Supply chain security
Australian firms are exploring the use and potential benefits of blockchain technology in transport
The state government-owned investment company Queensland Investment Corporation (QIC) expects “major changes” in the transport sector using new technologies such as blockchain. In its recent red paper, Blockchain is
Knocking at Infrastructure’s Door, QIC states that although autonomous vehicle (AV) technology that allows vehicles to operate fully without a human driver (Level 4 automation) is still 5-10 years away from commercialisation, and up to 20 years away from universal adoption in Australia, the next two decades will see signifi cant strides in new technologies such as blockchain.
Car manufacturers like Toyota, Ford, Honda, Hyundai and BMW are currently exploring the use of blockchain technology (BT).
“At the moment, blockchain technology is being used in the automotive industry primarily to help facilitate payments. But broader applications are on their way,” the QIC report notes.
“The benefits of widespread adoption could be immense: less risk-taking driving resulting in fewer injuries, deaths and economic loss.”
The same applies to freight transport, where benefits of this technology include improved efficiency, greater transparency, lower operational and maintenance costs, and potentially impenetrable networks that allow secure movement of goods across the various links in a chain.
CREATING NEW VALUE
QIC principal global infrastructure Tibor Schwartz says the investment fi rm considers blockchain to be one of the most disruptive technologies today, “potentially rating similar to what the internet and mobile telecommunications have done over the last 25 years”.
QIC notes that the transparency offered by BT opens up investment opportunities and reduces additional costs such as those paid to get transactions through. Blockchain
technology “fits into the distributed storage picture as a platform that enables both start-ups as well as large organisations embracing disruption to create new value”, QIC states.
“For start-ups, thanks to blockchain, access to capital would no longer be a hurdle limiting the ability of people to innovate. The blockchain makes possible an exchange of trust and thus removes the need for intermediaries who charge fees to facilitate, validate and execute transactions.”
Market research company Technavio’s analysis predicts BT market to grow steadily at a compound annual growth rate (CAGR) of around 56 per cent by 2021. An increasing number of Australian companies across various sectors are exploring the opportunities associated with BT, with many trails in the pipeline and some already underway.
A recent article in The Australian, titled ‘Port of Melbourne ponders driverless trucks, blockchain’, states that the Port of Melbourne is planning to implement BT to “enhance maintenance, improve security and enhance trade at the facility”. Details of this initiative will be covered in a separate feature in ATN in the coming months.
SUPPLY CHAIN SECURITY TRIAL
DP World Australia recently participated in a global blockchain technology trial that tested supply chain security efficiency across two continents.
The trial involved using a new system developed by Australian blockchain company TBSx3 to tackle the issue of counterfeit products.
The blockchain system was successfully used on a global road and sea supply chain stretch from South Australia’s Coonawarra region to the port of Qingdao in north- east China – a distance of more than 8000 kilometres. Other partners in the trial included global logistics services operator DB Schenker, international container shipping line Hamburg Sud and Australian wine producer IUS.
The TBSx3 architecture used “militarygrade” 44 alphanumeric character security cryptography as opposed to the common six- digit public cryptography.
The system provided three levels of logistics security, including: • Advanced proprietary systems developed
by major port and shipping operators • New TBSx3 security blanket into which
the proprietary systems were integrated • Unique and dynamic distributed blockchain ledger that was accessible to all participants in the chain, providing real-time information and updates during all custodial changeovers. Federal industry, innovation and science minister Arthur Sinodinos supports the use of BT across the transport and logistics
“Thanks to blockchain, access to capital would no longer be a hurdle limiting the ability of people to innovate”
sector and says the technology offers supply chain participants opportunity to substantiate the legitimacy of goods, which helps protects their own reputation.
“Blockchain is an exciting technology with great potential for Australian businesses and SMEs. It promises to reduce costs, create new market opportunities and transform industries,” Sinodinos says. “Importantly, the technology provides a new opportunity for Australian exporters and their customers to verify the authenticity of their products, protecting the reputations and brands of both Australia and Australian business.”
The Organisation for Economic Co- operation and Development (OECD) estimates the global trade in counterfeit products to be worth nearly half a trillion dollars annually. Meanwhile, international police agency Interpol estimates that every year fake pharmaceuticals kill over a million people across the globe.
TBSx3 chairman Anthony Bertini says the trial simultaneously tested the robustness of their BT system for every custodial link in the chain, and verification protocols for both bulk product and individual items for retailers and consumers at the end of the chain.
“In terms of the numbers of partners simultaneously involved and the challenges posed for resolution of integration with multiple existing proprietary security systems, we believe this can be developed to become a new security benchmark.
“A TBSx3 research team based in Sydney managed the multiple custodial changes with multiple partners in the 8100-kilometre journey: simultaneously, a TBSx3 directed research team in both Sydney and Beijing developed consumer protocols to verify genuine product at the end of the chain in supermarkets and AR (augmented reality) retail centres,” Bertini says.
Founder and director Mark Toohey says the TBSx3 system has been designed to be both “product and system agnostic so that it can have the widest possible application. We are confi dent that it can be integrated with any existing proprietary supply chain security system and used for any kind of product”.
“It has been purposely designed to reduce the supply chain installation and integration cost and ensure a ‘ whole of chain’ security solution, which can be continuously monitored from the beginning to the end of a supply chain and whenever and wherever necessary for an incremental cost, upgraded. TBSx3’s military grade cryptography, together with blockchain’s dynamic, constantly changing, live and (for the legitimate partners) transparent distributed ledger may dramatically change the security equation,” Toohey says.
Researchers at Princeton University in the US have estimated that the mathematical level of difficulty for anyone attempting to break into blockchain encryption is virtually impossible. To penetrate the system, a person would have to “break
“We operate under very safe security systems, but we always need to stay one step ahead”
through a constantly changing universe of numbers which is equal to each of the seven billion people now living on earth also being an individual planet of seven billion”.
Toohey says, when integrated with sophisticated proprietary security infrastructures, the BT system can reduce the increasing fake goods traffic worldwide.
“This fi rst trial which we have just successfully completed is a fi rst step in our determination to build consortia and use this cutting edge technology to help battle and defeat the huge and evil trade in deadly fake medicine that could, if not stopped, kill 10 million people over the next 10 years.”
DB Schenker Australia and New Zealand CEO Ron Koehler says the security of supply chain is not just a T& L concern. The implications of freight security affect businesses, consumers and communities alike.
Meanwhile, DP World Australia MD and CEO Paul Scurrah says the trial is a key step in testing how the technology can strengthen the security of cargo.
“We operate under very safe security systems, but we always need to stay one step ahead. We are keen to explore how we can avoid the trench warfare of centralised data systems with massive hacker attacks and equally massive static defences, which has characterised so much of online digitised security – up to now.
“DP World Australia was the fi rst global port operator to sign up to the US Customs Trade Partnership Against Terrorism (C-TPAT) and the fi rst to meet international ISDO 28000 security standards.
“We are committed to exploring how blockchain technology can be integrated with our deeply layered security infrastructure: the challenge and opportunity is for complete transparency – to know at any time what is in each container, palette, carton and box – to virtually the last grain of matter.”
DISRUPTION OR NEW POSSIBILITIES?
QIC head of global infrastructure Ross Israel says BT has the potential to both disrupt and create more possibilities for the future. Although the applications of blockchain within the infrastructure industry are largely unexplored, Israel says this technology has the potential to transform global infrastructure. Given industry support and regulatory backing, it can help boost the effi ciency and revenue generation of transport-related payments.
“The opportunity is to make things more efficient, to have more seamless passage between public and private transportation, to bring into play assets and that previously were private which would actually be able to be paid for by more than one user is certainly a great productivity gain in transport,” he says.
“The risk of course is that it alienates existing asset owners who work against the facilitation of that decentralised model and actually seek to centralise payment for the benefit of getting a higher return. Therefore there was going to be a significant element of regulatory guidance that is going to be required to facilitate blockchain but equally we can see applications which will slowly, as the internet did, penetrate slowly but surely into the way we do things.”
Below: DP World Australia participated in a successful global blockchain sea and road supply chain trial that spanned from South Australia to north-east China
Above: DP World Australia MD and CEO Paul Scurrah says DP World is keen to explore technologies that help avoid security breaches and massive hacker attacks
Opposite: Participants of the TBSx3 trial believe that blockchain technology can successfully tackle the issue of supply chain security