Industry Insight: When it comes to blockchain, manufacturers should believe the hype
Every so often, a technology comes along with such enormous promise that it’s hard to quantify its true potential. The emergence of blockchain, the underlying architecture for the Bitcoin cryptocurrency, represents one such moment in time.
Blockchain is a distributed ledger that maintains a continuously growing list of records, secured from tampering and revision. It’s already proved its worth as a means of recording peer-to-peer digital currency payments.
But blockchain has many other applications in wider areas. It could, for example, offer huge benefits in the supply chain, providing an immutable means of logging transactions and storing documents that have been exchanged between business partners. At present, every time a shipment makes its way across the world, a huge amount of documentation such as bills of lading, invoices and other forms of authentication are created. But what if the flow of materials, contracts and payments as goods are transported could be recorded on the blockchain? That could offer near real-time visibility of supply chain activity to registered partners, enhancing security, reducing fraud and cutting bottlenecks that arise from third party verification.
Supply chain financing is another area where the blockchain could re-engineer existing business models. Invoice settlements could be automated over the blockchain for members of the network without the need for a third party such as a bank, reducing individual transaction times to a matter of minutes, minimising delays across the supply chain.
Indeed, some of the world’s biggest industrial players have already recognised the potential of blockchain in supply chain and logistics applications. IBM and the global transportation giant Maersk, for instance, are developing a collaboration to use blockchain technology to help manage and track the paper trail of tens of millions of shipping containers across the world, effectively digitising the supply chain process from end-to-end.
Then there’s the Internet of Things, which is being used by a greater number of manufacturing companies to establish new business models. Blockchain could provide an authentic means of enabling data to follow physical objects or services. The promise of tamper-proof records to make it easier and less expensive for original equipment manufacturers and their customers to transact with one another in a verifiable way would represent an exciting advance, especially as companies look to establish new servitisation contracts which are based on the flow of many small transactions via machine-to-machine communication.
What’s really exciting about blockchain is that no-one really knows how it will end up being used. The technology could be really powerful in cases where multiple partners share data and these actions need to be recorded. That provides enormous opportunities across multiple applications. No wonder that big companies like Airbus, Daimler, GE and Siemens all have dedicated teams trying to understand the value it might bring to their organisations.
There’s no doubt that blockchain carries the full weight of expectation – but from early indicators, it’s a technology that could well be worth the hype. More insights on this topic can be found in our new whitepaper entitled 'How manufacturing companies can benefit from the transformational power of blockchain' - available for download using the form featured on the left hand-side of this page.
Author: Lee Hibbert, Industry Analyst and Content Director, Technical Publicity (Editor of Professional Engineering, February 2010 - January 2016)
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