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Should Manufacturers Use Blockchain?

Dec. 10, 2020
How blockchain can streamline and improve manufacturing processes.

Airbnb and PayPal are among the latest large companies to declare their interest in blockchain. So, can we expect to see manufacturers following suit in an attempt to radically change their supply chains? Here Claudia Jarrett, US country manager at industrial parts supplier EU Automation, shares some current blockchain applications and discusses how blockchain can streamline and improve manufacturing.

Airbnb has cited disrupted business during the COVID-19 pandemic as one reason for its embracing of blockchain. “Future success,” read a statement by the online vacation rental marketplace, “will depend on our ability to adapt to emerging technologies such as tokenization, cryptocurrencies, and new authentication technologies.”

Airbnb’s change of heart is interesting given the brand’s own previous agnosticism towards blockchain and that mainstream excitement about the technology has cooled in recent years. Most realize it will be many years before blockchain reaches technological maturity. The reason for Airbnb’s surprising announcement is likely to be driven by the need to diversify in the face of the continuing COVID-19 pandemic.

Manufacturers have been diversifying for the same reason. PwC’s COVID-19: What it means for industrial manufacturing report recommends that manufacturers must explore new industries and revenue streams, and do so with fewer workers on the factory floor. Technology will be vital if manufacturers are to adapt to the “new normal” era of COVID-19. Automated technology, including blockchain, has the potential to radically change manufacturing supply chains, streamline processes, improve security, and simplify data management.

Before we examine how, let’s first look at what blockchain actually is. The technology is an advancement on the distributed ledger, a database that is consensually shared by organizations over a decentralized network synchronized across multiple sites, institutions or geographies. The database can be accessed by multiple people and allows transactions to have public "witnesses".

This system differs from, say, a bank because there is no central administrator or storage. Instead, each participant on the network replicates, verifies, and saves an identical copy of the ledger by consensus. Reliance on a single individual at each point leaves the system vulnerable to human error and misuse.

That’s where blockchain comes into play. Because the technology is made up of a sequential chain of blocks, or nodes, containing timestamped data, it creates a historical trail of a record or transaction. The chain, which is a peer-to-peer network, depends on the agreement of all the nodes, so it is next-to-impossible to alter the record without the agreement of the other nodes.

In principle, blockchain is a cryptographically-secure and immutable digital ledger—one that allows a single, tamperproof, and universal truth to be maintained. It is easy to see the technology’s use in tasks that require confidentiality; for instance, the transfer of intellectual property (IP). But, what about the potential of blockchain in manufacturing—even helping them evolve towards implementing smart factories?

Protected Networks

Because the underlying technology of blockchain is robust, it is ideal for other networks that share data such as the IIoT, which, like blockchain, connects people, places, and products. Manufacturers have already seen some great successes with the IIoT, such as being able to equip their legacy equipment with sensors to help keep them running and to know when to order a replacement.

The IIoT is not without its challenges; unsecured IIoT devices are easy targets for cyber-criminals and Distributed Denial of Service (DDoS) attacks. Another issue with the IIoT is scalability. Expanding these networks can cause bottlenecks when authenticating, authorizing or connecting different nodes.

As we’ve established, blockchain is fundamentally about connecting nodes. Furthermore, blockchain systems are decentralized, so individual nodes can create secure contracts with other nodes on the network. The result is secure and resilient data sharing that alleviates scalability concerns and eliminates the need for human beings or centralized servers that slow down communication.

Different Types of Data

This brings us to the most talked-about use for blockchain within manufacturing: supply chain traceability. As the public becomes more interested in understanding exactly where their products come from, the secure data sharing capabilities of blockchain can allow for stronger trust to be forged between producers and consumers.

That’s one example. Another report by PwC, its 2019 Global Blockchain Survey, recommends other types of manufacturing data that can be shared using blockchain. “Blockchain has the potential to revolutionize how manufacturers design, engineer, make and scale their products,” states PwC’s report. Among the possible types of information that can be transferred through blockchain, PwC recommends data relating to materials provenance, engineering designs for complex products, asset tracking, quality assurance, and regulatory compliance.

Other practical advantages of the technology include its environmental impact, such as in creating secure and paperless methods of traceability even when large quantities of products are transported all over the world. There are potential time savings—and less red tape—in the transporting of goods.

Lastly, blockchain can help manufacturers manage complex global supply chains. Take track and trace in automotive, for instance. Carmakers are accountable to customers and regulators for their vehicles’ reliability and safety, yet visibility into the provenance of vehicle parts—from the mine to the showroom floor—is often lacking. Instead, with blockchain, it is possible for automakers to track every step of that journey with better data management across supply chain tiers, improved recall response, easier inventory management, and better value aggregation.

From Design to Production

Due to blockchain’s ability to support the secure communication of design data, it can also benefit 3D printing—data sharing is inherent in the whole 3D printing process, from design to production. The security issues around data sharing in 3D printing were highlighted in a report by New York University's Tandon School of Engineering. One issue is that, during collaborative projects, the 3D printing process may require small and large companies to access databases that contain design files or complex parts, which in turn raises all kinds of questions about access and IP.

Blockchain certification could be a possible solution—certificates would clearly state the owner of the IP, allowing all parties to see what it was used in and how much is due. This would streamline group design projects between companies as it would allow them to easily understand who had devised what part and allow for transparent and fair traceability of IP.

IP management could be taken further by registering products or parts for patents and backing them up in blockchain. Not only would this speed up the patent creating process, but it could also improve the speed at which violations could be found because a digital master template would be available to easily compare parts.

Blockchain has the potential to solve 3D printing's inherent security risks, help streamline the IIoT, and improve our manufacturing supply chains. As other companies undoubtedly follow in the footsteps of Airbnb and PayPal, adopting technology to diversify and adapt for future success, there are many opportunities for them to explore.