The Next Manufacturing Disruptor: Blockchain

Though it’s not nearly as photogenic, the next technology likely to reinvent and vastly improve manufacturing is blockchain.

Mnet 194375 Blockchain
Mickey PattonMickey Patton

When the general public hears about advanced manufacturing these days, its most often tied to one of two topics.

The first is that manufacturing in North America has declined to a point of no return, hollowed out by a move to much cheaper foreign factories. Countless stories have pointed out that while the trend is happening, they’ve also pointed out that advanced manufacturing facilities in North America are still thriving to such an extent that it’s impossible to find enough workers to fill jobs in these 21st century facilities.

Not surprisingly, the other popular mainstream story about manufacturing is all about the innovative technologies that fill modern factories. An obvious favorite topic is robots—photos and videos of their operations are irresistible—which have come to symbolize the efficiency and precision of modern manufacturing.

Leaders see blockchain as transformative

Though it’s not nearly as photogenic, the next technology likely to reinvent and vastly improve manufacturing is blockchain. Besides being far more difficult to explain compared to our robotic friends, blockchain technology also suffers a bit from bad publicity. Blockchain has drawn a lot of attention recently for its use in cryptocurrencies like bitcoin, which have a history of being popular with drug dealers and others up to no good.

But don’t let that bad press muddy your understanding about just how powerful and transformative blockchain technology will be in the manufacturing industry. In fact, many of the world’s most mainstream and influential industries are already vigorously pursuing blockchain technology initiatives. A Deloitte survey of 308 senior U.S. executives discovered that nearly 30 percent had already invested at least $5 million in the development of the technology. Furthermore, the market research company Tractica recently estimated that enterprise applications of blockchain technology across the world will grow from $2.5 billion in 2016 to just under $20 billion in 2025.

Blockchain provides transparency, eases compliance

Why is there such a rush towards a blockchain-enabled future and what value can it drive in manufacturing? It helps to first establish exactly what blockchain technology is.

At its most basic level, blockchain technology is a distributed ledger, basically a spreadsheet. Its defining feature is that information that is entered into each cell, or block, of a ledger is instantly locked and un-editable. For companies that have to handle large numbers of transactions, including when goods change hands, or need to have a verified chain of custody this is extremely appealing.

Healthcare is an example of an industry that could benefit tremendously from blockchain technology. Regulations around patient privacy make the risk of medical records being lost or stolen a big worry. But blockchain technology provides confidence that only patients and their caregivers have access to a person’s medical history and records.

The combination of the security and transparency blockchain technology delivers to healthcare and financial services is also compelling in the manufacturing space. Think about it: Healthy, long-term and profitable relationships between manufacturers and their customers are built on trust. Blockchain technology enables that trust because it allows customers and manufacturers to share the exact same view into even the most complicated supply chain. In fact, when manufacturers make products that can be outfitted with location-based technology, they can be continuously tracked when they are integrated into a distributed ledger made possible by blockchain technology.

As a tool to promote transparency, blockchain technology is also a driver of efficiency because it means time that used to be devoted to tracking down the status of an order and answering customer questions can instead be spent either looking for new opportunities to serve existing customers or finding new ones.

Blockchain technology that provides supply chain visibility also promises to give manufacturers more certainty when it comes to working with new suppliers of raw materials and other counterparties. Because manufacturers need to meet standards around sustainability and must ensure that raw materials aren’t sourced in exploitative or oppressive ways, visibility around sourcing becomes even more critical. Blockchain technology that provides a verifiable certainty around where a manufacturer obtains materials goes a long way towards meeting the demands of buyers and their customers.

There are internal benefits to the use of blockchain technology as well. Many manufacturers devote lots of resources and time to regulatory compliance. With blockchain technology, the reporting demands involved with compliance become much easier, faster and less expensive.

There’s even the opportunity to combine the power of blockchain technology with robots. When that happens, it makes constant monitoring of the robot’s performance and automatic reordering of parts something that can be automated.

Blockchain technology may not be as fun to watch as a bunch of robots spinning around a factory floor, but, implemented properly, it does have the ability to be as transformative of a breakthrough.

Mickey Patton is president and CEO of Clear C2.