Benefits of the blockchain technology in manufacturing

Blockchain technology attempts to address the problems described in the previous section through a common data architecture that allows non-trusting parties to share information in a more secure manner. Blockchains are designed to permanently record transactions, not only currency transactions but also data exchanges, in such a way that the record cannot be tampered with. In contrast, centralized databases can be altered after an entry has been made [5].

The unique design of blockchains can thus enhance trust among organizations, but also add another layer of security and reliability to the supply chain’s information system. By deferring questions of trust to a decentralized algorithm that no party controls, transparency along existing supply chains is ensured and, at the same time, the supply chains become more fluid and dynamic. For producers as well as for consumers, the gains can be translated into improved traceability of goods and work processes and, ultimately in greater efficiency and lower costs [5].

Blockchain technology can reduce the need not only for third parties (e.g. banks, escrow agents, lawyers) but also for accounting functions that measure, minimize or manage risk. It can also reduce the need for, and cost of, the middle managers, who now control such information. In the future, they can be replaced by smart contracts through which trade finance payment terms (e.g. letters of credit) will be automatically managed and prices, terms, and conditions will be negotiated. Digital product memories maintained on the blockchain and connected to validated IoT devices along the supply chain will provide a secure proof of the entire process from manufacturing to quality control. Blockchain-based Public Key Infrastructure (PKI) encryption can protect sensitive intellectual property. The technologies will enable the creation of so-called “trust factories”, which represent decentralized institutions and organizations that provide trust at a far lower cost than traditional providers [7].

Blockchain can also provide the scalability required for “mass customization”, the sales driver, which meets consumers’ needs for specific functions or styles. In addition, mass customization creates a more efficient market environment to easily produce small production runs of unique products. The smart contracts mentioned above will make it both easier and faster for buyers and sellers to find and trust each other and agree on terms. New manufacturing models, such as 3-D printing or agile manufacturing, eliminate the delays and costs of the tooling and production setup that once had to be spread across massive production runs. The combination of blockchain technology and 3-D printing allows organizations to quickly and easily reconfigure virtual supply chains, enable and scale a model of global micro-manufacturing. To ensure better resource utilization, manufacturing flexibilities in production schedules can be tokenized and traded [7].

Overall blockchain can greatly ease the deployment of such distributed manufacturing value chains, as it offers low-cost, distributed and assured integrity for contracts, product histories, production processes etc. The technology also enables the use of smart contracts to automatically locate the most appropriate manufacturer (based on attributes such as availability, price, quality, and location) and automatically negotiate terms (such as price, quality level, and delivery date). Finally, blockchain enables the creation of secure digital product memories – immutable records of everything from the source of the raw materials used, to where and how they were manufactured, to their maintenance and recall histories [7].

When manufacturing and blockchain are combined, these capabilities could result in the following advancements:

  • Boost innovation and economic development by enabling entrepreneurs in even remote areas to monetize their ideas
  • Slash inventory costs and service times by enabling companies to print parts on a just-in-time basis
  • Automate trade finance processes via smart contracts from inside the supply chain
  • Speed the flow (and reduce the cost) of new products
  • Create new market opportunities and increase market efficiencies by facilitating mass customization of products and smaller production runs
  • Monetize local over capacities globally by trading manufacturing flexibilities

Bibliography

[5] “https://www.coindesk.com/manufacturing-blockchain-prime-time-yet-come/
[7]   B.BLECHSCHMIDT, DR. C.STÖCKER. “How Blockchain Can Slash the Manufacturing “TrustTax” ”(https://www.cognizant.com/whitepapers/how-blockchain-can-slash-the-manufacturing-trust-tax-codex2279.pdf)

 

Radu DiaconescuThis article was written by Radu Diaonescu, an electrical engineer by trade having earned an EPFL (Swiss Federal Institute of Technology Lausanne) Management of Technology masters and honed his skills while at Honeywell. He is currently managing Swie.io’s business development efforts and sits on the Board of Directors building the world’s next generation platform for agile manufacturing of electronics.

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Original article: Benefits of the blockchain technology in manufacturing
Author: Paul Viorel