Why blockchain will be a gamechanger for manufacturers
The world as we know it has changed significantly in the last decade. As Executive Chairman of the World Economic Forum, Klaus Schwab, said way back in 2015, we are currently living through what could be considered as the Fourth Industrial Revolution.
Robotics, AI, quantum computing, fully autonomous vehicles and more are changing the way we work, the way we communicate and, importantly, the way we store and share information.
The manufacturing sector is no exception, and it is currently seeing a resurgence of interest in next generation technologies, with blockchain in particular capturing the imagination of many. Its application in cryptocurrencies, the broader ramifications of being able to store information in a decentralised manner, and its facilitation of smart contracts could pave the way for a complete overhaul in the way we make new products. But what exactly is blockchain technology, can it be beneficial to your business and if so, how?
Going back to basics
Put simply, blockchain is a technology that represents an advancement in the way that information is recorded and held. Fundamentally blockchain is a database, or ledger, of information, however its technical composition means that users can have absolute confidence that the data being displayed is complete, accurate and, by all intents and purposes, infallible: once information is written onto a blockchain, it is (close to) impossible to change that information. Blockchain also works on a distributed basis, which means that the ledger of information is not held in one, single location but concurrently on multiple computers across a network. To use a very rudimentary analogy, picture a write-only Excel spreadsheet (where new cells can be added but existing cells not amended), of which a copy is held by every party that could want to view it.
The benefits of a blockchain from an information storage perspective are threefold. Firstly, the information can be considered as up to date and accurate because, when information on a blockchain ledger is updated, everyone who holds a copy of that information on the blockchain network is notified of the update. Secondly, the information can be considered secure, as it is not held in a single place, so there is no centralised point of failure, and equally, no single party can force an update on their version of the information, because all other parties are holding a different version. The final benefit is efficiency. As all participants with access to a blockchain network hold a copy of the information, there is no need to go to an intermediary or third party to ask for it, which can take time, extra costs, and another layer of unnecessary process. Everyone has equal access to all the information held.
So how do these benefits correlate to a real-life scenario? Imagine if you are going to your local supermarket and want to buy salad that is organic. How confident are you that the packaging is factual and not a marketing ploy? In this scenario, you would have to take the packaging at face-value, but if you applied blockchain technology to it, by simply scanning a QR code a customer could have access to every facet of information, ranging from where the salad was grown, how it was transported, stored, packaged, and ultimately placed on the shelf of the store you are attending. This has much broader industry-wide ramifications because, after all, how do manufacturers cross reference the information that is presented to them? What measures do you take to confirm that the information is correct, and what cost or time is incurred in doing that?
For manufacturers, blockchain technology could help build transparency throughout the entire supply chain, ranging from quality assurance of the source material used in a product, tracking or tracing the product to your distribution network, and ensuring that the product is not counterfeited during its journey. From an auditing and accountability perspective, the utilisation of this technology can be revolutionary. For example, a manufacturer releases a product that includes parts from multiple suppliers and finds out that the product contained one faulty part, resulting in a product recall. By using the blockchain to track who the supplier was, they can contain the issue quickly and easily whilst reducing the time and costs required to do so.
Additionally, blockchain technology can facilitate the use of smart contracts, which are pre-programmed transaction protocols that are automatically executed once the terms of a contract are met. For manufactures, this can mean significantly reduced turn-around times, lower transaction costs and far less paperwork for both buyers and sellers.
While blockchain roll-out blockchain across the sector is still in its infancy, there are early adopters – particularly in the automotive industry – that are leveraging the technology. For example, German car manufacturer BMW launched ‘PartChain’ in 2020, a blockchain platform that allows the company to track a component’s journey from its origin to the factory. By adding its suppliers to the platform, BMW will have what is essentially a complete view of its supply chain, allowing for significantly improved compliance and a clearer audit trail. For manufactures that rely on an international supply chain, the opportunities of rolling out this technology, and the benefits of doing so, are limitless.
Although many applications of the technology are still in development, or even merely theoretical, its potential to impact supply chain and the broader manufacturing sector cannot be understated. It is our view that those companies that can identify opportunities for using blockchain in their business – and implement it successfully – will almost certainly gain an advantage on their competitors. Therefore, the time is now for the c-suite to arm themselves with an understanding of how blockchain works and, arguably more importantly, the benefits it can offer so when that the right opportunity for their business to embrace blockchain presents, it can be grabbed with both hands. Ignore blockchain at your peril; if wider adoption begins to take place it could be a gamechanger for the manufacturing sector.
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Gartner: Leaders Lack Skilled Smart Manufacturing Workers
With organisations rapidly adopting industry 4.0 capabilities to increase productivity, efficiency, transparency, and quality as well as reduce cost, manufacturers “are under pressure to bring their workforce into the 21st century,” says Gartner.
While more connected factory workers are leveraging digital tools and data management techniques to improve decision accuracy, increase knowledge and lessen variability, 57% of manufacturing leaders feel that their organisations lack the skilled workers needed to support their smart manufacturing digitalisation plans.
“Our survey revealed that manufacturers are currently going through a difficult phase in their digitisation journey toward smart manufacturing,” said Simon Jacobson, Vice President analyst, Gartner Supply Chain practice.
“They accept that changing from a break-fix mentality and culture to a data-driven workforce is a must. However, intuition, efficiency and engagement cannot be sacrificed. New workers might be tech-savvy but lack access to best practices and know-how — and tenured workers might have the knowledge, but not the digital skills. A truly connected factory worker in a smart manufacturing environment needs both.”
Surveying 439 respondents from North America, Western Europe and APAC, Gartner found that “organisational complexity, integration and process reengineering are the most prevalent challenges for executing smart manufacturing initiatives.” Combined they represent “the largest change management obstacle [for manufacturers],” adds Gartner.
“It’s interesting to see that leadership commitment is frequently cited as not being a challenge. Across all respondents, 83% agree that their leadership understands and accepts the need to invest in smart manufacturing. However, it does not reflect whether or not the majority of leaders understand the magnitude of change in front of them – regarding technology, as well as talent,” added Jacobson.
Technology and People
While the value and opportunities smart manufacturing can provide an organisation is being recognised, introducing technology alone isn’t enough. Gartner emphasises the importance of evolving factory workers alongside the technology, ensuring that they are on board in order for the change to be successful.
“The most immediate action is for organisations to realize that this is more than digitisation. It requires synchronising activities for capability building, capability enablement and empowering people. Taking a ‘how to improve a day in the life’ approach will increase engagement, continuous learning and ultimately foster a pull-based approach that will attract tenured workers. They are the best points of contact to identify the best starting points for automation and the required data and digital tools for better decision-making,” said Jacobson.
Long term, “it is important to establish a data-driven culture in manufacturing operations that is rooted in governance and training - without stifling employee creativity and ingenuity,” concluded Gartner.