In our previous article we took a look at some technology trends that are making an impact in manufacturing, of which one is blockchain. Blockchain is one of the biggest-trending buzzwords in the manufacturing industry and has been hailed as the biggest breakthrough since the creation of the Internet. Originally developed for the financial industry, the blockchain protocol is a software-based distributed ledger system providing manufacturers with trust in global supply chains, reduction of production costs, improved efficiency, and access to new business opportunities.
Manufacturers and their suppliers—all of whom often engage in a complex logistical dance to bring products to market—are intrigued by technology that would allow them to improve processes while trimming expenses and production/delivery time from their lifecycles. In fact, some supply chains are already using the technology and according to Spend Matters, experts suggest blockchain could soon become a universal “supply chain operating system.” Benefits include:
Real-time negotiation: Intelligent blockchain contracts, also referred to as “Smart Contracts,” can perform constant queries across all segments (called nodes) in the chain, analyzing elements such as the best pricing, delivery times, parts or supply costs and other terms and conditions that serve as cost drivers. This better equips a manufacturer to address shifts in demand for products and capitalize on opportunities to reduce expenses.
Transparency, traceability and thwarting forgery: Automated, dynamic supply chain tracking keeps up-to-date information on inventory and prices. All the while, the blockchain can trace the long and winding chain of title on goods along distribution channels to their ultimate destination, ensuring merchandise authenticity.
Increased agility, decreased transaction costs. Smart Contracts are software applications in blockchains that automatically execute, verify and enforce performance of a transaction that the parties have agreed upon. Paperless, self-enforcing and impartial, smart contracts contain all the elements of a paper-based contract yet have even more capability, including price negotiation, inventory level monitoring and automated dynamic supply chain tracking.
Better logistics management, better quality. Because blockchain technology makes it easier to follow and record product specifics at every stage in the supply pipeline, over time manufacturers gain a clearer picture of their products’ long-term performance and can act more proactively, from quality improvements to failing parts replacement.
Improved communication. Instantly share information with vendors and suppliers on purchase/change orders, receipts, shipment notifications, etc.; in the event of a recall, reduce liability and related costs by being able to quickly identify affected products.
Transparent audit trails. Document a product’s journey across the supply chain to show its true provenance, making it easier to justify premium pricing for items that are proven to originate from fair-trade or agriculturally responsible, sustainable sources.
Faster settlements. Blockchain was built to handle currency exchanges so every party involved from manufacturer to supplier can get paid faster. Blockchains integrated with smart contracts and IoT devices could automatically release payments for goods once they reach their final destination.
As a provider of insurance products and services for the manufacturing industry, Precision Manufacturing services (PMIS) stays abreast of developing trends, enabling clients to leverage emerging opportunities such as blockchain and avoid pitfalls. For example, while blockchain may offer tremendous advantages, additional reliance on technology and online business could increase your vulnerability if, say, a power surge damages or destroys your computer network. PMIS provides the insurance products to protect business equipment, leaving our clients to focus on their bottom line. For more information about our insurance products and services, please contact us at 855.910.5788.
Sources: Front Page News (Professional Edition), cognizant 20-20 insights (June 2016), loaddelivered.com