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Blockchain and the manufacturing supply chain

10 February 2020

Blockchain is changing the way trust, transparency and revenue in manufacturing supply chains is viewed, says Karthik Sundaram, program manager – industrial at Frost & Sullivan. 

Blockchain is a digital ledger that can be used to store, record and manage transactions. Originally created to support financial transactions with the aid of smart contracts, it can support the transfer of any data or digital asset. As records along the chain are stored and distributed across different nodes in the network, it is difficult to counterfeit these records, making Blockchain a secure, immutable and transparent way to record and service transactions. This advantage strengthens the cause for Blockchain applications outside of cryptocurrency exchanges.

Much of the potential for Blockchain in manufacturing has, to date, remained theoretical. Globally, factories manufacture products in huge volumes. However, there is still no guaranteed method of knowing how, when and from where these products originate. In almost every case, the journey of a product to the end user remains unseen, resulting in a lack of transparency, despite the fact that over 50% of customers today are seeking transparency in the production process. 

If a manufacturing supply chain can be made transparent, everything could be monitored and made visible to all stakeholders. This will help manufacturers establish trust in the system and their products. 

One of the key areas where Blockchain can bring value is in the audit trail. Currently, there is no uniform standard to aggregate and share data. Modern supply chains need a system that can enforce standards for parties to access the full set of data they require. Essentially, this is the purpose of a Blockchain. If there are defective products in a supply chain, they could be easily tracked across entities in a way that has never been done before. Instead of shuffling through a bulk of papers, bills, files, data and emails. A blockchain-based system could track goods with certainty throughout their journey.

Uniform, aggregated data will also allow manufacturers to perform higher levels of predictive analytics. One of the biggest challenges in modern supply chains is the ability to get all of the data in the right place, at the right time and within the same framework. Blockchain would help realise this scenario. It would allow data to be used along with several other technologies – such as artificial intelligence – to maximise efficiencies. This data could also be sold, providing companies with an extra revenue stream. For example, Blockchain can support new maintenance approaches (such as automated service agreements) and shorter maintenance times. Blockchain can also support more complex machine-as-a-service (MaaS) applications by facilitating IP protection, documentation management, and performance tracking.
 
But, is blockchain ready for factories? Yes, says Frost & Sullivan. It is confident that blockchain will have a critical role to play in shaping the future of factories. Undoubtedly, it will bring greater efficiencies to the supply chain, better coordination in automation, and maximum transparency when dealing with counterfeit trade. However, it believes that the rising diversity of applications and the complexities of manufacturing supply chains could delay blockchain adoption. The transformation will therefore require proactive collaboration among manufacturers, policymakers, scientists and technology investors underpinned by new platforms that can support this transformation.


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