Digitisation is the future, and German manufacturers have never been known to live in the past. But such changes are intensifying cybersecurity concerns
Many of Germany’s largest companies are joining the race to digitise manufacturing processes as it becomes increasingly clear that automation holds the key to the future. But as this shift occurs, the risk register will undergo substantial change, with both new and traditional risks rising to the fore.
The benefits are clear, including lower production costs, 24/7 production, shorter throughput time and better planning and logistics. But there is also risk of disruptive innovation and being out-competed as key manufacturing capabilities become obsolete, as well as the potential for cyber crime and IT vulnerability as systems become increasingly connected.
Hans Læssøe, principal consultant at AKTUS and former senior director of risk at the Lego Group, explains: “Digitising manufacturing is the next step in advancing the way things are produced. Today, some industries are much further on this than others – the auto manufacturing industry being one example.
“Best-class auto manufacturing is digitised and automated to a very high extent, and for some enables levels of ‘single-piece mass production’, which allows the factory to build exactly to order rather than stockpiling (which means freezing capital) and hoping for a subsequent sale (which is uncertain).”
DRIVING CHANGE FORWARD
“Any piece of data that hits the internet or the cloud can be hacked and looked at, by competitors as well as by criminals seeking to profit.” - Hans Læssøe, founder, ATKUS
As the competition from Silicon Valley intensifies, Germany is raising the stakes in auto innovation and digitised manufacturing processes. This includes the automation of logistics, with robots, self-driving vehicles, blockchain initiatives and the Internet of Things.
In August, Maersk and IBM launched their blockchain shipping solution in an effort to digitise the supply chain, while increasing automation and efficiency, and preventing the build-up of unknown risk accumulations.
Bridget van Kralingen, IBM’s senior vice-president, global industries, platforms and blockchain, says: “Success rests on bringing the entire ecosystem together around a common approach that benefits all participants equally. Blockchain can be used to transform a vital part of how global trade is conducted.”
However, as systems and supply chains become more connected, this introduces new exposures. Smart buildings and factories and more interconnected systems present challenges on multiple fronts, according to Alister Jupp, head of global technical services for Crawford & Company. “Buildings are becoming a lot more complex and the more complicated a building, the higher the risks.”
Cyber crime is another vulnerability. Nearly half of manufacturers have been the victim of cyber crime, with the sector now the third most targeted, according to research by manufacturers organisation the EEF, AIG and the Royal United Services Institute. It found that cyber threats are preventing companies from investing in digital technologies, with a third of those surveyed nervous of digital improvement (see charts, below).
“By digitising your manufacturing, you acquire tonnes of data and options to control machinery, product flow, planning and so on,” says Læssøe. “While this is all good, any piece of data that hits the internet or the cloud can be hacked and looked at, by competitors as well as by criminals seeking to profit.”
He cites the example of disruption caused by the ransomware attack NotPetya to shipping giant Maersk. The firm revealed that the total cost of the attack was $300m in business interruption as it was forced to reinstall 4,000 servers as part of a complete infrastructure overhaul.
IP theft is likely to be a motivation for manufacturing cyber attacks in the future. “Maersk were just collateral damage, and not the real target for the attack,” says Læssøe. “But there is a risk that competitors may be able to hack into your systems, potentially using third-party ‘vendors’, and steal your product ideas. For one company, a copy-cat manufacturer actually launched a product before the company that designed it.
“Competitors may also hack into your systems with the intention of disrupting your manufacturing processes. Or they may seek to disrupt your vendors, delivery routes and deteriorate your ability to deliver the products in time.”