Disrupting Industries with Blockchain: Manufacturing

Benefits, challenges and practical use cases

This is Part 1 of the series of articles “Disrupting Industries with Blockchain” dedicated to the sectors which are bound to be shaken by the most innovative technology of our time. 

The manufacturing industry is contributing to a significant portion of the GDP worldwide. You could easily see this in America where only last year,  the manufacturers equated for $2.33 trillion to the U.S. economy This equals of 11.7% of the nation’s economic output. Moreover, 1 dollar in manufacturing output contributes roughly $1.89 to business growth in related sectors.

Challenges & Benefits

However, the manufacturing sector is faced with challenges. Supply chains grow ever more complicated and entangled as the economy continues to globalize. At the same time, with the lack of skilled professionals, managing those supply chains an expensive and headache-inducing task. If employees competent replacements don’t continue to arise, this will without a doubt affect the bottom lines in manufacturing. That’s the reason why there are projections that blockchain technology is a solution to make the supply chains easy to manage and sustain production levels to create efficiency within the industry.

The benefits of applying blockchain to the manufacturing sector include:

  • Record-keeping: secure, auditable and immutable records of events throughout the supply chain
  • Smart Contracts: self-executing contracts which can automate lengthy and inefficient processes
  • Transfer of Value: issue new or exchange of ownership without intermediaries

Use Case 1 – Supply Chain Management

According to the 2014 Travelers Business Risk Index, about 78% of manufacturers worry about supply chain disruptions, and at the same time only 19% plan for them. Other data reveals that between 2017 – 2014 the waste and abuse fraud risk in supply chain increased with 10% up to 35%. In 2017, for a third consequential year, Deloitte reported the highest levels of supply chain abuse in comparison to any other industry with 39% of the interviewed reported at least one case of fraud in last year.

Manufacturers could apply blockchain as a way to minimize supply chain disruption and quell their supply chain-related uneasiness. According to an article by MH&L, within the next year, around 60% of major manufacturers will turn themselves to digital platforms, which will be responsible for supporting functions that account for 30% of their revenue. What’s more, by 2021, 20% of the players in the manufacturing sector will use some combination of IoT, AI, and blockchain technology.

Use Case 2 –  IoT Device Authentication

Being able to secure and limit particular data to those who possess the needed authorization is not a revolutionary thing. IoT Device Authentication is one thing that manufacturers rely upon in order to dismiss inefficiency and increase profits.

For the period of one year, between 2016 and 2017,  there has been an 84% increase in the IoT network connections in the sector which compared to the energy sector the percentage was only 41. The International Data Corporation predicts that by 2022 “35% of manufacturing organizations will have created new ecosystems by implementing AI- and blockchain-centric platforms, thus automating 50% of processes.”

Additional Use Cases of Blockchain in the Manufacturing sector

Optimized communication across the supply chain and back office

  • KYS – Know Your Supplier
  • Provenance – receive  information about products and their origin
  • Events tracking on the supply chain:
    • Order or sell, track and pay for goods once they arrive at their destination
    • Documentation would be created, updated, viewed or verified by parties on the blockchain
    • Payments could also be initiated seamlessly between parties throughout the process based upon agreements
    • Connected IoT sensors and smart devices could measure the condition of containers and other information that can be recorded on the blockchain and inform final settlements e.g. if goods have been damaged

We can confirm that the manufacturing sector will continue to transform. Whether your area of work is supply chain, operations or service, having digital capabilities as a means to create business value is critical to success.

No doubt that the manufacturing industry is one of the areas with the highest potential for blockchain disruption. With the more and more automated systems are on the rise, organizations need interoperability protocols to make sure that their systems talking to each other, regardless of whether or not they were implemented at the same time. At the same time, they need improved data system for tracking that has the ability to classify every step in the process so that issues can be rapidly resolved.