Unblocking the chain with blockchain

By - World Manufacturing Journal

Unblocking the chain with blockchain

Manufacturing supply chains can provide an utterly perplexing network of exchange with which companies must contend.

For a global manufacturer, shipping new equipment and service parts across the world, such exchanges present an array of accountability, audit and ethical challenges. Companies with nuanced supply chains often rely on parts that are moved across national borders. Suppliers must ensure each element of their supply chain upholds the ethos of the company while operating at maximum efficiency.

Disruption to the supply chain can be hugely detrimental to any business. Any delay in the shipment of parts can grind manufacturing assembly lines to a halt, with each hour of delay causing a domino effect throughout the rest of the business. The consequences of inaction can be catastrophic.

Global manufacturers operating in the 21st Century cannot afford to receive a message such as “shipment on hold” without fully understanding the background to it and having the chance to pre-empt the disruption altogether.

For British-based manufacturers, Brexit and the transition phase poses a further threat to the smooth running of their vast supply chains. Car manufacturer Nissan has stated that its primary Sunderland plant only holds half a day’s stock at any given time, which is a stark figure given it uses five million parts a day. Nissan described any potential disruption to its supply chain as “a disaster”.

Fortunately for manufacturers, solutions rooted in automation and digitisation provide an answer to these pressure points.

What is blockchain?

Coordinating a comprehensive supply chain requires shipments to be signed off by a multitude of organisations, a process that can involve hundreds of messages going back and forth across multiple communication channels. If one of these organisations loses a form, or one of the vital communications goes awry, a manufacturer could be looking at months of delay. One such solution to this issue is blockchain technology, which many experts are touting as having the potential to revolutionise the global manufacturing and logistics sectors.

Blockchain technology, sometimes referred to as Distributed Ledger Technology, is a decentralised record containing information about the origin and path of any asset, making pathways unalterable and transparent via a decentralised online interface. Blockchain has long been synonymous with cryptocurrency and the recording of digital assets.

While its original use was for an ultra-transparent ledge from which Bitcoin could operate, industry specialists are currently looking to extend its uses beyond cryptocurrencies as a revolutionary technology for manufacturing supply chains. Asset records are distributed in real-time across the entire supply chain, as opposed to being copied or transferred on an individual basis.

A simple analogy for its functionality is using a live, cloud-based google document as opposed to a group of people sharing a single document of many versions. Obviously, a large manufacturing supply chain dwarfs this in terms of complexity but the principles of openness and transparency remains consistent.

Getting to the root cause

For a global manufacturer, awaiting news on part of their shipment, blockchain technology provides real-time updates surrounding the status of that part. Blockchain does not fundamentally alter the functions of a given supply chain. However, it can have a drastic impact on results. While officials await the transfer of a container to port, they can submit electronic approvals, which are then confirmed by blockchain, generating a smart contract and releasing the shipment.

With each part of the supply chain receiving unfiltered, unaltered updates, all stakeholders remain constantly informed. Furthermore, in an age where supply chain leaders are trying to shift away from transitional, reactive responses to faults, whereby part of the chain must break before something is done, blockchain offers a more proactive means of fixing issues. In addition, it keeps all elements of the supply chain informed about the reason for failure, allowing manufacturers to root out future problems quickly.

Another unique aspect of this technology lies in its verification potential. Through blockchain, a supplier can be pre-verified using comprehensive data sets that provide a proper audit trail of a supplier’s business. Ultimately, this can reduce supplier registration from weeks to days. This type of cross-supplier network will provide a major competitive advantage to manufacturers that choose to embrace it.

Innovation in all sectors

In 2015, US fast-food outlet Chipotle experienced a major E. Coli outbreak among the companies in its supply chain. The company failed to properly contain the outbreak, largely due to undigitized processes that did not allow it to locate the source of the infection and prevent its spread. The result was 55 infections across 11 US states, hospitalising 21 people.

While the end result does not often endanger life, manufacturers share many of the same issues that Chipotle had in 2015; most notably, a supply chain in dire need of modernisation. It is vital that both manufacturing and logistics sectors move to a more proactive means of dealing with chain breakdowns. However, achieving this in practice may be easier said than done. The ocean freight industry, upon which global manufacturers are largely reliant, accounts for some 90 per cent of all goods traded worldwide. This sector largely remains reliant on floods of paperwork and the exchange of spreadsheets via email for approval. To see the benefits of blockchain realised, this will need to fundamentally change.

Three crucial factors to implementation

While many experts tout the potentially revolutionary impact of blockchain technology, several challenges must be overcome if supply chain and logistics specialists are to truly allow blockchain to permeate throughout the system.

Firstly, all parts of a supply chain must operate under strict and consistent standards of data integrity and security. Traceability must be apparent across all data that is shared, either within or across the companies that make up a supply chain. If there are shortcomings within the chain, a cyber-attack risks bringing down the entire system.

In order to foster sufficient trust in the technology right across the supply chain, all suppliers must be able to operate knowing that data confidentiality is of the utmost importance. Limiting data that is shared across the chain to essential information only is crucial to ensuring better confidentiality while allowing for greater trust and visibility.

Finally, any manufacturer looking to implement blockchain across a global supply chain must be able to convince all parts of the chain that it is worthy of their investment. All companies involved must believe it is worth their while and that resources are being well attributed in becoming part of a large, cross-sector network. Convincing all stakeholders in a chain that there is a clear and rapid return on investment, both in time and in money, could be a challenge until the evidence base of success builds up.

Once supply chains have significant buy-in from all parties, information must be shared in a way so it is understood by every part of the supply chain. While most companies claim to strive for collaboration across all areas of work, it is easier said than done to collaborate with dozens of interlinked but wholly separate companies from different sectors.

Manufacturers striving for transparency across enterprises should look to develop an ecosystem of participants who share the same enthusiasm for cross-sector collaboration. Furthermore, the platform through which the technology is provided must be neutral and have an appreciation of the challenges experienced by members across the chain.

What comes next?

It remains to be seen how successful manufacturers will be in transforming their supply chains in a way that will facilitate blockchain implementation. There are many moving parts to be addressed and not every sector has reached the required level of digitisation to facilitate such revolutionary technology.

With consumer demand only going in one direction, companies need proactive approaches that facilitate product uptake. Therefore, manufacturers will increasingly have to manage their ever more complicated supply chains with rapid and proactive responses. The faster companies can move away from paper-based, error-prone processes, the better.

#WMJ #WMJnews #WMJDevelopment