In an increasingly interconnected digital marketplace, threats to cyber security are ever present and mounting. The recent cyber-attack that struck Maersk Line, the world’s largest container shipping company, has exposed the vulnerabilities in the existing supply chain infrastructure.
Originally thought to be a form of ransomware, investigation by the EC-Council has shown the virus in question to be destructive viper malware designed to destroy data permanently. In customer advisory emails sent in the aftermath of the attack and obtained by FACTS, Maersk Line apologised for the attack, said they were “unable to serve new quotes or accept future bookings” and detailed a number of ports that were offline. Since then, Soren Skou, CEO at Maersk Line, has announced the company are set to foot a bill of between $200 to $300 million from business disruption due to the attack on 27 June.
One potential way to combat this mounting cyber security threat, whilst adding operational efficiencies, is blockchain technologies. While still in the nascent stages of its development, some commentators are foreseeing this technology to be like the Internet in terms of its potential dominance.
Editor Joe Wyatt spoke to Daniel Wilson, Commercial Manager for Global Trade Digitisation at Maersk Line, about the current supply chain, blockchain, and the company’s ambitions to bring digitisation to the container shipping industry.
Can you describe the existing supply chain infrastructure?
In a typical shipping supply chain, you’re going to be involving up to 30 different parties during that one transaction; the exporter or seller, the importer or buyer, the shipping line, trucking companies, train companies, terminals and ports, customs agents, banks, insurance firms, the list goes on. If you expand that to include significant events in a transaction, such as natural resource extraction or manufacturing, then there can be a million smaller transactions involved. The way the supply chain process is done physically is largely optimised nowadays. Where efficiency problems arise is the informational flow that underpins the entire operation. In that regard, the shipping industry is still living in the past – and when I say the past, I mean it is something out of the 1970s.
The numerous parties in a supply chain currently communicate in an inefficient, non-real time and largely paper-based process. Our idea for the future of the industry is to have a single digital hub where participants can store, interact and manage that data at any given time. Rather than having to wait for documents to be physically transported, all this information can be uploaded into one online repository of information that can be accessed and acted on at any one time. This is one of the reasons why Maersk is moving towards integrating a blockchain-enabled solution into our system.
Why is digitisation such an important issue for Maersk?
It is very important for our customers to get timely access to data. We think improving that information flow through digitisation will improve transparency. In March, we announced our partnership with IBM regarding building an industry-wide, cross-border supply chain solution on blockchain based on the Hyperledger Fabric.
Traditional, centrally-housed databases require a services provider, like SWIFT for international banking, to act as an intermediary and approve transactions, which takes time and money. Blockchain removes the need for that central authority. Blockchain requires fewer intermediaries, with every transaction made directly available from one party to another. But it goes one step further: it keeps a shared, immutable and auditable record of all transactions between engaging parties on a decentralised database. Everyone involved can then view and act on a definitive blockchain record, secure in the knowledge that all transactions have been processed successfully.
Why would this be advantageous?
This can be useful for international transactions – it might be commercially useful to not have an intermediary company approving transactions. If there is a shipment of goods between the US and China, both countries may prefer not having a Chinese or a US-based and controlled database that determines the transaction record. If parties from both countries have equal ownership of that data, there is greater transparency. Equally, as blockchain solutions are decentralised, there is no single copy of the data that can be held to ransom by criminals.
A peer-to-peer system run through a blockchain will be quicker than updating and transferring information than a conventional centralised database. A blockchain is a decentralised ledger that is updated in real time, whereas a centralised ledger carries out updates in batches, which often increases transaction processing time. So, there are productivity and efficiency gains to be made.
Do you have any concerns?
Blockchain has been around since 2009 and there has been no widespread implementation of it outside cryptocurrency transactions using Bitcoin or Ethereum. We don’t know how well it will scale. The cost per transaction at a large scale may be much higher than a centralised database. Part of our job now is to work out what the cost of business may be and how that will change.
The second concern is that change isn’t always for the best. Centralised ledgers are safe; the market knows them and we know they are effective. The potential benefits of blockchain are yet to be definitively proven.
What is the future of blockchain?
The position of Maersk and the industry in general is that blockchain is an exciting, emerging technology – but we are eager to hear the views of our customers and potential partners in this instance. If it turns out blockchain fails to fulfil its perceived potential, we still believe that there is a significant benefit that comes from digitisation. Even if we adopt a more conventional approach to building a digital solution without blockchain, but it works, we think that is better than the current situation which involves tonnes of paper and thousands of people processing information that could be done automatically. The real challenge for the shipping industry and the supply chain business isn’t bringing things into the 21st century, it’s bringing it into the late 20th century. That may sound unambitious but it is still a massive improvement.