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CS 783
CS 783 Term Project
Blockchain SCM – Maersk
Boston University
James Davis
2
Term Project
Introduction to Maersk
Financials
The Problem
Business Objectives
Technical Objectives
Operating Model
Maturity
Past
Present
Future
Blockchain Technology for SCM
Vendors
Core Business process
Development Environment
The Terminal Business
How Hyper Ledger Fabric Works
Proposed EA
Core EA diagram
Core Shared information and services
Conclusion
Bibliography
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Term Project
Introduction to Maersk
A.P. Moller–Maersk Group, also known as Maersk, is a Danish business conglomerate
that has been around since 1904 that controls nearly 15% of the market share of the global
supply chain with a market capitalization of nearly $45 Billion with activities in the transport,
logistics and energy sectors. Maersk has 374 offices in 130 nations and is Maersk line is the
worlds’ largest shipping container company with over 88,000 people in its payroll. It has an
armada of over 600 large container vessels all over the planet and has been the predominant
force in the global supply chain for over twenty years. Along with its transportation business
Maersk also maintains several international ports called APM terminals, is in the energy sector
by licensing oil rigs, and has recently been in the business of selling its used containers
considered End of Life or “EOL”. An important pre-requisite to understanding before we dive
into improvements on the global supply chain is to understand that Maersk takes part in what is
called “Carrier Haulage” which is when the shipping company itself takes care of preliminary
and subsequent transport of a container. This means that Maersk has its hands in the supply
chain from end to end. By partaking in carrier haulage Maersk is able work with their customers
around the world to optimize their supply chains, maximize their distribution networks and most
of all help their clients realize their business potential. Maersk is devoted to creating simple and
reliable solutions for its partners, continuously lifting industry standards and enabling global
trade in the most sustainable manner possible.
2017 Financials
Revenue: $30.9 Billion (14.9% increase from 2016)
Profit/ Loss: $356 Million profit
EBITDA: $3.5 Billion
Cashflow From Operations: $2.5 Billion
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Term Project
The Problem
The global supply chain is broken. Regulations, shipping distances, and cross-currency
issues make logistics an inherently difficult and complex aspect of business for companies
interacting with the global supply chain. The UN also plays a significant part in the design of the
global supply chain and how regulations are implemented. These policies have huge impacts on
the operation and management of global supply chains and one of their key focuses is on anticorruption and transparency. Across the world supply chains are bogged down by a plethora of
paperwork due to a glut of middlemen which hamstring this ideal of transparency. Because of the
fact that many industries are getting their raw materials from the developing world many supply
chains rely too heavily on paper documentation for validation and regulatory compliance.
Because of this disorganized process many products either end up lost or delayed which causes
perishable goods to lie in wait to spoil. This broken process can end up costing a business as
much as a fifth of the total expense of physical transportation. (Robert Hackett) In most cases
these businesses are operating with very tight margins so losing this amount of money on
logistics alone is devastating. According to a 2013 study by the world economic forum reducing
the friction around information sharing and border administration when it comes to international
trade “could increase GDP by nearly 5% and trade by 15%”.
Maersk Objectives
“The basic principle is that people can trust us.” – Mærsk Mc-Kinney Møller (1913–2012)
The values that a company espouses set the culture from the top down. Maersk has laid out
five core principles for its employees and partners. According to the Maersk website Maersk
aims for:
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Term Project

Constant care which is a value to take care of the problems of today while preparing for
the ones of tomorrow.

Humbleness which aims to not only not underestimate the competition but also to listen,
learn, and share ideas freely and openly.

Uprightness where the outside world sees the company as fair and trustworthy.

Employee work life balance

Maersk is a name that should be upheld in reverence as something the outside world not
only recognizes but that they see it in a positive light.
If we look at the overall basic principles of Maersk there is a common theme. That theme is
that if you do business with Maersk that there will be an open, honest, and professional setting
that you can rely on and that if this in infringed upon they will do everything in their power to
take corrective action. I see the exploration of blockchain technology as a way that Maersk is
expanding upon these core principles and doing everything in its power to ensure global trade is
more efficient, transparent and secure.
Technological objectives
The technological goals of the company are to make a more transparent supply chain that
clients can interact with to ensure that they are attaining peace of mind for all their shipments.
The aspects of this technology objective include the following:
•
Easily manage shipments: From looking up rates and making bookings to submitting
documents and tracking cargo. Maersk will implement a web application that interfaces to
IBM’s Blockchain as a Service that will provide a one stop shop allowing the client to
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Term Project
instantly check schedules, get instant booking confirmation, track cargo, and manage
payments.
o
An integrated Blockchain solution which includes highly intelligent wireless tracking
devices. These real-time IoT tracking devices, called TREC (Tamper-Resistant
Embedded Controllers), are fitted to shipping containers. The devices automatically
collect information on each container, including physical location based on GPS,
temperature/ humidity, and sensory readings to detect intrusion. The blockchain
network combines data from the TREC devices with smart contracts also referred to
as chain code. This network eliminates manual processes, and enables accredited
supply chain participants to access relevant data. The information gathered can be
connected to decentralized databases which can be accessed for audit trail needs.
o
Below is a snapshot of what the web interface looks like to the client. In this example
the peers have insight all the time. They can all see the steps that were completed and
the ones that were not. This provides trust and assurance to the process. The client
will be able to literally track money transfers from their home nations bank through
an escrow application, along with port information, customs checks, and its arrival to
market, all of which is captured in electronic PDF format.
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Term Project
Achieving this technical objective will remediate the problem of bottlenecks, transparency issues,
lack of confidence, and high operational costs. The blockchain will let entities with no confidence in
one another collaborate without having to go through a neutral central authority. Simply put, it is a
machine for creating trust.
(image is a snapshot from the link below) For more information about this process please visit this
site for a quick video:

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Term Project
Operating Model: Within Maersk there are essentially four different businesses who operate
semi-independently which is why I have classified the conglomerate as a diversified operational
model with a hybrid of unification. The different business units that make up the business are
Maersk Line, APM Terminals, Maersk Energy, and Maersk Containers. These four businesses
operate independently from each other and have their own specific financials and statistics.
However, on the website one can navigate to each of these areas for more information about
them from a single interface. While the nature of the EA is diversification there is room in the
EA for information sharing, particularly with all the other aspects of the business into the
terminals, which would create aspects of unification. Due to the nature of this assignment I will
be specifically focusing on Maersk Line as well as the APM terminal business and the
integration of the underlying Supply Chain Management EA into the blockchain.
Coordination
•
•
•
•
•
•
•
Shared Customers
Impact on other business unit transactions
Operationally Unique business unit transactions
Autonomous business management
Business unit control over business process design
Shared Consumer data
Consensus processes for design of IT
infrastructure: application of IT made in
business unit
•
•
•
•
•
•
•
Diversification
•
•
•
•
•
•
•
•
Few Shared customers
Business unit control over business process design
Independent Transactions
Operationally unique business units
Autonomous business management
Business unit control over business process design
Few data standards across business units
Most IT decisions made within business units
•
•
•
•
•
•
•
Unification
Customers may be local or global
Globally integrated business processes with
support of enterprise systems
Business units with similar or overlapping
operations
Centralized management often applying
functional/process/business unit matrices
High level owners design standardized
processes
Centrally mandated databases
IT decisions made centrally
Replication
Few shared customers
Independent transactions aggregated at high
level
Operationally similar business units.
Autonomous business unit leaders with
limited discretion over processes
Centralized control over business process
design
Standardized data definitions but data locally
owned with some aggregation at corporate
Centrally mandated IT services.
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Term Project
Yellow = Maersk Line and APM terminals, Green = Representation of Maersks Silo’s.
Maturity
Past: Prior to the Industrial Revolution, supply chains existed in a crude manner. For
example: farmer > horse cart > market > corn buyer. With the advent of mass manufacturing,
mechanization, and transportation, businesses began to resemble what we consider today as
having true supply chains. Over time different models were adopted by most organizations with
efficient processes as the focus, and some amazing advances occurred. According to the UN
ocean freight transport accounts for ~90% of goods traded globally. (Tompkins, Jim) This ocean
transportation has traditionally been dependent on paperwork that has not been properly
digitized. Shipping information usually travels through numerous companies and contractors,
any one of which can cause a delay.
Present: In the world today most of the world’s leading companies deploy computerized
enterprise resource planning systems (ERP’s) and supply chain management (SCM) software.
This enables them to connect manufacturing equipment to digital shipping notices and RFID
scanning. This allows product origin to be tracked. However, despite this huge investment and
advancement in digital infrastructure, most companies have limited visibility into where their
products are at any given moment. The guilty party in most instances is the gap between systems
within internal enclaves and ones outside of enterprise boundaries. Production may be recorded
digitally, but the moment it moves to shipping, a PDF document is created for the shipping label
which acts as little more than a placeholder until it arrives to port.
Future: The big idea for the future is to digitize the SCM into a blockchain which will
act as a secure way to modernize logistics through a digital ledger. The future of SCM looks
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Term Project
something like this: Internal SCM’s would be scrapped and replaced with a cloud based software
as a service SCM hosted by IBM and their version of Hyper Ledger Fabric. Internal applications
would be integrated into this service and IoT devices would be fitted to containers which store all
sorts of information. Entities looking to move their products then run applications that interact
with the blockchain to look for these tags and carrier haulage companies like Maersk bid for the
delivery contract. The carrier offering optimal price and service (in this use case Maersk) gets the
business. A smart contract then tracks status through the IoT device and final delivery
performance. Readings can be stored on the blockchain which is permanent and tamperproof. If
a storage condition deviates from what has been agreed upon, each member of the blockchain
will see it and the problem can be remediated or the client can be reimbursed via escrow funds
which the smart contract controls through the permissioned financial entities. By doing this the
issue of decentralization of information gets remediated so that a customer can view a products
life cycle in the supply chain at any time. It also helps fight monopoly and allows for
accountability if there is a contamination. Below is a diagram to show how this would work from
a high-level overview. Notice the circles drawn around the terminal and the carrier which will be
the space that Maersk operates in.
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Term Project
Image from IBM website, designed by Michael White.
Blockchain Technology for SCM
The Four Pillars of Blockchain according to Roger Strukhoff:

Consensus. All ledgers in the network are kept in sync and all agree to the what’s and
when’s of a transaction.

Provenance. There are records of where each asset has been.

Immutability. Anything written on the ledger cannot be undone. This means you cannot
delete records and you cannot insert them halfway through the blockchain.

Finality. Anything written in the blockchain cannot be disputed.
Blockchain technology for Supply Chain Management is extremely cutting edge with
solutions being as new as January 2018. One of the key principles that must be adhered to is that
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Term Project
the Blockchain must be a shared, immutable ledger which can record all the transactions that
take place within a specified network. In this Maersk use case IBM is providing this network.
What will make this all work is that only certain entities will be considered “permitted parties”
and have access to trusted data in real-time on specific channels within the hyper ledger.
Vendors
There are several early movers in this space including Factom, Skuchain, Amazon and
IBM. Skuchain helps buyers control their inventory procurement across partners and Factoms
main goal is to provide documentation verification and an authentication system that can be used
for logistics related documentation. Amazon is offering something similar to IBM in a Block
chain as a Service vendor however what makes IBM the best solution for Maersk is that it is the
first entity to create an enterprise level API for blockchain-based shipping supply chains. While
these companies offer slightly different variations of the same technology I will be focusing on
the IBM Hyperledger Fabric BaaS solution for this project since it most closely aligns
specifically with Supply Chain Management and offers an enterprise level UI that can be easily
integrated into Maersks website. The overall aim of this new technology from IBM is “to offer a
jointly developed global trade digitization platform built on open standards and designed for use
by the entire global shipping ecosystem.”
Core Business Process: Supply Chain Management and APM terminals
The supply chain of Maersk will be relying heavily on the IBM Blockchain as a Service
(BaaS) cloud infrastructure which is based on the open source Hyperledger Fabric project from
Linux. The source code for Fabric is openly available on Github and IBM has built onto this
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Term Project
open source project and has added a set of security services to entice enterprise customers. In
order to enhance security, IBM Blockchain is also underpinned by IBM LinuxONE, a Linux
server which is heavily influenced by security. (Osbourne, Charlie) The reason for this is that
while the blockchain itself is immutable, the network it lives on is not and must be very locked
down. The fact that IBM is deploying Blockchain as a Service (BaaS) means Maersk will be
enabled to a point where it will make sense for it to abandon its current SCM infrastructure to a
more lightweight solution and move to the cloud based platform. For a company like Maersk
they can get access to this BaaS through a subscription based transaction which will provide not
only a fully interactive User Interface but will also come with the following services according to
IBM’s website:
“A Simple migration solution, Industry code samples, Rolling migrations with no network
outages, All Hyperledger Fabric features and capabilities, Deployment of apps created
w/Hyperledger Composer, Advanced secure container technology, Fault tolerant ordering service
and CA, Production environment for demanding workloads, Governance tooling, Extreme
scalability (According to the company, the blockchain is capable of supporting rates of over
1,000 transactions per second), Hardware security module, Multi-site business continuity, and
24x7x365 Support.”
Development Environment
It’s important to think of Hyper Ledger Fabric as the OS that powers the IBM blockchain.
This platform will provide Maersk with a set of development tools that easily integrate into Java
and services that can easily integrate into the platform. Hyper ledger provides the Node SDK,
JAVA SDK, Go SDK, REST SDK and Python SDK. This framework allows for easy API
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Term Project
integration and for connection to external data sources. It is more than likely that the developers
will be new to blockchain so the platform offers a sandbox called “composer”. According to the
IBM website the only thing developers will need to know is Javascript. Maersks DevOps team
will need to develop definitions of its assests (for example its oil) and the smart contracts. A
smart contract is code deployed on the IBM network and it is executed and validated by “peers”
together during the consensus process. These “peers” are similar to nodes and are deployed
within the network through the use of Hyper Ledger Cello. (Similar to Docker Swarm or
Kubernetes). The development of these smart contracts can be done in the composer sandbox
which helps organizations construct microservices. These smart contracts are run in a secure
Docker container inside the fabrics context layer where only certain permissioned peers within
the network and who have been given access to the specific channel can have insight into them.
IBM is planning to offer their MVP clients (which Maersk certainly would qualify as) with a full
blockchain integration plan into their enterprise within 10 weeks at a cost of ~$400,000. This
integration service would help the devops team integrate the enterprise into the Fabric solution.
Considering global trade is projected to increase by 15% from this blockchain adaptation Maersk
will be adding a significant increase to their bottom line every year so this investment to ensure it
is done correctly makes sense from a business perspective.
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Term Project
The Terminal Business
Maersk is not just in the container shipment industry but also manages several ports and
terminals world-wide. This means that they would also be able to integrate the operations at
APM Terminals and use the blockchain platform to enhance port collaboration and improve
terminal planning. This is because in the hyper ledger, when goods and materials are inserted
into the blockchain the port authorities and terminals have insight into this as it is a universal
permissioned authority and can prepare for their ar …
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