Managing Director & Partner
Like the rest of the world, the factory is rapidly becoming more interconnected. In the factory of the future, data sharing occurs across a complex network of machines, parts, products, and value chain participants, including machinery providers and logistics companies. As a result, today, more than ever, manufacturers face the challenge of securely sharing data within and outside the factory walls.
Traditional databases are not always well suited to the task. But in seeking a solution for specific applications, manufacturers can explore an emerging technology: blockchain.
A blockchain is a digital ledger that provides a single, tamperproof version of truth. The technology offers unique advantages in situations where trust is lacking between parties that need to securely capture, store, and share critical data—for instance, data related to intellectual property (IP). Manufacturers can also apply blockchain to develop innovative business models and expand the boundaries of production beyond the traditional factory.
For many factory applications, however, blockchain is not the best option. Recently developed central ledger databases that offer some of the features of blockchain are easier to implement and can process more transactions. And other types of databases are appropriate when parties need to store and process large volumes of data in real time.
To pinpoint situations where blockchain is the right technology to use to support operations, a manufacturer must conduct a structured assessment, starting with identifying the company’s current business problems and future needs. Next, it can explore how to use the technology to relieve the factory’s pain points and address its needs. Equipped with a strong understanding of the opportunities and challenges it faces, the manufacturer can then select the best options from among the available technology solutions.
To ensure trust among value chain participants, manufacturers have traditionally relied on strong supplier relationships, independent quality audits, “six sigma” practices, and extensive documentation. Unfortunately, these practices typically entail high costs, known as a trust tax. By ensuring trust more efficiently—in addition to conferring other benefits—blockchain reduces the need for these expensive approaches. (See the sidebar, “Breaking Down Blockchain’s Benefits.”)
Blockchain’s technical features provide four key advantages over traditional databases:
Here, in basic terms, is how blockchain works: When a participant in the network submits an update to a blockchain ledger, the database uses an automated process to ask other participants to approve the update. Approved updates are time-stamped, cryptographically signed, and added to the block. The new block becomes part of the blockchain, an immutable record of all transactions and agreements of interest to the participants.
The originators of blockchain developed it to provide a technological foundation for digital currency. Early generations of blockchain did not support industrial applications effectively, owing to limitations in network scalability, interoperability, and processing speed. The versions now under development, however, use new consensus protocols that improve the efficiency of the verification process by increasing the number of transactions per second and reducing computing costs.
The improvements under development will enhance interaction between blockchain technology and the Internet of Things (IoT)—a prerequisite for enabling blockchains to connect networked devices in the factory of the future. The interaction demands a common technical standard for communication and data transmission. Such a standard will promote levels of interoperability, transparency, and security that are superior to those of existing systems and platforms. But because no common standard exists yet, many blockchain applications have not proceeded beyond the proof-of-concept phase.
Efforts are underway to unleash blockchain’s potential in manufacturing. For example, the Trusted IoT Alliance, a collaboration among leading technology companies (including Bosch and Cisco Systems) and numerous startups, is developing an open-source standard for integrating blockchain and the IoT. The standard focuses on a smart-contract interface that allows data to move seamlessly within and between blockchain-enabled systems.
Although the Trusted IoT Alliance’s earliest proof-of-concept applications focus on the supply chain, the developers envision creating other applications that will support immutable documentation and trusted hardware identification. Once established, a standard could be integrated into new factory hardware and software to expand blockchain applications.
The recent launch of blockchain as a service (BaaS) is also helping to smooth the path toward implementation of blockchain in the factory. Traditional blockchains are self-managed, meaning that a company must customize the database’s capabilities (for example, how it manages cryptographic keys) and organize the hosting of the nodes either locally or in the cloud. BaaS offers the same features as a self-managed blockchain (such as security for critical data) and adds tools that facilitate management and deployment at scale. For many manufacturers, especially those with resource-constrained technology teams, using BaaS will be easier than implementing a self-managed blockchain.
Although blockchain is becoming simpler to deploy in the factory, it is not a panacea for challenges in industrial operations. A case in point is real-time data. For applications that require nearly immediate data exchange, such as the on-line steering of production equipment, the latency time entailed in using blockchain is excessive. In a similar vein, blockchain technology is not suitable for running advanced analytics—a capability of increasing importance in factory operations.
In assessing appropriate opportunities to use blockchain, manufacturers should consider whether other databases are better options. (See Exhibit 1.) Recently developed central ledger databases offer some of the benefits of blockchain (including trust and immutability), although they are applicable to fewer use cases. On the positive side, they are easier to set up and can handle more transactions. Because a trusted central party manages these ledger databases, executing transactions does not require multiparty consensus. Each type of database has its own tradeoffs in performance and functionality; there is no one-size-fits-all solution.
We have selected five use cases for blockchain in the factory of the future to illustrate the many available opportunities. Three of these use cases help enable other factory-of-the-future applications, while the other two make new business models possible. (See Exhibit 2.)
Enhancing Track and Trace
Companies can use blockchain to exchange data easily, accurately, and securely within complex supply chains. Blockchain can provide an immutable, permanent digital record of materials, parts, and products, thereby promoting end-to-end visibility and providing a single source of truth to all participants. These benefits are valuable if the supply chain includes multiple participants with independent IT systems, or if there is a lack of trust among participants or a frequent need to onboard new participants.
Protecting and Monetizing Critical Intellectual Property
Companies across manufacturing industries face an imperative to protect IP. Along with cost, IP protection is a critical consideration in decisions about whether to make parts in-house or to buy them from a supplier).
One possibility is for a company to use blockchain technology to help prove that it owns IP in the event of a patent dispute. For instance, Bernstein Technologies has developed a web service that allows users to register IP in a blockchain. The service creates a certificate that proves the existence, integrity, and ownership of the IP.
Blockchain is also one of several solutions available to help a company protect and maintain control of IP when monetizing digital assets. For instance, machines connected to a blockchain can produce parts by using digital design files included in the database. The company that owns the IP uses a licensing model to make the proprietary information available through the blockchain to the company that produces the part.
Simplifying and Safeguarding Quality Checks
By using blockchain to support quality control, a company can enhance value for customers, another primary objective of the factory of the future. Today, in the absence of blockchain, offering full transparency and complete documentation to customers with regard to the quality of processes and products requires costly support from central parties that operate IT platforms.
In addition to helping customers track and trace inbound parts along a supply chain, blockchain creates immutable documentation of quality checks and production process data. The database uniquely tags each product and automatically inscribes every transaction, modification, or quality check on the blockchain. To enable this application, the production setup must include automated quality checks that generate and write measurements directly to the blockchain. This use case supports multiparty access to data and can eliminate the need for inbound quality control to verify checks that the supplier performs. It may also reduce the need for audits by original-equipment manufacturers or central authorities to verify quality controls. Parties will be able to use the technology’s certificate-management capabilities to gain full transparency into all relevant documents, thereby ensuring authenticity.
Two examples from aircraft manufacturing illustrate the opportunities:
One example of how manufacturers can use blockchain to control their products after production involves cost and performance management. Blockchain can provide a flexible, comprehensive system—not owned by a single manufacturer, supplier, or operator—for logging and tracking all relevant information about parts. This includes data about raw materials, usage (if logged by embedded IoT capabilities), maintenance cycles, and performance testing. Participants gain access to a complete, auditable log of a particular part. Users can gather insights into the history of component configurations and product performance throughout a part’s lifetime and feed them into the R&D process to optimize component complexity, cost, and performance. In the aircraft industry, for example, Boeing is currently in an early stage of developing a business intelligence platform for cost and performance optimization.
The main challenge in using blockchain for quality checks involves ensuring trust by linking a physical object to its digital replica (known as a digital twin). This connection must either prevent or reveal any human interference that alters information. To help create such a connection and maintain an accurate digital twin, more and more devices will contain sensors that can communicate with blockchains.
Advancing Machines as a Service
Blockchain expands the possibilities for using an innovative pay-per-use model for machinery, known as machines as a service (MaaS). In this model, rather than selling production equipment, a machinery provider charges for the equipment’s use on the basis of the output it generates. For example, instead of selling a compressor, the machinery provider sells compressed air by volume. By relying on MaaS rather than owned machines, manufacturers can avoid large upfront investments and can easily upgrade equipment to gain access to the latest technology. Applied effectively, the MaaS model enables manufacturers to increase their production flexibility.
Today, MaaS is limited to easy-to-measure applications. But blockchain can support more complex MaaS applications by facilitating IP protection, documentation management, and performance tracking. By feeding an accurate record of use—enabled by blockchain’s authentication features—into smart contracts, a machine can automate payment for services. For example, by inputting its operational parameters (such as overall equipment effectiveness and consumables usage) into the blockchain, a machine can automatically trigger a payment by the manufacturer that is using the equipment. Blockchain can also enable users to activate built-in features on demand. Companies are currently testing the use of blockchain for automated MaaS payment systems.
Enabling Machine-Controlled Maintenance
Blockchain can support new maintenance approaches (such as automated service agreements) and shorter maintenance times. These innovations are necessary to manage the greater complexity and technological sophistication of advanced production machinery.
To facilitate outsourced maintenance, users append service agreements and installation documentation related to each device to the blockchain record, creating a digital twin of the device. Blockchain technology can then enable the automated execution of and payment for scheduled maintenance. A machine that requires maintenance can trigger a service request and generate a smart contract for the work or for a replacement part. Upon fulfillment of the order, payment processing occurs automatically. Similarly, immutable documentation of the maintenance history is appended to the blockchain record. Such applications, which are still in the early development phase, improve the reliability of equipment, facilitate the monitoring of equipment health and attrition, and create auditable health assessments of the machinery. In addition, in the context of maintenance performed by in-house teams, the blockchain record can serve as proof to equipment providers that the team has executed maintenance in accordance with requirements set out in the warranty and guarantee agreements.
Immutable documentation of maintenance history also facilitates the sale of used equipment. In the future, shorter product life cycles and rapid design changes will motivate manufacturers to upgrade their machinery more frequently. When selling used equipment, a manufacturer can direct prospective buyers to the blockchain record for evidence that it has properly maintained the equipment.
Envisioning these use cases in a shared factory for additive manufacturing (AM) illustrates the potential of blockchain. Until recently, companies primarily used AM either for prototyping or for manufacturing low-volume parts. Today, however, they are more widely adopting AM in industrial manufacturing processes.
As manufacturers ramp up their use of printed parts, outsourcing to a shared AM factory offers an attractive way to optimize the cost, speed, and feasibility of production. For example, manufacturers can print and obtain spare parts faster and can produce unique or low-volume parts more economically. But before they can use outsourced AM, manufacturers must overcome several obstacles. These include protecting IP, creating direct digital connections with the AM factory, and ensuring adherence to quality and process standards. Today, manufacturers generally rely on an intermediary (referred to as a 3D printing platform) to overcome these obstacles and identify the best print shop or service bureau for making a part. An automated blockchain bidding platform that uses smart contracts eliminates the need for support from 3D printing platforms.
Within shared AM factories, the five blockchain use cases that we discussed earlier are currently in the proof-of-concept phase. (See Exhibit 3 for highlights of the three enablement use cases.) They offer the following advantages:
In order to capture these benefits in AM factories, manufacturers must advance use cases beyond the proof-of-concept phase and improve technology so that factories can conduct additive production economically. Moreover, a critical mass of end users must recognize the need to outsource AM, either because they lack the necessary internal resources and capabilities or because they require the specialized services that an AM factory offers.
Prior to selecting which blockchain use cases to pursue, manufacturers should conduct a multistep assessment. (See Exhibit 4.) The assessment of applicability should touch on six factors:
Blockchain and the factory are converging toward being a better match. The latest blockchain protocols seek to increase processing speed and improve data privacy and governance. And as the technology quickly matures, factory operations increasingly require data sharing and collaboration among complex networks of companies and machines. By forging trust and connections within these complex networks, blockchain can help manufacturers clear some hurdles that have impeded the full-scale deployment of other next-generation technologies and innovative business models. Even so, blockchain is not a panacea, and other databases remain a better choice for specific applications. Armed with a detailed assessment of pain points and a prioritized set of use cases, a manufacturer will be well positioned to match the right technology solution to its most important business needs.