Blockchain is great...but are manufacturers using it?
PwC’s recent survey and report “How can blockchain power industrial manufacturing?” explores how manufacturing companies are using blockchain to streamline operations, transform pricing models and enhance transparency and trust at every stage of the industrial value chain. You can find the report here.
But first, check out the preview with PwC US Industrial Products Leader Jeff Sorensen here:
Smart Industry: How can blockchain change the way manufacturers design/engineer/scale products?
Jeff: In terms of transparency, blockchain is rewriting how firms—including their competitors—interact with one another. The underlying technology fosters trust because it forces companies to cooperate with a common ecosystem.
Perhaps the greatest benefit to manufacturers is blockchain’s ability to seamlessly aggregate information. This is revolutionizing the way manufacturers are going about their operations. We’re seeing early adopters use the technology for supply-chain monitoring, materials provenance and counterfeit detection, engineering design, identity management, asset tracking, quality assurance and regulatory compliance.
Smart Industry: What most surprised you among the findings in the survey?
Jeff: Nearly half of respondents indicated the biggest barrier to blockchain adoption is a lack of trust among users. There’s a level of education that my colleagues and I are trying to raise awareness on. This number needs to be 0% and our job isn’t done until it is. Blockchain is a failsafe system where inputs to the ledger are visible to all parties involved and cannot be altered; there shouldn’t be trust concerns.
I was also surprised by the discrepancy between the number of respondents who said their companies have some form of involvement with blockchain (84%) and those with live projects (15%). It’s great to see enthusiasm and a willingness to explore how blockchain can benefit a manufacturing company, however it’s a more careful and thoughtful approach than what news headlines lead people to believe. It appears companies are taking a slower approach to identifying the gaps in their business strategy and determining how blockchain can help. As we’re in the midst of this Fourth Industrial Rrevolution, early adopters are successfully innovating their business models and becoming industry leaders.
Smart Industry: Explain the concept of the "digital birth certificate" and why this is critical.
Jeff: Taking a step back and understanding blockchain on a very basic level, it’s a reliable tool that establishes and tracks virtual credentials. These credentials will be labeled according to the purpose they serve. For example, as it applies to an individual, we’re seeing educational institutions like MIT create digital diplomas for recent graduates. Digital diploma, digital birth certificate, they’re all interchangeable names supported by the same technology.
As it applies to manufacturing, let’s use the aerospace industry as a great example. A plane, depending on size, will have a range of individual parts from hundreds of thousands into the millions. Blockchain generates a digital certificate for EVERY part installed in a plane from the onset, hence why we call it a digital birth certificate. The payoff is in the long run because every time a part is serviced or inspected by a technician, it will be logged accordingly based on when, what part was attended to, where it was done, and the identify of each technician with whom the part has interacted.
These digital certificates are critical because a blockchain-powered solution can give the right stakeholders a view of that part from birth to current day, while withholding data from others to avoid revealing proprietary information or trade secrets.
For example, an airframe manufacturer or airline implementing such a solution might be able to see the condition, usage, installer and manufacturer of all parts on each of its planes, while a parts manufacturer could only see aircraft in which its products are installed, but not those installed with a competitor’s product. Nonetheless, even this level of visibility would give unprecedented clarity into its true market share.
Smart Industry: The report notes two notable pain points: materials provenance/counterfeit detection and engineering design for long-duration products. What are the solutions?
Jeff: Every industry, unfortunately, has to deal with counterfeiting and piracy, and manufacturers are no stranger to this. But with a blockchain solution, manufacturers are able to track the origin of materials and their journey throughout the supply chain. A few years ago, we saw a major steel company falsify inspection certificates for products they were selling, which created a ripple effect felt by global supply chains. Blockchain takes a manual process littered by human error (whether intentional or not) and reduces the time and cost of doing business while increasing the overall level of trust between parties. Not only is blockchain creating upfront solutions, it makes it easier to backtrack parts and supplies to find the root of a problem.
When dealing with long-duration and highly complex products, it’s all too common for delays in sharing updated engineering specifications. This is happening simultaneous to parts-supersessions, which increases reworks and delays the final delivery of a product. The solutions are addressed in the aerospace example above on digital birth certificates.
Smart Industry: Where are the auto and A&D industries regarding blockchain adoption?
Jeff: It’s difficult to apply one label to the auto industry. While we’re certainly seeing elements of blockchain used across the entire automotive landscape, there are manufacturers and suppliers that lag behind more tech-savvy peers who are creating smart sensors and lidar. The most vocal proponents of blockchain are the car manufacturers themselves; they want greater visibility downstream into their supply chain to make sure the companies they’re working with are sourcing parts ethically.
Similar to the auto industry, A&D is difficult to apply a broad label to. Both of these industries have some of the largest and most complex supply chains out there. The findings from our global blockchain survey paint a really clear picture on which industries are early adopters vs. laggards. Bitcoin and other financial applications of blockchain may be leading the charge, but companies in the industrial-manufacturing sector are also developing innovative commercial solutions based on the technology. Manufacturers are quietly experimenting with blockchain use cases that are rewriting how firms interact. It will be interesting to track the year-over-year changes in our blockchain surveys to see the shift from R&D and piloting to live projects.
