How Companies Worldwide are Using Blockchain Technology in Their Manufacturing Processes

Table of contents

• A quick recap
• The scope of blockchain in manufacturing industry
• What’s driving this growth?
• Blockchain use cases in manufacturing
  1. Improved Tracking and Traceability:
  2. Efficient Procurement of Products:
  3. Better Payment Process:
  4. Efficient inventory management
  5. Elevated customer engagement
  6. Improved data security
  7. Automated supplier payments
  8. Reliability of supplies
  9. Blockchain for manufacturing plants
  10. Warrant Management
• How companies worldwide are using blockchain technology in their manufacturing processes
• Conclusion

A quick recap

When people hear about blockchain, the first thing they associate it with is cryptocurrency. And it’s only fair because that’s where blockchain technology actually began. But as we advanced through the years, the technology evolved and today, it is widely being used as a distributed ledger technology.

We are aware that the technology creates a chain of blocks, where each block contains information and is verified. These blocks are further validated and attached to the chain of transactions and information in the preceding blocks. To put it in simple terms, let’s compare it with Google docs. We are aware that in Google docs, multiple users can access and edit a single document simultaneously. Blockchain works in a similar fashion- one set of data is replicated across multiple locations. But there’s one key difference- unlike Google doc, you can’t edit previous entries, you can only add a new one to the ledger. This feature has led to many industries finding potential use cases of blockchain and the manufacturing industry stands at the forefront of it.

The scope of blockchain in manufacturing industry

Manufacturing sector has emerged as the new frontier for distributed ledger technology.

Across the industry, many innovation-driven companies see a vast potential of improvement in various processes with blockchain development.  49% of these companies believe that blockchain can help ensure better compliance with current and future regulations, 31% state that blockchain can enable better product sales in new markets and 28% think that blockchain can reduce the risk of product recalls.

Whether it is suppliers, procurement, sourcing, shop floor operations or anything related to manufacturing, blockchain offers a completely new way of doing things and has the potential to emerge as a disruptive solution to various functions in manufacturing. With the increasing adoption of blockchain in manufacturing, experts predict that the use of blockchain in the manufacturing market is expected to register a CAGR of approximately 78%.

What’s driving this growth?

It is a known fact that the current supply chain systems are outdated and unable to handle the fluctuations in supply-demand. The recent COVID-19 outbreak is revealing how vulnerable the current supply chain systems are.  According to a Bloomberg report, manufacturers with a presence in China report operating at 50% capacity with 56% of normal staff, average lead times have more than doubled since the end of 2019, 53% have difficulty getting supply chain information from China and 44% of respondents don’t have a plan to address supply disruptions. Even in the U.S, nearly 75% of companies have experienced supply chain disruptions because of transportation restrictions in the light of current pandemic.

Additionally, the manufacturing industry has been struggling to eliminate a number of bottlenecks such as:

• Outdated tech and manufacturing processes: According to reports, every year, inefficient procurement processes cause a yearly loss of $1.55 billion in revenue within North America alone

• Lack of traceability: With increased global trade, it has become difficult for companies to keep track of individual events. This often leads to shipments getting lost, delayed or stolen

• Entrance of counterfeits: Due to loss of documentation, it’s often difficult to avoid the entry of counterfeits in the supply chain, especially in automotive, aerospace and healthcare industries where fake products have higher repercussions

• Lack of accessibility and visibility: There’s a lack of visibility into the procurement process which makes finding the right manufacturing supplier a problematic issue for almost 31% buyers

• Lack of intellectual property protection: In the last 12 months, 39% of businesses have experienced a breach in their intellectual property, making it a top concern for a lot of businesses in the manufacturing industry.

We also talked about challenges faced by manufacturers globally and how they intend to leverage digital technologies to tackle them in Current State of Digital Transformation in Manufacturing: Driving Factors, Opportunities and Learnings. Blockchain can help significantly to overcome these challenges.

Blockchain use cases in manufacturing

The manufacturing industry, that accounts for 17% of the global GDP, has always been plagued with several problems such as quality control, inefficiency and more. Blockchain has the potential to radically transform it by offering visibility across every aspect of manufacturing. Here are 10 potential use cases of blockchain technology in manufacturing:

1. Improved Tracking and Traceability:

An IoT-powered system can be used to track the origin of a manufacturing part from the point of production till retail destinations, thereby enhancing transparency and traceability for everyone in the value chain. The data gathered from IoT sensors can be fed into the Blockchain, allowing for a shared view and ensuring that there are no gaps in handling goods as they move along the supply chain. Multiple processes involved such as documentation, acquiring certifications, timestamps, quality checks, can all be improved significantly with the implementation of Blockchain.

2. Efficient Procurement of Products:

One of the major causes of financial loss for manufacturers has been inefficient procurement of products. The complex supply chain often exposes organizations to risks and unwanted expenses. With Blockchain solutions, companies can streamline and automate their supply chain and speed up the procurement process- both ordering of goods and payment involved.

3. Better Payment Process:

Since Multiple parties are involved in verifying and releasing payments, manufacturers often face delayed payments in addition to the lack of transparency in the payment process. The payment gets stuck at various stages in the supply chain. Smart contract functionality of Blockchain automates the payment process and ensures quicker and guaranteed payment to the suppliers.

4. Efficient inventory management

Because Blockchain enables you to connect with every stakeholder in the supply chain- supplies, distributors or even retailers, the records can be accessed by everyone in the network. This means, everyone holds a copy of the information, thereby eliminating confusion  created in the supply chain processes. This helps to plan and manage inventory better.