Towards Just And Resilient Supply Chains For The Digital CBD

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Towards just and resilientsupply chains for the digital CBDRMIT Blockchain Innovation HubRMIT Centre for Cyber Security Research & InnovationRMIT Digital Ethnography Research Centre

Published by:Authors:Dr Tharuka Rupasinghe, Dr Konrad Peszynski,Dr Banya Barua and Laki KondylasAcknowledgments:We would like to thank Distinguished Professor Jason Potts,Professor Shams Rahman, Dr Alexia Maddox, Dr Darcy Allen,Associate Professor Chris Berg, Michael Fairbairn,Tulley Kearney and Sally Piper for their valued contributionto this report.Published on: May 2022 Copyright RMIT University 2022Page 2

ContentsExecutive summary5Introduction7What caused the supply chain disruptions?14Workforce shortages15Logistics: Transportation disruptions16Information asymmetry: Insufficient knowledgeand control across the full supply chain network17Security: Increased number of security breachesand attacks in digital supply chains18Building resilient supply chains through technologyTransparency and authentication38End-to-end visibility and connectivity41Efficiency through automation43Predictive analytics and forecasting44Operational-resilience through cyber-resilience45Experimenting with the metaverse to build newonline shopping experiences47Recommendations and future directivesCase studies20Case Study 1: Food service and hospitality22Background and challenges22Mitigation strategies for future shocks24Case Study 2: Construction27Background and challenges27Mitigation strategies for future shocks29Case Study 3: Renewable energy34Background and challenges34Mitigation strategies for future shocks3537RecommendationsConclusion484951Page 3

Forewordfrom Associate Professor Chris Bergof catastrophe, the supply ofconsumer goods has been almostentirely unabated. While in-storeshortages of consumables like toiletpaper received much press, thoseshortages turned out to be shortlived and almost entirely driven byconsumer panic than dysfunctionalsupply chains.On the other hand, the pandemicsignificantly disrupted advanced andcomplex manufacturing. Computerchip shortages have affected almostUntil the COVID-19 pandemic,every downstream industry in somehow supply chains were organisedway, leading delays and costs inand maintained was hardly viewedequipment provision across the globalas a central public policy issue.economy. But again, the causes ofNor should it be admitted, werethese shortages is not easy tosupply chains a central focus fordisentangle – geopolitical issues suchsocial scientists. Other thanas the US-China trade war and morespecialisations such as logistics,recently the invasion of Ukraine haveother fields had a habit of abstracting also disturbed the production andthe complexity and tangibility of supply flow of chip components.chains away from their thinking.This report is part of the Digital CBDThe pandemic has shown us thatprogram – a joint project bringingsupply chains matter, and both policytogether researchers across RMITactors and scholars need to bring theUniversity from RMIT’s Blockchaincomplex supply chain networks intoInnovation Hub, Centre for Cybertheir understanding of the economy.Security Research and Innovation,and Digital Ethnography ResearchOn the one hand, it has beenCentre – to understand the impactremarkable how well supply chainsof the pandemic and digital changehave adapted to the pandemicon Melbourne’s CBD.shock. Despite many predictionsAssociate Professor Chris BergThe program has been supportedby the Victorian Government’sVictorian Higher Education StateInvestment Fund.At first glance, a single city might bea strange framework to think aboutsupply chains when we associatesupply chains with large scale globalnetworks rather than the urban andsuburban environments of a city.But as this report shows, the cityis shaped by supply chains bothlarge and small. As economic activityshifts, as it did during the pandemic,so too supply chains are restructuredaround the new demands andenvironments. It was not simplysupply issues that caused supplychain backlogs for computer chips,it was a jump in demand for theequipment that allowed work fromhome in a digital environment.In this report, the authors compellinglyset out the challenges posed by supplychain disruption during the pandemicand explore how to develop supplychains that are resilient, adaptableand responsive to social needs.Most importantly, they outlinehow new technologies such asblockchain and artificial intelligencecan facilitate innovation in supplychains that provides greaterresilience and adaptability.Associate Professor Chris BergCo-Director RMIT Blockchain Innovation HubPage 4

Executive summaryThis report provides a strategic analysis on developingresilient and just supply chains for a digital CBDIn this report, the third in the DigitalCBD research series, we explorehow to utilise innovative emergingtechnologies such as blockchaintechnology, Artificial Intelligence (AI)and Machine Learning (ML), Internetof Things (IoT) and their applicationsto address the supply chain challengesand cybersecurity risks within thecontext of a CBD.We look back at the impact of theCOVID-19 pandemic response onsupply chains, and find that supplyand demand shocks are caused byfour key supply chain issues being:By following an interdisciplinaryapproach, we have combined theknowledge and advancements frommultiple disciplines such as cybersecurity, information technology, supplychain management and economics,to highlight the issues, challengesand opportunities for Melbourne totransition towards a digital CBD.3. Insufficient knowledge acrossthe full supply chain network.1. Sudden work-force shortages.2. Transportation andlogistics disruptions.4. Increased number of securitybreaches and attacks in digitalsupply chains.The Melbourne CBD is known asMelbourne’s business and financialcentre. The twin shocks of theCOVID-19 pandemic and the rapidlyaccelerated technology adoption haveradically changed the way supplychains operate which in turn havesignificantly impacted the overallconsumer experience of Melburnians.Page 5

Executive summaryThis report aims to explore tworesearch objectives. The firstobjective is proving a deeperunderstanding of the issues andchallenges supply chains faced dueto the twin shocks. The secondobjective is to explain how emergingtechnologies and other digitalinfrastructures can be used to buildsecure digital supply networks thatcan reduce the informationasymmetries and enhancecollaboration, agility and optimisationwhilst embedding just and fairerpractices into digital processes.We look at three supply chain casestudies and the unique challenges theyfaced during the pandemic, then weexamine how to leverage emergingtechnologies in the Web3 space toaddress these supply chain challengesincluding blockchain, smart contracts,NFTs, verifiable credentials, TradeTech,IoT and smart sensors, autonomousvehicles and robotics, drones andAI/ML for forecasting.The Solution:RecommendationsFinally, out of the findings of thisreport, we propose the following sixrecommendations for the governmentto action:Recommendation 4:Melbourne as a testbed forautonomous vehicles.Recommendation 1:Recommendation 5:Supply chain datagovernance framework.Uplift digital skills within supply chains.Recommendation 2:Standardise supply chain cybersecurity requirements.Recommendation 6:Develop a blockchain pilot for aVictorian supply chain.Recommendation 3:NFTs as digital twins.Page 6

Introduction

Supply chains are known as the lifeblood of a resilient economyThe COVID-19 pandemic highlightedvulnerabilities in supply chains bothat national and global levels.1 It opensup conversations around how we canbest deal with supply and demandshocks in a just and fair way intothe future. First, we experienced asubstantial supply shock that affectedmany global supply chains.2 Then withpurchase limitations and panic buying,demand shocks continued to disruptthe global economy and supply chainswithin it.3 During the past two years,businesses had to endure numeroussupply and demand uncertainties,as well as logistic disruptions thatcaused a significant impact onbusinesses and access to goodsand services for end consumers.4In Australia, Victoria isone of the states which isknown as an attractive placefor businesses to locate.Victoria’s supply chain andlogistics industry contributesapproximately A 21 billionper year to the economyand employs around280,000 people.5Melbourne is also strategicallylocated with major ports,roads, rail, airports andtransport hubs well networkedto move products amonglocal, regional, interstate andglobal markets.For instance, the Port ofMelbourne is Australia’slargest maritime hub whichholds an economicalsignificance to the businessesacross Victoria andsouth-eastern Australia.123456The Port of Melbournecontributes 6 billion eachyear to Victoria’s economy.Victoria’s commercialports (Port of Melbourne,Port of Geelong, Port ofHastings, Port of Portland)collaboratively supportAustralian businesses byhandling around 26 billionworth of local exports andalmost a quarter of Australia’stotal food and fibre exports.6Therefore, with largerpopulation and transportationinfrastructures, Victoriahas become a prominenttransport and logistic hubin Australia with Melbourneat the centre of several keysupply chains.Thilmany, D., Canales, E., Low, S. A., & Boys, K. (2021). Local Food Supply Chain Dynamics and Resilience during COVID-19. Applied Economic Perspectives and Policy, 43(1), 86–104. https://doi.org/10.1002/aepp.13121Fonseca, L. M., & Azevedo, A. L. (2020). COVID- 19: outcomes for Global Supply Chains. Management & Marketing (Bucharest, Romania), 15(1), 424–438. a, S., Smark, C., & Mir, M. (2021). COVID 19: Social, financial and economic implications. Australasian Accounting, Business & Finance Journal, 15(1), 1–4. rts-and-freight/commercial-portsPage 8

Melbourne CBD is also known as the fastest-growing small area of AustraliaThe series of lockdowns Melbournehas experienced in the last two years,resulted in the heart-breakingoutcome of seeing some of ourfavourite shops and restaurantsclosing permanently or barelysurviving. The ‘work from home’recommendations7 and theself-imposed ‘shadow’ lockdowns8were also disrupting factorsaffecting the economic stability ofMelbourne. For instance, data fromthe City of Melbourne pedestriansensors have reported an almost70% reduction in foot traffic withinthe Melbourne Central BusinessDistrict (CBD),9 compared to2019, destroying businesses andtransforming Melbourne intoa ‘ghost town’.10Cities are the junction pointswhere all value passes through andsupply chains meet, build businessrelationships and coordinateeconomic activities.117891011121314Through these coordinated economicactivities, supply chains alsoconnect cities together economicallyinterrelating cities and supply chains.12Primarily, both cities and supply chainsconsist of people, businessesand data as key components.When cities are disrupted, supplychains also get disrupted and viceversa. With rapid technology adoption,both cities and supply chains are ontheir way to becoming fully digitalised.As a result, cities and supply chainsboth have experienced a similar set ofchallenges during the past two years.Interestingly, the strategic directivesthat cities and supply chains have toconsider in order to overcome thesechallenges, are also the same.In this report the followingterminologies will be usedfrequently. We define themto guide the reader:Supply chain:Management of upstream anddownstream relationships withsuppliers and customers in order todeliver superior customer value at lesscost to the supply chain as a whole.13The goal of a supply chain is toMelbourne CBD:ensure that the products and servicesThe Melbourne CBD is knownare efficiently and effectively flowingas Melbourne’s business and financial from the producers to consumerscentre with retail, restaurant and other by creating a collaborative networkservices offered throughout the day.of business entities. Traditionally,The CBD is also known as the fastest- a ‘supply chain’ can be defined asgrowing small area of Australia witha “linear chain of suppliers, wherethe highest number of businessesone organisation feeds resourcesand residents.or materials into another”. However,especially in modern supply chains,we can also see ‘networks of multipleand bidirectional interdependenciesbetween 90-40f9-8797-6efd66bf4c1aRodrigue, J.-P. (2012). The Geography of Global Supply Chains: Evidence from Third-Party Logistics. The Journal of Supply Chain Management, 48(3), 15–23. idChristopher, M. (2016). Logistics & supply chain management. Pearson UK.Garnett, P., Doherty, B. & Heron, T. Vulnerability of the United Kingdom’s food supply chains exposed by COVID-19. Nat Food 1, 315–318 (2020)Page 9

Resilience in supply chains:A resilient supply chain has theability to quickly return to its originalstate or move to a new, more desirablestate after undergoing a shock’.15We encountered this in the ongoingsupply chain crisis because localsupply chains were not equipped toadequately respond to the demandand supply shocks they underwent.Usually, the traditional supply chainsthat follow linear business processesare known to be less resilient towardsthese challenges because they consistof tightly coupled business processes.16As a downstream consequence ofthe complex interdependenciesbetween these tightly coupledsupply chain networks, they end updeadlocked waiting for each other toresolve their supply chain disruptions.17Therefore, during the last decade,many organisations have begunto invest in digital supply chainnetworks that are more resilientto these disruptions.Digital supply chains:With the rapid digital accelerationthrough Web3 and Industry 4.0,A digital supply chain is defined asmodern supply chains are nowan intelligent best-fit technologicalexploring far more advancedsystem that is based on the capabilitytechnologies such as Artificialof massive data disposal and excellentIntelligence (AI), blockchaincooperation and communication fortechnology and Internet ofdigital hardware, software, and networksThings (IoT) to manage and monitorto support and synchronise interactionthe supply chain processes.between organisations by makingThese technologies have becomeservices more valuable, accessible,and affordable with consistent, agileessential when undertaking real-timeand effective outcomes.18planning, forecasting, warehouse andinventory management, transportationDigital supply chains are not aboutand delivery of products.21whether goods and services areThe insights gathered throughdigital or physical, it is aboutbusiness intelligence systems thathow supply chain processes areare linked to supply chains can bemanaged across a wide variety ofused to forecast the demand as well19innovative technologies.as the supply of products and servicesDigitalisation refers to the impact ofwhich are vital to creating morethese technologies, caused by adoptionresilient supply chains.22 Irrespective ofand operation, in organisational andthe disruptions caused by COVID-19,societal perspectives.20companies have continued to investin their technological infrastructuresand digitising supply chain operations.Christopher, M., & Peck, H. (2004). Building the resilient supply chain Christopher, M., & Holweg, M. (2017). Supply chain 2.0 revisited: a framework for managing volatility-induced risk in the supply chain. International Journal of Physical Distribution & Logistics Management,47(1), 2–17. tt (n 14)18Büyüközkan, G. and Göçer, F. (2018), “Digital supply chain: literature review and a proposed framework for future research”, Computers in Industry, Vol. 97, pp. 157-177, doi: 10.1016/j. compind.2018.02.01019Ibid20 Queiroz, M. M., Pereira, S. C. F., Telles, R., & Machado, M. C. (2019). Industry 4.0 and digital supply chain capabilities: A framework for understanding digitalisation challenges and opportunitiesBenchmarking : an International Journal, 28(5), 1761–1782. https://doi.org/10.1108/BIJ-12-2018-043521 Ibid22 Ardito, L., Petruzzelli, A. M., Panniello, U., & Garavelli, A. C. (2019). Towards Industry 4.0: Mapping digital technologies for supply chain management-marketing integration. Business Process ManagementJournal, 25(2), 323–346. https://doi.org/10.1108/BPMJ-04-2017-00881516Page 10

Industry 4.0:Blockchain and smart contracts:Non-Fungible Token (NFT):Industry 4.0 is the fourth industrialrevolution which involves thedevelopment, merchandising andoperation of autonomous, knowledgeand sensor-based, self-regulatingproduction systems. The opportunitiesand benefits that are anticipated tocome along with Industry 4.0 seemto be manifold, resulting in highlyflexible mass production, real-timecoordination and optimisation of valuechains, reduction of complexity costsor the emergence of entirely newservices and business models.23A blockchain is a distributed anddecentralised database that supportsimmutable data records and trackingdigital assets in business networks.24It has the ability to secure datarecords and facilitate trustworthyinteractions without relying on a thirdparty. Smart contracts are pieces ofsoftware stored on the blockchain thatcontrol the transfer of assets betweenparties under certain conditions.25They are business agreements thatare written as code and deployed onthe blockchain. When predeterminedconditions are met, these businesscontracts are automatically executed.Blockchain technology and smartcontracts are known for their capabilityto address global supply chainissues by ensuring transparency andtraceability of products, enablingsecure coordination between partners,and aiding access to decentralisedfinance options.26NFTs can be used to record and verifythe ownership of any unique digital orphysical asset by maintaining a digitalrecord on the blockchain.The blockchain space consists of bothfungible and Non-Fungible Tokens(NFTs). We can define ‘fungibility’as the ability of an asset to beinterchanged with a similar kind ofasset. Therefore, only a unique assetcan be considered as a NFT. Whena NFT is created, it is immutablyrecorded on the blockchain whichprevents others from modifying theownership of the NFT. They are uniquedigital artifacts that are stored on theblockchain with each NFT being oneof-a-kind and can represent a varietyof physical or digital assets.27 In thecontext of the supply chain, NFTscan establish verifiable immutabilityand authenticity required as part of asupply chain, and provide additionalfeatures such as building uniqueand related identifiers.28 NFTs aredistinguishable, their ownership istrackable on an individual basis, andthey provide the capability to associatemetadata to each unique token foridentification purposes.29Hofmann, E., & Rüsch, M. (2017). Industry 4.0 and the current status as well as future prospects on logistics. Computers in Industry, 89, 23–34. ://hbr.org/2017/01/the-truth-about-blockchain25 Laneve, C., Coen, C. S., & Veschetti, A. (2019). On the Prediction of Smart Contracts’ Behaviours. In From Software Engineering to Formal Methods and Tools, and Back (pp. 397–415). Springer InternationalPublishing. https://doi.org/10.1007/978-3-030-30985-5 2326Saberi, S., Kouhizadeh, M., Sarkis, J., & Shen, L. (2019). Blockchain technology and its relationships to sustainable supply chain management. International Journal of Production Research, 57(7), 2117-213527D. Mouris and N. G. Tsoutsos, “NFTs For 3D Models: Sustaining Ownership In Industry 4.0,” in IEEE Consumer Electronics Magazine, doi: 10.1109/MCE.2022.316422128Maleh, Y., Shojafar, M., Alazab, M., & Romdhani, I. (Eds.). (2020). Blockchain for cybersecurity and privacy: architectures, challenges, and applications. CRC Press29Ibid2324Page 11

Digital twin:Digital twin technology consists ofcreating virtual replicas of objects orprocesses that simulate the behaviourof their real counterparts.30 In otherwords, they are digital versionsupdated in real time to create anexact replica of the real life version.An NFT can be a digital twin as cana supply chain.A supply chain digital twin is acomprehensive simulation model of areal supply chain which uses real-timedata to see information from the past,optimise the present and forecastthe supply chain behaviours. The useof 3D and 4D mapping technologymap the physical world and createdigital twins for cities, retail spaces,store shelves and inventory. In thefuture, the applications will enable newinteractions and transactions acrossbusinesses.31 In the context of thesupply chain, these applications havethe potential to revolutionise how wecurrently track and manage supplychains and logistics by providingcollaborative environments and datadriven decision making to create morerobust business processes.30313233343536373839Artificial Intelligence (AI) andMachine Learning (ML):Autonomous (automated) vehicles,robotics and drones:AI can be defined as the “capabilityof a computer system to mimic humancognitive functions such as learningand problem-solving”.32ML is a subset and an application ofAI that enables computer systemsto continuously learn using the datamodels. Therefore, by leveragingAI/ML based technologies, wecan build applications to forecastthe supply and demand trends byanalysing past and real-time data.Fully automated supply chains withrobots, drones and driverless vehiclesare expected to be fully operationalisedby 2025.33 We believe that a newparadigm of transportation which istransport-as-a-service (TaaS) will becreated through large-scale adoptionof automated vehicles in Victoria.34This is also expected to providebetter access to labour, markets andgoods while creating new economiesand services which are favourable tosupply chains.Marmolejo-Saucedo, J. A. (2020). Design and development of digital twins: a case study in supply chains. Mobile Networks and Applications, 25(6), arning/#introductionhttps://www.ey.com/en arch-papers/13839-automated-vehiclesBen-Daya, M.; Hassini, E.; Bahroun, Z. Internet of things and supply chain management: A literature review. Int. J. Prod. Res. 2019, 57, 4719–4742Miorandi, D.; Sicari, S.; De Pellegrini, F.; Chlamtac, I. Internet of things: Vision, applications and research challenges. Ad Hoc Netw. 2012, 10, 1497–1516Mathaba, S.; Adigun, M.; Oladosu, J.; Oki, O. On the use of the Internet of Things and Web 2.0 in inventory management. J. Intell. Fuzzy Syst. 2017, 32, 3091–3101Lee, C.K.M.; Lv, Y.; Ng, K.K.H.; Ho, W.; Choy, K.L. Design and application of internet of things-based warehouse management system for smart logistics. Int. J. Prod. Res. 2018, 56, T04-001Internet of Things (IoT):IoT can be defined as a network ofinterrelated physical objects andcomputing devices that are embeddedwith sensors and other softwaretechnologies to collect and share data.IoT plays a key role in converting dayto day items and tools (machines,containers, trucks etc) we see inbusiness processes, into smart andintelligent devices.Supply chains are plagued by manyissues such as effectiveness andefficiency of deliveries, continuousmonitoring and close relationshipsbetween the partners.35 The adoptionof IoT allows greater transparencyand visibility of data, including themonitoring of temperatures, positions,humidity, pressure, exposure to light,and broken seals36, and can assist inreducing waste and costs.37 In recentyears, IoT applications have beenwidely used to locate, identify,monitor and track products andservices in the supply chain.38Cybersecurity:Cybersecurity is the art of protectingnetworks, devices and data fromunauthorised access or criminaluse and the practice of ensuringconfidentiality, integrity and availabilityof information.39Page 12

This report aims to explore two research objectives:This report is being written at thevery beginning of the post-pandemicera, while most of the supply chainsaround us are still struggling to recoverfrom the challenges they faced duringthe pandemic, with the purpose ofreflection to learn from the supplyand demand shocks faced in the lasttwo years and to build more resilientand just supply chains for the futureof Melbourne. Our journey towardsresilience began with technologyadoption and innovation through theproposal of digitalisation of cities andsupply chains. These challenges canbe addressed for cities and the supplychains within them with the adoption ofbusiness process automation and thevisualisation of data.The first objective is proving adeeper understanding of theissues and challenges supplychains faced due to the twinshocks. This objective hasbeen addressed by analysingthe documents and otherpublished materials from theyears 2020 to 2022 for threespecific supply chain domains.The selected domains are:1. Food serviceand hospitality;2. Construction; and3. Renewable energyWe examine the recentfailures in these supplychain networks to identifymitigation strategies thatwill sustain resiliencein the long term.The second objective,is to explain how emergingtechnologies and other digitalinfrastructures can be usedto build secure digital supplynetworks that can reduce theinformation asymmetriesand enhance collaboration,agility and optimisationwhilst embedding justand fairer practices intodigital processes.Finally, this report will contributeto strategic insights towards buildingresilient and just supply chains byhighlighting research opportunitiesand policy recommendations fora digital CBD.Page 13

What causedthe supplychain disruptions?

Supply chain vulnerabilitiesencountered during the COVID-19pandemic can be divided intofour areas:1. Workforce2. Transportation3. Information4. SecurityVulnerabilities from these areascaused some of the major supplychain issues that businessesexperienced. Issues includedinconsistent and sudden dropsin workforce; unavailability ofshipping containers and freightspace in global supply chains;insufficient knowledge andcontrol over the full supplychain network; and, securitybreaches and attacks in cybersupply chains.In this section, we analyse thesefour supply chain vulnerabilitiesin detail to understand how theyimpacted supply chain resiliencein Melbourne.Workforce shortagesA skilled workforce is one of the keypillars of success for any organisation.The COVID-19 pandemic disruptedthe employed workforce throughsickness, isolation restrictions andwork-from-home regulations, resultingin an inconsistent and sudden dropin the workforce.40 During the thirdwave of COVID-19 with the highlycontagious Omicron coronavirusvariant,41 the ‘inconsistent andsudden drop in the workforce’ turnedinto a massive labour supply issue.The issue was further aggravated withthe failure of another supply chain ofthe Rapid Antigen Tests (RATs).Australia’s demand for RATsskyrocketed when employees withinsupply chain networks were battlingwith the Omicron coronavirus variant.RATs were not sufficiently availableand caused massive staff shortages,consumer disappointment andother financial losses throughoutsupply chains.Major supermarkets struggled to meetthe required consumer demands ofRATs and enforced buying limitations.42Individual organisations initiated directprocurement processes for RATs tominimise supply chain disruptions andstaff shortages (eg Victorian FarmersFederation).43 The shortage of essentialgoods such as RATs highlighted alack of supply chain transparency andresilience, coupled with unsustainablejust-in-time manufacturing leading toworkforce shortages.44This issue also affected businessactivities that are less automated andhave highly labour intensive servicebased supply chains. The hospitalityindustry which includes restaurantsand bars was significantly impactedby population density requirementsand staff shortages.45 As a result,restaurants, bars and other retailersclosed their doors to customers anddetermined opening hours based onstaff availability.46https://www.aph.gov.au/About Parliament/Parliamentary Departments/Parliamentary Library/pubs/rp/rp2021/COVID-19-Stat -go-it-alone-and-order-own-supply-of-rats/?cs 967644 Zhu, G., Chou, M. C., & Tsai, C. W. (2020). Lessons learned from the COVID-19 pandemic exposing the shortcomings of current supply chain operations: a long-term prescriptive offering.Sustainability, 12(14), 20I

Co-Director RMIT Blockchain Innovation Hub Foreword from Associate Professor Chris Berg Until the COVID-19 pandemic, how supply chains were organised and maintained was hardly viewed as a central public policy issue. Nor should it be admitted, were supply chains a central focus for social scientists. Other than specialisations such as logistics,

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