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BLOCKCHAIN TECHNOLOGY Leveraging blockchain in manufacturing

Dec 7, 2020

With manufacturing industries now running towards technologies that streamline their operations, it is the perfect time for them to think about using blockchain technologies for the coming period of evolution. In this article, Frost & Sullivan – a company integrated research & analysis, collaboration & networking to help CEOs’ growth teams to identify opportunities, analyses how blockchain helps interconnecting of manufacturing systems for efficient manufacturing, create a transparent supply chain and helps customer make a much more informed decision. - Vignesh Kumararaja, Consultant, Manufacturing & Process Consulting Practice, Frost & Sullivan

The manufacturing sector has always been a front runner in using advanced technologies to become efficient and competent. In the era of cyber-physical systems, the quantity of data from Internet of Things (IoT)-enabled field systems is massive and unimaginable. Data security and transparency are vital to a future-ready manufacturing ecosystem.

Blockchain technology is an enabler of advanced data management in manufacturing. This technology stores information in a block with immutable timestamping. These blocks of information are stored in a chain of decentralised networks for transparent and secured data exchange. Utilising the features of blockchain technology in the value chain will shake up manufacturing in the future. It is the right time to leverage blockchain technology and find solutions for roadblocks to the next-generation manufacturing.

Connected value chain

A transparent value chain is one of the key differentiators for an efficient manufacturing organisation. The MIT Center for Transportation and Logistics defines supply chain transparency as ‘accurately identifying & collecting data from all links in one’s supply chain’. Blockchain establishes end-to-end visibility in the entire value chain with improved data integrity. It can easily connect stakeholders, from material supplier to the end customer, in a digital thread, without compromising the data security.

Empowered customers

The customer has a right to know the quality, safety and other important aspects of the product. The present manufacturing system gives assurance on quality through various third-party certifications. Imagine a car buyer validating the results of the safety test that happened during production or a truck driver having access to the pressure-testing performance of the tires. Blockchain technology will empower customers to validate the critical aspects of products by providing the necessary information as an essential part of the product or service. Manufacturing in the future is all about empowering customers, making them confident and providing all the required information.

Smart supplier management

A conventional manufacturing system has many silos in supply chain management that are connected digitally. In general, multiple functions are involved in approving the order fulfilment for suppliers. For better understanding, let’s trace the conventional material and information flow in manufacturing. Incoming store checks for on-time delivery, the quality function acknowledges the quality and the procurement team measures the operational performance of the supplier. After receiving validation and approval from all the stakeholders, the finance team processes the payment. In this overall process, due to the lack of data integrity, manufacturers repeat the inspection and validation process at multiple stages. Smart Supplier Contract powered by blockchain automates the execution of the contract once the defined criteria are met. It slashes the lead time, avoids duplication and eliminates human efforts.

OEM-driven maintenance

In manufacturing industries, the plant maintenance team is responsible for maintenance and the role of Original Equipment Manufacturers (OEMs) is limited. IoT-enabled machines are equipped for data exchange within the organisation and the maintenance team has to interpret the data for decision-making. With blockchain, OEMs can connect directly to the machines and monitor all of the critical machine parameters for healthy operation. If required, OEMs may also inform the plant management about the periodic maintenance, timely replacement of spares and forced deteriorations. IoT and blockchain will change the plant maintenance team dramatically in the future. Technology makes the maintenance team’s job easier and empowers OEMs to extend service to improve machine performance and lifetime.

Optimum inventory

High inventory turns are mostly due to the disconnected supply chain and ambiguous stakeholders. Blockchain connects all stakeholders, such as suppliers, distributors, retailers and transporters, in the network. Real-time stock is visible across the supply chain and enables tight inventory control.

Improved traceability

Traceability is an important concern in all forms of manufacturing. The automobile industry requires the traceability of hundreds of sub-parts in the vehicle to ensure performance. Traceability in the food industry is for legal compliance and to strengthen the quality & safety of the product. Blockchain provides a solution for carrying the information across all stages of the product lifecycle.

Industrial Internet of Things (IIoT) & blockchain

IoT is revolutionising manufacturing through sensors and edge devices. Data collected at field systems is computed for intelligent and automated decision-making. IoT architecture is making factories smarter and more efficient in operation. However, IoT-enabled field devices connected for data capturing are growing exponentially every year and have made data security a real concern. Blockchain is safeguarding the IoT systems from security breaches. It connects with IoT and makes Machine-to-Machine (M2M) information exchange more reliable, eliminating the problem of data fudging. The combination of IoT and blockchain has multiple advantages and permits smart systems to work independently in a decentralised network.

Challenges of adopting blockchain

Blockchain is beneficial in several ways because it provides visibility, traceability and improved automation. It also has various implementation challenges, including:

  • Scalability: A large storage space is required for blockchain technology to store information. The concept of a secure platform that verifies information exchanges also leads to a scalability problem. According to our analysis, the blockchain platform needs 10 minutes to process a block of 1 MB.

  • Speed: Scalability restrictions reduce transaction speed. As technology evolves, transaction speed will also increase gradually.

  • Performance: Each transaction is updated in all corresponding ledgers, which is more time-consuming. The size of the information is proportional to the size of the ledger and reduces the performance and velocity.

  • Standards: Existing legal and regulatory frameworks for blockchain need more clarity. This limits blockchain adoption and implementation.

Increasing transparency and reliability

Despite these challenges, blockchain technology has the required features to revolutionise and transform the manufacturing sector. Blockchain is an innovative and evolving technology for the future; its inherent characteristics will help manufacturing industries become more transparent and reliable.

Image Gallery

  • Manufacturing value chain

    Manufacturing value chain

  • Stakeholders’ impact in the value chain

    Stakeholders’ impact in the value chain

  • Vignesh Kumararaja
Manufacturing & Process Consulting Practice
Frost & Sullivan

    Vignesh Kumararaja


    Manufacturing & Process Consulting Practice

    Frost & Sullivan

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