Digital supply chain with block chain technology

The startup Arxum enables companies to digitize their supply chain without having to worry about cyber security. This is because block chain technology does not store data, but only the rules according to which individual players are granted access to it. Dr. Markus Jostock is managing director and co-founder of the Kaiserslautern-based startup, which recently became part of the 5-HT network. Together with Project Manager Kamil Gaweda, he explains in an interview how Arxum facilitates IT integration in addition to data security, and how companies in the chemical and pharmaceutical industries in particular can benefit from a digitalized supply chain.

ARXUM Markus Jostock
ARXUM Kamil Gaweda

What are the obstacles to the digitalization of supply chains?

Dr. Markus Jostock: Digitalisation is the core topic in logistics. Up to now, supply chains have already been partially digitalized, but not holistically. One major obstacle is IT integration: every company has many different suppliers, just as every supplier has different customers. If each of the players involved uses a different cloud, IT integration becomes very complex and expensive. This problem often also exists within the company, as we noticed in discussions with chemical companies: As a result of plant acquisitions, large corporations often have a very fragmented IT landscape because each plant uses its own ERP or warehouse management system. Another important issue is data security: to protect sensitive information from access by third parties, databases are generally not interconnected. However, the lack of digitization of supply chains can threaten the very existence of a company, as was clearly demonstrated during the Corona crisis. Companies depend on a good overview of their supply chains and must be able to quickly find out, for example, from which supplier they can order which products if a supply chain breaks down.

How does the digitalization of supply chains work with Arxum?

Kamil Gaweda: Supply chains have two levels: first, the transport of products from A to B, and second, the exchange of data about this transport. The special feature of Arxum is that we are installing a third level above the two existing levels – a block chain level, on which not the data itself is stored, but only the rules that determine which actor may have access to which data.

How does Arxum facilitate IT integration between different players?

Dr. Markus Jostock: Within the framework of large-scale IT integration projects, it is indeed possible to introduce a new system into which all data from previous systems, for example from the various plants of a group, is integrated. However, such projects are very expensive. With Arxum, our customers can save themselves this expense because we simply dock a Connectivity Agent to the individual existing systems, which creates a connection between the internal database and the block chain. This adapter enables us to merge data from different systems, so that the existing systems can continue to be used and no large IT integration project is necessary.

Arxum Visual

How is data security guaranteed?

Dr. Markus Jostock: Like a doorman, the Connectivity Agent controls which supply chain partner may have access to which data. We use block chain technology for this. This topic is easily misunderstood, because companies naturally do not want to make their data publicly accessible to everyone via a block chain. But in our system there is no production data in the block chain at all. The block chain level is merely a governance level, where a so-called smart contract defines the conditions under which automated data transfer from A to B may take place. This script cannot be changed without leaving a trace, because cryptographic authentication is always required for this. The block chain allows companies to optimize their data exchange processes while maintaining control over their data.

What industries do your customers come from?

Kamil Gaweda: Many of our customers are companies from the automotive industry, but we are currently focusing more on the pharmaceutical and chemical industries. We are already working with the first customers from the recycling sector and are currently also holding talks with major chemical companies. Arxum’s basic technology is always the same, but with the appropriate programming of the Smart Contract it can be used for very different use cases.

Which applications are particularly relevant for the pharmaceutical and chemical industry?

Dr. Markus Jostock: Automated access to data silos within supply chains can help speed up processes in pharmaceutical and chemical companies by eliminating manual requests for information from suppliers. Our solution can also be used to manage internal material stocks, for example, when information from different locations needs to be viewed in an integrated manner.

Kamil Gaweda: A special potential lies in tokenizing, the digital representation of physical goods. One of our customers, a UK recycling company, is already using our solution for tokenizing recycled plastics to ensure the authenticity of the recycled materials. One ton of raw material generates a digital token, so that from raw material to product to recycling process, it is possible to identify exactly which materials have been used and ultimately returned to the material flow. This technology thus enables our customers to document the material properties of their products via certificates or, conversely, to purchase materials with a specific proof of origin. In addition, our solution has great potential in the audit sector, as the block chain documents beyond doubt who exchanged which data, when and how.

How was Arxum founded?

Dr. Markus Jostock: Before founding Arxum, I was responsible for cyber security in production digitalization at AREND Prozessautomation GmbH. When the topic of block chain came up, we first asked ourselves whether production machines could be connected directly to the block chain via an IoT gateway. But we soon realised that the block chain could go much further and digitalise the entire supply chain. In 2017 we started with an internal project, followed by the official foundation of Arxum in 2019 together with my then boss Axel Haas and Jens Harig, who has experience as CEO of a listed IT company. Arxum currently has ten employees in Germany and France. With our location in Kaiserslautern we have good connections to research and industry, also due to the proximity to the chemical cluster in Mannheim/Ludwigshafen.

ARXUM Team

What are the next goals for Arxum?

Dr. Markus Jostock: We want to bring our solution more into industrial use and find new customers to whom we can show that our system works and can offer added value. Next year, we also have another financing round coming up.

What do you hope to achieve by being part of the 5-HT network?

Dr. Markus Jostock: Through 5-HT we have gained access to a large chemical company and have already been able to conduct initial talks. In general, we hope that we will be able to work together with companies from the 5-HT network to solve problems that may have just been washed up by the corona crisis. Recently, it has been noticed that those businesses that were reasonably digital have continued to operate, while those that were dependent on having staff on site have run into difficulties. As a result, many businesses have now realised the importance of digitising supply chains. Digitisation is also the only way for companies to make sustainable cost savings. In view of demographic change and the shortage of skilled workers, industry in Germany ultimately has no choice but to rely on the digital transformation. At Arxum, we are happy to help our customers analyze their processes together with them and realize a holistic digitization of their supply chains.

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