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Blockchain Technologies for Engineering: What’s Next?
Crypto-currencies like Bitcoin have been around for a while. Yet, most people seem mystified by the concept of how virtual end-to-end transactions work. Fewer people probably have an inkling about the potential benefits/uses of blockchain technology for large organizations, particularly those with large-scale supply operations. Here, we take a closer look at the emerging uses in manufacturing, and what technological advancements we can expect in the near term.
So, what are the essential elements of blockchain and how does it? At its core, blockchain is a database, which simply is a collection of information that organizations store electronically on a computer system in a format to allow for easy searching, filtering and retrieval for specific information. While this basic definition seems to describe a spreadsheet, there are a few critical differences relating capacity and accessibility. Spreadsheets store limited amounts of information for one or a small group of people. Databases store large amounts of information for easy manipulation and retrieval by any number of users, each of whom can “customize” search criteria to meet their specific needs. Several people can access the database simultaneously. Databases can archive data on servers that comprise hundreds or thousands of computers that enable the computational power and storage capacity that is necessary. Control of databases often vests in an administrator who “owns” the content, accessibility, and integrity of the information. Another key difference is that a blockchain collects and stores information in “containers” or blocks, each with its own storage capacity. When a blockchain reaches capacity, it is linked or “chained” to a previously filled block – thus the name, “blockchain.” In case you ever need to explain the concept to someone clearly and simply, “a blockchain is a shared, time-stamped, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network.” For a deeper dive into the key elements of a blockchain, interested readers can click on this hyperlink.
The next inquiry is how blockchain works with business transactions. There are several types of blockchains, including “permissioned” “private,” “consortium” and “public.” The focus of this article is on business uses. Therefore, we will not go into public blockchains that anyone can join, such as Bitcoin, where drawbacks can include little or no privacy for transactions and weak security. Limited access, secure transactions are critical considerations for business.
The other types of blockchains are more suited to business transactions. The main benefits of those are that a business can track and trade any asset of value, whether tangible or intangible (e.g., intellectual property) at reduced cost and risk for all parties to the transaction. Those with permission to access get a “transparent” view of the information at their convenience. Because each “permissioned” user sees the same transparent information as the other permissioned users, the human to human interaction between the parties is reduced or bypassed completely so there is only one version of the truth. With immediate access to the most recent information, there is no need to wait for a telephone call, email, etc. from one of the parties. Today, businesses run on information. Faster and more accurate information can give a business a significant competitive edge. These include, banks, investment firm, and healthcare organizations, and any organization, in fact, that is in a competitive market.
It is important to note that all types of blockchains are susceptible to cyberattack. All organizations using or considering blockchain applications consider all layers of security in their technology stack, including how to manage governance and permissions for the network and security controls specific to blockchain solutions like identity and access management, data privacy, secure communication, transaction endorsement, smart contract endorsement, key management, and disaster recovery for participants. For additional detail, see this IBM-sponsored website.
With this primer on business blockchain solutions and considerations, what are some emerging trends for manufacturers? There are several. Improved track and trace capability with blockchain technology can save manufacturers money in the costly product recall process recalls cost manufacturers $8M on average). Similarly, blockchain is revolutionizing track and trace, warranty management, maintenance, repair and overhaul for smart, connected products (IoT). By improving supply order accuracy, product quality, manufacturers will be able to meet delivery dates, improve quality thereby improving customer service and increasing sales. According to a recent Capgemini survey manufacturers cite gaining cost savings, enhancing traceability and enhancing transparency are the top 3 drivers attracting them to blockchain technology, followed closely by increasing revenues and reducing risks. As for the trends in the next 3 5 years, participants in the same survey found that digital marketplaces, tracking critical supply chain parameters, tracking product/component quality, preventing counterfeit products, and tracking product maintenance will spark the greatest adoption.
According to Gartner, the value-add to businesses will grow to $176B by 2025, then exceed $3.1T by 2030. Further, Gartner predicts that 30% of manufacturing companies with more than $5B in revenue will have implemented pilot projects using blockchain (up from 5% today). As businesses are discovering, blockchain technology has many applications beyond crypto-currency – ones that are revolutionizing the core of the way we do business.