The tangible value of blockchain for OEMs

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Quite simply, blockchain is a means of recording and verifying information. It may be thought of as a database spread out over several locations where timestamped records are continuously accumulated and linked to previous records (or blocks).  Although blockchain is currently just in the early phases of adoption there are several reasons for OEMs and their supply chain partners to consider exploring implementation of this powerful technology.

For manufacturing industries, blockchain technology expands horizons – the landscape is wider, the potential is huge for sourcing materials, creating product designs, and producing finished goods. Blockchain reduces the distance between you and your end-user and makes mass customization more practicable.

Experts believe that blockchain technology can decrease costs, enhance productivity and access to global markets for products and services, especially when combined with 3-D printing. In this post, we discuss some of the benefits of adopting blockchain technology.

Build ethical manufacturing relationships

Blockchains are meeting spaces to create and develop digital relationships and as such are invaluable in creating intelligent smart manufacturing contracts. A smart contract is a digital pact that executes automatically, instantly and without the need for intermediaries, when prearranged conditions are fulfilled. It holds each party accountable for their role in the contract.

Such contracts are nimble, accurate, quick, secure and credible. They lessen the likelihood of errors, and allow the smart contract to auto-execute when terms are met. The secure technology and the basic nature of the blockchain will not allow the other party to default.

Over time, such smart contracts build reputations and relationships between suppliers and their clients based on mutual trust. The visibility and transparency offered by blockchains allows manufacturers to uphold ethical business practices by identifying unscrupulous supply chain constituents.

Supply chain fraud

According to the Blockchain Research Institute, global supply chain fraud amounts to about $300-billion annually. This damage and the related risk of counterfeit goods and materials can be significantly reduced by using blockchain to monitor the movement of materials and goods from their point of origin through a supply network.

Versatility

A 2016 Deloitte study highlighted the versatility of blockchain technology, with companies having diverse perspectives on the main drivers for adoption:

• its ability to improve systems operations;
• its advanced security features; and
• its potential for “enabling new business models and revenue streams”.

All these advantages are indispensable for an OEM looking to operate on a global scale.

The study also noted that many companies in the manufacturing and consumer products industry were expected to invest about $5 million in blockchain technology starting 2017. This is a solid indicator of industry confidence and expected value.

Multi-industry manufacturing

Blockchain is relevant for manufacturers across diverse industries. For example, the Internet of Things (IoT) is a growing industry with connected devices, transportation, and even homes. Manufacturing for IoT is technically and operationally complex. As blockchain emerges it has the potential to help manufacturers securely connect and manage a large number of distributed devices. In the upstream oil and gas industry, exploration and production can benefit greatly from blockchain to handle enormous amounts of data to ensure safety, efficiency and transparency.

As blockchain continues to advance and develop, OEM’s should consider the merit of integration. Driving increased efficiencies will strengthen ROI and market share expansion for their respective business. Not only could OEMs realize the benefits of this innovative approach, but suppliers and end-user would also reap its benefits.

Linking CEMs, OEMs and customers

Blockchain is making way for more collaborative interactions in manufacturing between suppliers, Contract Electronics Manufacturers (CEMs), OEMs, and end customers. Through streamlining the supply chain, regulatory compliance, quality control, and shipment tracking, blockchain’s automation can enhance trust between business partners, while optimizing manufacturing costs and data traceability.

OEMs, CEMs, and end customers’ combined value from adopting blockchain technology are just starting to be realized. The integrity of design, materials, and processes are assured and become verifiable at any stage in the product lifecycle. Long lead times and non-value-added costs associated with manual processes are significantly reduced. Risks associated with fraud, part counterfeiting, intellectual property, and human manipulation can also be mitigated.

End-to-end insight along the value chain allows for cross-company tracking of products in the manufacturing lifecycle from design to warranty, allowing for streamlined manufacturing and higher customer service levels. Electronic manufacturing product lifecycles tied to blockchain technology have the potential to become more transparent, reliable, and secure for stakeholders to quickly verify the source and authenticity of their products or any of its components. With more OEMs exploring the possibilities of implementing blockchain technology, it’s no surprise that the manufacturing industry will soon see some exciting changes.

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August Electronics is a Calgary-based CEM, providing end-to-end electronic manufacturing services from prototyping to production.