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Jeffrey Rowe has more than 40 years of experience in all aspects of industrial design, mechanical engineering, and manufacturing. On the publishing side, he has written well over 1,000 articles for CAD, CAM, CAE, and other technical publications, as well as consulting in many capacities in the … More »
What’s Blockchain Got To Do With Manufacturing?
November 30th, 2017 by Jeff Rowe
One of the most interesting, but mysterious and most misunderstood technologies in the digital realm are blockchain and bitcoin. Blockchain, specifically, is also the technology with the greatest potential to secure data and transactions that demand trust. Although they are related, separately and together they require quite a bit of space to adequately explain, so this time around, I’ll focus on a few aspects of blockchain and their possible implications for manufacturing.
Blockchain combines the openness of the Internet (unless/until Net Neutrality goes away) with the security of cryptography to give companies a faster way to verify vital information and establish trust without the need for third parties and other intermediaries. It was initially developed more than a decade ago to provide the technical underpinnings for Bitcoin, the cryptocurrency with which it is sometimes mistaken. As Pat Bakey, president of SAP Industries, noted, “Early horror stories about bitcoin, the most famous digital currency to use blockchain, prompted its mainstream dismissal as a dubious tool of the dark web.”
At its core however, blockchain is simply an open and secure method of recording transactions, just like a traditional ledger. Because blockchains establish trust, they provide a simple, paperless way to establish and track ownership of money, information, and objects by individuals, companies, and other organizations.
Blockchain: What’s In It For Manufacturers?
“The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value,” wrote Don and Alex Tapscott in their book, Blockchain Revolution.
By design, blockchains are inherently resistant to modification. The data stored in a blockchain exists as a shared and continually reconciled database hosted on millions of computers around the world, so that no single version of it exists in a single place. In addition, each block of data in a blockchain is linked and secured to the next in a sequence using cryptography.This makes it virtually impossible to add, remove, or change data without alerting others in the chain.
Today, most ordinary transactions are verified by a central authority, such as a government or a credit card clearinghouse. Blockchain applications replace these centralized systems with decentralized ones, where verification comes from the consensus of multiple users.
On the other hand, blockchain features could offer a number of key benefits to users.
First, it could dramatically speed up and simplify a wide range of transactions for individuals and corporations. In particular blockchains make it much easier to identify ownership, verify authenticity, and reconcile processes.
Second, blockchain implementations could lead to the elimination of many of those entities that currently provide trust and verification services, including banks, clearing houses and trust firms, and supply chains.
Third, it could hasten the digitization process by making it easier tag and track physical goods by providing them with highly secure digital identities.
Understanding what blockchain can do and enable is part of the process of understanding both the challenges and opportunities for innovation, afforded by digital transformation.
Data is at the core of this transformation, and has become the biggest resource for business. The companies that survive and thrive in this new hyper-competitive environment will collect and curate Big Data using IoT sensors and other tools, process that data to discover patterns and insights through machine learning and analytics, and secure and streamline their operations using blockchains.
The SAP Leonardo Blockchain Co-Innovation Program
Blockchain may still lack the star status and recognition among business executives and consumers of artificial intelligence, machine learning, or Big Data, but it is an integral part of major initiatives such as SAP Leonardo and blockchain is rapidly coming of age.
The SAP Leonardo Blockchain Co-Innovation program gives SAP customers and partners the opportunity to explore applications including registering events to blockchain from product inception and design to manufacturing and logistics phases for product track and trace. The program also addresses parts serialization and order validation for inventory management and for product providence and authenticity. SAP is also exploring digital supply chain scenarios where different suppliers submit offers directly to blockchain to improve effectiveness across their business networks.
“In the digital economy, an iterative, fast-paced approach in close collaboration with our customers and partners is imperative,” said Dr. Juergen Mueller, chief innovation officer, SAP. “With the blockchain service as part of the SAP Leonardo digital innovation system we are enabling an open collaboration around distributed business processes in peer-to-peer networks.”
SAP also opened registration for the SAP Leonardo Blockchain Early Access program, which provides customers and partners access to standard SAP products that have been enhanced and augmented with blockchain functionality.
In its early access blockchain program, SAP is focusing on industries including automotive, aerospace and defense, discrete manufacturing and utilities, with additional participation across the broader supply chain and business networks, including logistics network providers. SAP is collaborating with multiple system integrator companies to help ensure the accelerated adoption and rollout of blockchain-enabled IoT and digital supply chain solutions from SAP, running on SAP Cloud Platform Blockchain.
“Blockchain is a transformative technology that can simplify multiparty transactions and open new possibilities for digital innovation in many industries,” said Dr. Tanja Rueckert, president of IoT and Digital Supply Chain at SAP. “Our early access customers and partners can join SAP to get a first-mover advantage innovating and scaling blockchain as a core part of their Internet of Things strategies.”
Like the other technologies that help enable digital transformation, blockchain still faces a number of hurdles. These include the relatively slow speed that blockchain-based transactions can currently be processed compared to, for example, ATM transactions, and questions over the ultimate security of the cryptology that underpins it.
SAP Bringing Blockchain Initiative to Manufacturing Supply Chain
Last month, SAP SE said that 27 customers and partners had joined Its blockchain co-innovation initiative that seeks to integrate the digital ledger system into Internet of Things (IoT), manufacturing and digital supply-chain solutions using the SAP Cloud Platform Blockchain service.
Participating companies span the globe and represent the consumer products, telecom, retail, pharmaceuticals, logistics, agriculture, high-tech, aerospace and defense, industrial machinery, energy and utilities, and public services industries. This breadth signals the potential broad adoption of blockchain technology.
SAP said it is co-innovating with customers and partners to establish use cases for blockchain that can be standardized to enable wide adoption in digital supply chain solutions built around SAP Leonardo IoT capabilities, including:
“Benjamin Moore & Co. is interested in exploring blockchain technology to streamline operations and improve efficiencies throughout our supply chain,” said Joe Peraino, director — Center of Excellence, Benjamin Moore & Co. “Our company is particularly eager to explore possibilities with transportation management and simplify the complexities that exist in today’s paper-based systems. This type of digital innovation helps Benjamin Moore & Co. deliver on one of our strategic goals — ease of doing business.”
“Blockchain could be a revolution in the way everyone — businesses, governments, organizations, and individuals — work together,” says Goldman Sachs. “It provides a simple, secure way to establish trust for virtually any kind of transaction, helping simplify the movement of money, products, or sensitive information worldwide. It’s a transformation that’s already begun. And organizations — both the ones that it can help, and the middlemen at risk of disintermediation — will need to be prepared as the technology matures.”
Blockchain may just be getting started in manufacturing, but is almost certain to be one of the most disruptive technologies taking it into the future.