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6 ways blockchain will benefit manufacturing

Dec. 14, 2018

Enabling smarter contracts and better client relationships.

Once a gleam in the eye of technologists, blockchain is now a reality—and an emerging competitive asset

Productivity Bytes' Kayla Matthews

for business owners and other industry leaders. By the year 2030, the industries-wide "value add" of blockchain technology could top $3.1 trillion, according to Gartner. And yes, that means every industry—from financial services and food-and-beverage distribution to product testing, mining and energy generation.

But even among these many industrial beneficiaries, the benefits of blockchain on the manufacturing industry are worth a closer look…

1. Smarter contracts and better client relationships

One of the first applications for blockchain in manufacturing involves a faster, more secure and more legally binding way to draw up agreements between partners in a complex supply chain. A so-called "smart contract" is an offshoot of blockchain technology. Essentially, it's a bundle of "coded logic" that accompanies entries in shared ledgers. It sounds complicated, but it's not.

It brilliantly combines the process of drawing up legal business contracts with the art of automation. When the procedural and financial conditions of a contract have been satisfied by both parties, this "coded logic" notes the change and signals the business operations described in that contract to commence immediately.

The miniature-scale version would be something like a callback URL, an API or a geo-fenced automated reminder on a smartphone—something that gathers data about two software processes (or business partners) and facilitates the automatic exchange of information or material goods between them. It's a deceptively simple tool that eliminates a lot of busywork and wasted time.

2. Lessen the pain of product recalls

Recalls can be expensive. According to Forbes, the cost of recalling just a single product averages $8 million. Blockchain can help reduce the number of impacted parties when contamination is discovered in a food or pharmaceutical product, or a design flaw or faulty component is found in a more complex piece of electronic or mechanical merchandise.

Additionally, blockchain greatly improves manufacturers' traceability when it comes to finding and isolating faulty or expired materials making their way into finished products—a must-have for any business that's sensitive to safety-compliance regulations and traceability requirements.

3. Data mobility and protection

There are tons of moving parts in manufacturing supply chains. One way in which the immutable record-keeping potential of blockchain benefits manufacturing is by offering a way for designers, engineers, clients, vendors, managers and decision-makers to all retain access to the most up-to-date records, technical documents and, as the case may be, intellectual property and trade secrets.

Blockchain cryptography should help keep relevant parties in the loop and intruders' eyes elsewhere. When an exchange is requested, the details and participants of the exchange—be it data or manufactured goods—are recorded as a "block" in the "chain" that makes up the public ledger. The result is a reliable chain of custody that everyone can see, but nobody can tamper with. Moreover, blockchain relies on individual nodes and peer-to-peer (p2p) data processing, which makes it decentralized and more resilient when it comes to interruptions and unforeseen data-loss events.

4. Prevent counterfeit parts and track material origins

In addition to facilitating a faster response to product recalls, blockchain can also help risk-averse industries prevent counterfeit parts from entering their supply chain. This has been of especially keen interest to consumer-electronics manufacturers recently. In the interest of sustainability and customer satisfaction, manufacturers can also use blockchain to ensure clean and ethical chains of custody for their products.

Thanks to a partnership with IBM, Danish freight giant Maersk, through something called "Hyperledger Fabric," is demonstrating what's possible when immutable recordkeeping is applied to the task of tracking hundreds and thousands of containers and pieces of freight through multiple nations' customs processes, across oceans and through state lines.

Given how stringent safety and quality guidelines can be in the various manufacturing disciplines, having "eyes on" the whole product journey, plus a reliable, trust-proof record of every time an item changes hands and the condition it's in, is an advantage that can't be ignored.

5. Keep assets connected and secure

The advantages of combining IoT and blockchain are obvious. Blockchain provides a way for industrial facilities to immediately identify devices on that network, alter permissions as needed and then communicate seamlessly and securely. Critical machinery and equipment in industrial settings will use blockchain to create foolproof maintenance records, for instance.

In other cases, companies that lease complex machinery, and the companies that provide such equipment, will likely use blockchain in lease agreements to exchange data about how, where and to what effect leased and rented products are being used out in the field.

6. Cleaner exchanges of data between companies and customers

Finally, it's worth looking at how blockchain facilitates the gathering and deploying of data from the client side of the operation. Some manufactured devices will use blockchain to allow product owners to sell back anonymized data gathered by their purchased electronics. This creates an open, crowd-sourced data-sharing portal or exchange, built around the promise of making products and services better for the end user.

Depending on the case, product owners could opt-in to giving back, or even selling back, information to the original manufacturer about how products are used. The company could then incorporate these and other objective measurements into the R&D process.

These and a host of other applications should see blockchain-based tools raise the stakes for some companies and level the playing field for others. In most cases, the shareholders, as well as the public, will benefit from a manufacturing industry that has more detailed and complete records when it comes to compliance, sourcing, process ownership, custody, industrial efficiency and more.

Kayla Matthews is a technology writer who can be reached via her blog Productivity Bytes.