the world of containerised shipping things are even worse: freight forwarders deal with shipping firms, airlines and hauliers mainly by fax.”Hidden CostsWhile hidden from most consumers and businesses, these inefficiencies constitute major embedded costs to end-purchasers.“Administrative costs can sometimes exceed the end-to-end transport costs for a given container, and overall efficiencies are estimated at 15% or higher,” White noted, adding that the World Economic Forum reckons that reducing these supply chain barriers could increase global trade by as much as 15%.“The cost of all this is enormous. Removing administrative blockages and outdated practices would, by some accounts, do more to boost international trade than eliminating tariffs,” The Economist argued, citing a United Nations estimate that simply putting trade-related paperwork online in the Asia-Pacific region could boost exports by $257 billion per year.Indeed, even in the age of automation, time spent on paperwork, trying to track shipments where paperwork arrives separately and accounting for late or inaccurate deliveries constitutes a significant administrative burden.“Given the complexities of the modern supply chain, multinational corporations have invested large amounts of money in enterprise resource planning (ERP) and supply chain management software yet only have limited visibility and insight into where all their products are at any given moment,” said Chris Rubio, vice president global customs brokerage staff at UPS, during the hearing.Underutilization of shipping resources, partly a result of a lack of information-sharing, also comprises another hidden cost. The Economist notes that American cargo ships travel empty 25 percent of the time — with the total wasted capacity equivalent to 200,000 ships traveling 1,000 kilometers every day.Why the Holdup?Why is the supply chain industry so stuck in its ways? Because as flawed as these procedures might be, they can still manage to deliver a shipping container from Point A to Point B, albeit in a cumbersome and costly manner.“[N]o single participant is able to effect change because of an overarching desire to stick with what is known to work (if not very well) over an experiment that could fail with disastrous and cascading consequences,” White explained, offering detail into Maersk’s partnership with IBM to create an ecosystem for this activity.While it will take a lot of labor and coordination, blockchain technology is a “critical ingredient” to any solution, he continued, in that at the end of any given trip, the blockchain will provide one verified version of a particular’s journey and any attempted fraud will be snuffed out by the records’ immutable nature.“The result: a previously unattainable information backbone of the global supply chain encompassing shipping milestones, documents in structured and unstructured form, customs filings, internet of things data and much more,” White concluded:“With access to that information, and the ability to utilize blockchain to securely and confidently collaborate, the industry is finally poised to realize the enormous potential offered by true supply chain digitization.”About SweetbridgeSweetbridge is a new economy built for commerce that enhances the world’s current economies. Sweetbridge and its alliance partners offer a unique set of blockchain protocols, applications and crypto-economics to create an economy of opportunity for all participants. The goal of Sweetbridge is to transform brittle, industrial-era commerce through decentralized industry ecosystems that create a faster, fairer value exchange, unleash working capital, better utilize resources, and optimize talent for the benefit of all participants. For more information, follow Sweetbridge on Twitter at @sweetbridgeinc or visit https://sweetbridge.com.U.S. Congress, The Economist Highlight Need for Supply Chain Transformation was originally published in Sweetbridge on Medium, where people are continuing the conversation by highlighting and responding to this story.