Blockchain is a technology that has found a way to be useful in different fields and industries from the financial world down to even the manufacturing sector. Initially, the technology was restricted to the financial realm, offering incredible services to users and operators in the financial field. As a result of its innovations, a new genre of the financial sector has been created by the infusion of blockchain, which is the decentralized finance space.
Blockchain can have similar effects in the manufacturing scene, as more companies are seeing the need to incorporate the distributed ledger in their operations.
Manufacturing is a complex process, as different components have to be merged to create one product, meaning that it will work better with blockchain. With this relatively new technology, manufacturing companies can easily keep a record of the raw materials, processes, and operations of the production.
Applications of Blockchain in the Manufacturing Sector
Blockchain technology will alter the manufacturing sector in different ways, which will be discussed below:
- Injection Traceability and Transparency
Every aspect of manufacturing needs transparency and traceability, which are key concepts of blockchain. In this industry, multiple processes have to be done before a product is created and released.
Products need raw materials, and every manufacturing company has a procurement team that handles this aspect. With a blockchain-based system incorporated into the architecture of the company, it becomes easy to keep track of the raw materials, their supply, usage, and much more.
Once the data is added to the system, a permanent copy is kept, thereby preventing the alteration of records. Interested parties can view when a particular raw material is finished and needs re-ordering. It also shows the employees that authorized the purchase of raw material, replacement of a machine, and other crucial details. Auditing the processes in a manufacturing firm is a lot easier with blockchain technology.
Not only will transparency and traceability help in the manufacturing process, but it also makes the supply chain seamless. Potential clients can access data concerning the manufacturing process, raw materials, and much more. When considered, this technology could help put firms in this industry on a pedestal in the eyes of their clientele. Consumers are now craving a more open production process.
An example of a company that is using blockchain to improve manufacturing is SyncFab.
According to SyncFab, “Companies building cutting-edge space exploration vehicles, experimental aircraft, autonomous cars, and drones are already using our technology to secure their supply chains, minimize product recalls, counterfeit parts, and intellectual property theft.”
- Regulatory compliance
Manufacturing companies have to abide by regulations churned out by the authorities of the country. Failure to do this comes with penalties, which could include fines and even closure of the company. To avoid this, some manufacturing institutions create a compliance department, and sometimes, it may be difficult to be kept abreast with the regular changes in regulation. With oracle nodes feeding data into a blockchain-based system, the compliance department and operations are alerted of changes in the ecosystem.
- Improves Customer Experience
A manufacturing company is more than a place where products are created. Customer service is also a big aspect because clients can make or mar a company. Blockchain can help to improve customer services by allowing the company to collate data from different sources including feedback from clients, and make necessary changes and forecasts.
Apart from the aforementioned, clients can access a great deal of data concerning the manufacturing process, thereby improving their trust in a company. For companies that have the interests of their clients in mind, transparency of data is important.
Some manufacturing companies are using a marketing intelligence firm with links to blockchain to cater to this, and an example is Digital2Go.
- Reduce Product Recalls
One big problem in this realm is product recalls. Recalls make companies in different fields from the agricultural space down to the manufacturing realm lose billions of dollars annually.
In the agricultural space, according to Food Safety,
“Estimates of direct losses from an 8-day recall ranged from $37 to $74M. One year later, the spinach industry reported a 20% reduction in sales and a $350M loss. In this case, an entire industry was held accountable for the lapse.”
An article by Forbes stated that,
“Typical product recalls cost $8M, and many could be averted with improved track-and-traceability enabled by blockchain.”
“Capgemini found that there was 456 food recalls alone in the U.S. last year, costing nearly $3.5B. Blockchain’s general ledger structure provides a real-time audit trail for all transactions secured against modifications making it ideal for audit and compliance-intensive industries.”
- Smart contracts
An important application of this technology is smart contracts, which allow manufacturing firms to easily draft agreements with other participants that can’t be altered by any of the parties. Smart contracts remove the need to have an intermediary to create an agreement, which may be at risk of errors.
Companies tend to enter into agreements with suppliers, vendors, logistics companies, and so on. Having an efficient way to make this happen is crucial. It is common to see manufacturing companies being sued by different parties for breach of contract, errors, and even misunderstanding, which could have been reduced if a smart contract was utilized. With a smart contract, the different parties to an agreement draft the terms and conditions, which are encoded and can’t be altered, unless every party agrees to the change. Once the smart contract is on its way, the contract ensures that every term is met. It is a smart tool that removes the need for paperwork and unnecessary interruptions from intermediaries. Since it can’t be altered, it makes better evidence for an arbitration case.
- Data Storage and Accessibility
Before a product is manufactured and received by the end-user, a lot of processes have to be undergone, and each process is filled with different participants, which may come with issues if not handled properly.
This is why a distributed ledger that has immutable features is important to the functioning of a versatile workplace. It offers the different participants, from managers down to the engineers a way to access records and documents. When changes are made, records of the participant making the alterations are available. Only those with the necessary authorization can access and make changes in the distributed ledger.
Challenges associated with infusing blockchain technology into the manufacturing industry
Though blockchain may revolutionize the manufacturing industry, it still faces some limitations in the aspect of adoption.
- Lack of technical know-how
Before a company can use blockchain efficiently or any new technology, there is a need for the retraining of staff members to understand the features it offers and how it operates. Re-training staff members is not cheap, and this may discourage some manufacturing companies from incorporating this technology into their architecture. It takes off time from the production process, as workers have to spend time learning about the technology, which may be discouraging.
- Status quo syndrome
Many people tend to prefer using the method that they have utilized for a long time, and any sign of change scares them. They try to fight change of any type. Blockchain comes with change and efficiency, which may be scary. Some workers are averse to change because they feel that it may cost them their jobs.
- Incompatibility with underlying technical components
Before blockchain can work effectively with an underlying technology, the latter has to be modified a bit. Manufacturing companies, at the moment, may feel that it is a hassle modifying their underlying architecture to accommodate blockchain, not minding that it will improve their operations.
To combat this, new solutions that can link a legacy system to a blockchain backend should be created. It will go a long way to encourage more manufacturing companies to incorporate blockchain into their operations. An example of a platform that is developing this feature is Modex Blockchain Database. According to them, they are “a lightweight enterprise middleware that connects legacy databases to a blockchain engine to ensure trust, security, and integrity for enterprise data. Modex Blockchain Database (BCDB) is a hybrid data storage system that combines standard database engines with blockchain frameworks to add unique custom-built functionalities that turn the technology into an effective tool in an enterprise context.”
- Regulatory concerns
The regions where some manufacturing companies reside are anti-blockchain technology, while some governments have been unable to keep up with it. Lack of regulatory clarity is a major roadblock to its adoption, as some companies may feel that using it could open them to scrutiny by the government.
In Conclusion
- Blockchain injects transparency and traceability into the manufacturing sector.
- It makes it easy to abide by regulations.
- Customer experience is imported with the technology.
- Issues like product recalls could be nipped in the bud with blockchain
- Though it is efficient, it is not being massively adopted by manufacturing companies because of issues like lack of technical know-how, status quo syndrome, and so on.
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