Blockchain in Manufacturing: Applications and Adoption Challenges

22 July 2021

 Manufacturing is leading the race for blockchain adoption. The industry currently boasts the highest number of applications and also leads in use cases. However, it’s never been a smooth journey, and the challenges abound even as we head into the future. 

Like the rest of the world, manufacturing is becoming increasingly interconnected. Various parts, products, networks, and value chain participants, including logistics providers and machinery companies, are increasingly becoming connected to provide value internally and ease access externally. 

Blockchain is at the heart of this interconnection. A digital ledger that provides a single, tamperproof version of the truth, blockchain technology provides unique solutions to build trust among parties, allowing stakeholders to capture, store, and share data securely. 

Blockchain also cuts costs by allowing manufacturers to eliminate intermediaries, i.e., vendors and third-party providers, which partly explains the sudden increase in direct-to-customer businesses. Of course, blockchain also increases transparency. 

Unfortunately, the journey has been bumpy. Implementing blockchain in manufacturing is a complex and expensive undertaking, which means some manufacturers are ultimately left behind. Additionally, as a new technology, there’s been resistance in some quarters. 

In this post, we’ll take a closer look at some of the biggest opportunities and challenges in blockchain for the manufacturing industry. 

The Top 4 Blockchain Applications in Manufacturing 

Manufacturers currently getting maximum value from blockchain use the technology in the following ways;

          1. Protecting and monetizing IP

The need to protect intellectual property (IP) is, alongside cost, one of the biggest challenges for manufacturers. Why? Because IP directly determines whether the company uses in-house parts or gets them from a supplier. 

Blockchain can help manufacturers prove IP ownership, especially if there’s a dispute. Take an example of the Bernstein Technologies’ IP registration service. It uses blockchain to allow manufacturers to register intellectual properties for proof of ownership. The owner gets a certificate that proves the existence and integrity of the IP. 

This can prove even more helpful when the company wishes to monetize its digital assets. For example, blockchain-powered solutions can produce parts using digital design files. This way, IP owners can use a licensing model to avail propriety information to the purchasing company. 

          2. Enabling machine-controlled maintenance

Blockchain is supporting new maintenance approaches. For instance, predictive maintenance, and thus cutting on cost. These innovations are critical to managing the increasingly complex and technologically sophisticated production machinery. 

Outsourced management is also much easier with blockchain. Once everyone is on board, stakeholders append service agreements and installation documents related to each device on the blockchain. This creates what’s known as a “digital twin.” Whenever maintenance is needed, the digital twin triggers a service request and generates a smart contract for the task. Once the job is done, blockchain enables automated payment processing. 

The best part is that blockchain also allows the storage of maintenance records transparently and accessible to any interested party. This improves the reliability of equipment and significantly boosts trust between machine owners and the maintenance provider. 

          3. Simplifying and safeguarding quality checks 

Industry leaders in the manufacturing industry have also found that they can enhance value for customers by utilizing blockchain to boost quality control. In the absence of blockchain, transparency and complete documentation for customer services are a nightmare. Quantifying quality for products and services is both opaque and costly because manufacturers have to rely almost exclusively on third parties. 

Blockchain solves this problem in many ways. For one, blockchain makes it easier for customers to track and trace inbound parts along the supply chain. 

Not only that, but blockchain also creates immutable documentation for quality checks. Blockchain databases assign a unique tag to each product and process and automatically record every transaction, modification, or quality check. 

The result? It eliminates the need for inbound quality control. Additionally, it reduces the need for central authorities and original equipment manufacturers (OEMs) to verify quality controls. 

          4. Advances machine-as-a-service business models

We’re headed to a new paradigm where manufacturers can sell machines at little or no cost and recover costs by charging a small fee every time an item or product is placed on the machine. This is known as a machine-as-a-service (MaaS) business model. 

Another approach in machine-as-a-service businesses involves outsourcing the machine as part of the manufacturer’s production lines and assemblies. Both approaches significantly increase production capacity by enabling high levels of flexibility. 

Unfortunately, MaaS is a rather complex process that requires a robust industrial cloud platform to capture and relay real-time data from the machine to the manufacturer and the client. Such cloud platforms aren’t readily available yet. 

Among the few manufacturers utilizing MaaS today, blockchain is the key driver. The main reason is that blockchain facilitates IP protection, documentation management, and performance tracking. Keeping accurate use records brings trust where none existed, allowing manufacturers and clients to work together happily. 

Blockchain Adoption Challenges in the Manufacturing Industry

Unfortunately, adopting blockchain remains a major challenge throughout the manufacturing industry. It explains why, according to Gartner, only 43% of manufacturers are thinking about blockchain adoption. About 34% openly say that they aren’t interested in implementing blockchain. 

  • Regulatory uncertainties

The top concern among manufacturers who say they’re skeptical about cloud adoption is regulatory uncertainty. Blockchain is still a largely unregulated area. What if you invest heavily in the area and lose all the gains when the government doesn’t approve on-chain transactions?

  • Lack of trust

As many as 45% of manufacturers say they either don’t trust blockchain in the long term or feel that many users in the industry don’t yet trust the technology. It’s a contradiction, given that the pioneers promote blockchain primarily on the promise of resolving trust issues. 

  • Incompatibility 

Although blockchain means the same thing wherever you go, we’ve seen dozens of different blockchain versions recently. Even blockchain now has multiple versions. Unfortunately, many of these versions are currently incompatible—and that’s where problems begin. When you have separate blockchains that aren’t compatible, it creates transaction issues across the network. 

Power the Manufacturing Industry with Blockchain

Blockchain seems like a godsend in the manufacturing industry. It already solves so many problems and has the potential to unlock endless potential in the industry. However, blockchain implementation, specifically in manufacturing, is also experiencing multiple challenges, some of which threaten to derail take-up speed. Hopefully, these bottlenecks can be resolved soon. 

Contact NIX Solutions to learn more about blockchain and how to take advantage of it to position your business for future growth.