Proving the Business Case for the Internet of Things

DB Schenker tests blockchain on Australian wine supply

Steve Rogerson
June 20, 2017



German logistics company DB Schenker has partnered with port operator DP World Australia and container shipping line Hamburg Sud to test blockchain technology in the wine supply chain.
 
Working with Australian wine producer IUS, which exports seven product lines into the rapidly growing Chinese wine market, one of the largest and most comprehensive trials of blockchain technology for global supply chains has ended with an Australian developed blockchain security architecture called TBSx3 potentially raising global supply chain security to military grade as a standard feature.
 
TBSx3 uses a military-grade 44 alphanumeric character security cryptography, compared with the six digit public cryptography which up to now has been commonly used.
 
The architecture provides three levels of supply chain security. First are sophisticated proprietary systems developed by major port and shipping operators. Second is the TBSx3 security envelope into which the proprietary systems can be integrated. And thirdly the unique and dynamic distributed blockchain ledger is transparent at any time to all partners in the chain and continuously provides live information, particularly during the many custodial changeovers, before the product is finally delivered to the consumer.
 
The TBSx3 benchmark was successfully used on an 8100 km global road and sea supply chain stretching from the wine growing Coonawarra region of rural South Australia to the port of Qingdao in north-eastern China.
 
KPMG advised TBSx3 on the trial and verified the custodial handovers for the integrity of the product on the 8100km land and sea journey. Furthermore, KPMG simulated the customer at the end of the trial by receiving, validating the product and checking if the system could potentially detect duplicates.
 
Australia’s minister for industry, innovation and science, Arthur Sinodinos, said: “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. 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 completion of the trial between Australia and China is the first of a planned series with multiple partners to test the robustness of TBSx3 blockchain technology for every custodial link in global supply chains and also verification protocols for 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,” said TBSx3’s chairman, Anthony Bertini. “A TBSx3 research team based in Sydney managed the multiple custodial changes with multiple partners in the 8100km 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.”
 
Verification at the retail end following constant tracking from the production source of the supply chain is critical to brand and product provenance.
 
“Using TBSx3 we can provide our customers with 100 per cent guarantee of supply from the vine to the glass,” said Sam Brand, founder and vintner of IUS Wines.  “It is a great honour to be involved with this trial and development to give our Chinese customers the assurance of integrity, and build trust.”
 
TBSx3 has been designed to be both product and system agnostic so it can have the widest possible application.
 
“We are confident it can be integrated with any existing proprietary supply chain security system and used for any kind of product,” said TBSx3 founder and director Mark Toohey. “It has been purposely designed to reduce the supply chain installation and integration cost and ensure whole-of-chain security that can be continuously monitored from the beginning to the end of a supply chain and whenever and wherever necessary.”
 
He said the TBSx3’s military grade cryptography together with blockchain’s dynamic, constantly changing, live and, for the legitimate partners, transparent distributed ledger could dramatically change the security equation.
 
The mathematical level of difficulty for anyone attempting to break into blockchain encryption has been estimated by researchers at Princeton University as two to the power of 67.
 
“This means that anyone must break 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,” said Toohey. “The TBSx3 blockchain security, integrated with sophisticated proprietary security infrastructures, holds the promise to significantly reduce the immense and growing traffic worldwide in counterfeit and often highly dangerous food products and fake medicines.”
 
The OECD has estimated that the global trade in fake goods is now worth nearly half a trillion dollars a year: the international police agency Interpol has estimated that fake pharmaceuticals kill more than a million people each year.
 
Of the one million people each year who die from malaria – one of the three great global killer diseases with HIV Aids and TB – the World Health Organisation estimates that 200,000 die because of fake anti-malarial drugs. Malaria kills one child every 30 seconds.
 
“This ruthless, evil, cascade of fake drugs organised on an industrial and global scale, to maim and kill can only be described in one word – pharmacidethe use of drugs to murder for profit the innocent,” said Toohey. “A bits and pieces security mosaic is no longer enough. A whole-of-chain global supply chain security environment that has a military precision and force and that can constantly monitor product movements anywhere at any time is an absolute necessity. This is particularly true as in the globalised world economy more than half the active ingredients in life saving drugs are coming from countries other than where they are sold.”
 
This trial is intended as a first step to build consortia and use this technology to help battle and defeat the huge trade in fake medicine that could, if not stopped, kill ten million people over the next ten years.
 
“In a globalised world, the safety and security of supply chains is in a very real sense a matter of human rights,” said Ron Koehler CEO of DB Schenker in Australia and New Zealand. “The medicines you buy, the food you eat, the parts that are used for your cars and the planes you fly in, should be made to heal to nourish and to work. Supply chain security affects everyone: consumers, companies, communities.”
 
Blockchain technology can enhances the security equation for ports that now because of their size and complexity are the industrial world’s city gates of continents.
 
“We operate under very safe security systems, but we always need to stay one step ahead,” said Paul Scurrah, DP World Australia’s chief executive officer. “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.”
 
He said the TBSx3 trial was an important step in testing how new technology could strengthen the security of cargo and that he understood the scale and intricacy of the security challenge.
 
“DP World Australia was the first global port operator to sign up to the US Customs Trade Partnership Against Terrorism (C-TPat) and the first to meet international ISDO 28000 security standards,” he said. “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. Security for DP World Australia is not an option, it is a part of the contract with every customer.”
 
Laszlo Peter, director at KPMG Australia, said the recently completed TBSx3 trial was “an important step” in developing consortia that could track product or assets and protect provenance through every part of a supply chain from factory or farm gate, across continents, by land, sea and air, all the way to the end customer.
 
“Establishing a strong and meaningful governance for partnerships of this kind is crucial for a successful cross industry collaboration,” he said.
 
He described the global supply chain network as a constantly moving leviathan of separate but interlocking parts including 50,000 ships registered in more than 150 nations, staffed by more than a million merchant seamen and nearly 2000 freighter aircraft, tens of millions of lorries and railroads sprawling across millions of kilometres of track on every continent on earth.
 
“The immense, immersive and irrepressible force of global trade and global supply chains is unprecedented in human history,” he said. “Growth in global trade has been three to five times greater than population growth since 1950, the total value of global merchandise trade has increased from $US61.8bn in 1950 to $18,827bn in 2014 and the technological revolution of containerisation has boosted international trade by more than all the trade agreements made in the past 50 years. What we need at the heart of this massive, always moving and constantly growing mechanism is transparent, dynamic, governance.”
 
He said the development of consortia such as TBSx3 and the accelerating investment of human and commercial capital globally in the continuous refinement of blockchain technology particularly smart self-executing contracts could be the beginning of a new age of integrity for international trade.
 
“Supply chains in the future may in large part be legally governed by automated, blockchain enabled networks of machined codes built from the best of commercial practice and human behaviour, which can not only verify each genuine product in a supply chain anywhere, at any time, but also hold each human actor in a supply chain to account for his or her actions, anywhere, anytime,” he said.
 
DP World Australia is Australia’s integral port supply chain partner and part of the DP World network of 70 international container terminals. Its team of 2000 people operating marine ports in Melbourne, Sydney, Brisbane and Fremantle aim to cultivate long-standing relationships with governments, shipping lines, importers and exporters, communities, and many other constituents of the global supply chain.
 
Founded by Sydney based Toohey, chairman of Adroit Lawyers, a general counsel for publicly listed media and technology companies, TBSx3 has research teams in Sydney and Beijing working with global partners, which represent each part of a supply chain. The researchers are developing a blockchain enabled military grade automated security architecture that aims to reduce significantly the time, cost and documentation for custodial handovers from the beginning to end of a chain and validate the integrity of product at any custodial point.