• Navigation: Home
  • Midlothian Blog
  • How Blockchain is Leading the Advanced Manufacturing Transformation

How Blockchain is Leading the Advanced Manufacturing Transformation

August 10, 2017 by Midlothian Economic Development


The term ‘blockchain’ is becoming increasingly familiar in the industry, but you’ll be hard pressed to find anyone who truly knows what it is. According to Automation World, a blockchain is “an unalterable peer-to-peer recordkeeping system that enables communities to securely record and share information.” And because of the advancement of manufacturing through the implementation of technologies such as the Industrial Internet of Things (IIoT), artificial intelligence, and robotics, the need for securely recording and disseminating information becomes an increasingly vital part of the supply chain.

And although in its infancy, many are starting to believe Blockchains could be the solution to secure information transmission.

Why is Blockchain relevant?

Blockchain is most widely associated with Bitcoins, a digital currency and payment system that allows users to make peer-to-peer transactions without an intermediary. The transactions are then recorded by a blockchain. Although bitcoin isn't widespread in use for many reasons (volatility and cost mostly), there are certain retailers that accept it as currency, such as Subway, Whole Foods, and Dish Network.

According to Automation World, “each validated transaction creates a block, which attaches to the chain of blocks before it, thereby creating an easy-to-follow trail.” This process is simplified compared to traditional transactions which need accountants and banks to record the transaction.

The beauty of the blockchain is it allows for an information ledger without reliance on a central authority, which has potential benefits for manufacturers who decide to implement blockchains in their supply-chains. As blockchain began as an open source technology, anyone is able to use and implement it without restriction, and update the chain to meet their needs.

Blockchain also prevent people from tampering with records. Due to their transparency in distributing data through multiple blockchain nodes, it is virtually impossible to forge records without being caught.

The Benefits of a Blockchain In Manufacturing

One the biggest benefits manufacturers can reap from implementing blockchains is cutting cost by eliminating financial intermediaries. This means you no longer have to worry about third-parties getting in the way of transactions.

According to Cognizant, one of the leaders in blockchain implementation in manufacturing,”by allowing supply chain partners to begin using it to create trusted relationships without the need for banks or, perhaps, even traditional purchasing processes, manufacturers, suppliers, customers, and machines can find each other and do business much more quickly and inexpensively.”  

By cutting out the middle-man of financial intermediaries, businesses can develop what Cognizant calls “smart-contracts,” allowing manufacturers create terms and conditions that are agreeable to both parties.

The potential benefit of smart contracts is they can strengthen the value chain, which according to Investopedia, is “the process by which businesses receive raw materials, add value to the raw materials through various processes to create a finished product, and then sell that end product to customers.” Through strengthening value chains, there will be a reduction in  transaction cost, improved business relationships, and improved integration of new technologies.

Another benefit is how blockchains can speed-up the supply chain through transparency and traceability. Supply chains are complex, and humans aren’t always able to detect problems in the supply chain and react quickly enough to resolve the problem. A blockchain can help solve this problem. According to Sanjeev Ramakrishnan, general manager and business unit leader at Wipro, “The high visibility provided by this system also enables problems to be detected early in the supply chain and eliminates human intervention in making complex supply chain decisions to speed up the overall supply chain.”

The Challenges Faced With Implementing a Blockchain

As with any new technology, blockchain is not all sunshine and roses. With blockchain technologies still being in their infancy, there is the potential for some challenges when implementing them into your supply-chain.

It will take time for adopters of the technology to develop the skills and the thinking to properly implement blockchains into their supply chains. This can lead to blockchain applications being a costly investment for companies initially.

Integrating a blockchain could also mean totally replacing your existing supply chain solutions, and using large amounts of energy consumption to keep it running. According to Deloitte, “The Bitcoin blockchain network’s miners are attempting 450 thousand trillion solutions per second in efforts to validate transactions, using substantial amounts of computer power.”

Another challenge with any new technology connected to the internet is cyber-security. Bitcoin companies that utilize a blockchain have seen large hacks occur. Bithumb, a bitcoin website, had over 30,000 accounts compromised by hackers this July. One individual lost the equivalent of $870,000 from the hack. So this is definitely an issue to consider before implementing a blockchain into your supply chain.

However, as companies and developers continue to refine and develop blockchains and their implementation, we will continue to see the potential transformative benefits of blockchains to for manufacturers.   


Get the Advanced Manufacturing Infographic Download Now   

Connect With Us!