Blockchain technology: what impact could it have on supply chains?
In today’s digital world, market leadership increasingly depends on innovation and the ability to utilise the latest technologies such as artificial intelligence and blockchain. Although blockchain is still in its infancy, it has the potential to greatly impact business processes as well as improve the visibility and transparency offered to those involved in the global supply chain.
What is blockchain?
In short, blockchain is a technology that allows digital information to be distributed without being modified or replicated. Each group of updates is referred to as a ‘block’; these are added to the entire system and are accessible by all users, providing total transparency and verifiability.
For example, a spreadsheet that is owned by one organisation could be made available across a network of thousands of individual computers, designed to regularly update this spreadsheet simultaneously.
Rather than using a ‘username/password’ system to protect online identities and assets, blockchain uses encryption technology as a security method, using public and private ‘keys’ to make data more secure. The ‘public key’ (a long, randomly-generated string of numbers) is a user’s address on the blockchain. The ‘private key’ is a password that gives its owner access to their digital assets.
In addition, blockchain technology has an extra level of security. The contents are hosted by millions of nodes (any computer connected to the blockchain performing the task of validating and relaying transactions) meaning that the blockchain cannot be controlled by any single entity. Similarly, there is no centralised version of the information, eliminating the risks associated with the information being corrupted or hacked.
If any unwarranted updates do occur, the altering of any unit of information on the blockchain alerts the whole network of nodes and makes the adjustment public. It would take a huge amount of computing power to override the entire network of nodes making the data virtually incorruptible.
What could blockchain mean for the automotive and manufacturing industry?
Businesses in the financial sector have been among the earliest to see the potential of blockchain technology, along with other highly digitised sectors such as gaming.
As a time-critical logistics specialist supporting the automotive, aerospace and other manufacturing sectors, it is particularly interesting to see the potential developments as we move into the fourth industrial revolution. One of the most exciting areas of development associated with the application of blockchain is the concept of ‘digital twins’ – a dynamic, digital representation of a physical asset which provides companies with the ability to track past, current and future performance throughout a product’s lifecycle.
All testing and analysis can be performed on the digital twin before the physical one is designed. For example, Tesla deploys digital models and runs multiple automation and ‘what if’ scenarios before building models and manufacturing engines. The same goes for designing and producing large-scale aircraft engines or other systems. Digital twins in manufacturing keeps the risks and manufacturing defects to a minimum and it allows engineers to test and update the digital models thoroughly.
From assembly and manufacturing, all the way to customer usage and product expiration, these digital twins keep evolving and updating their product status as they move through the production cycle. Consider it as a digital passport of physical products, being stamped at every stage by stakeholders, from sourcing all the way through to disposal. This concept works particularly well within the automotive industry. With the digital twin fully transferable on the blockchain-based system, each vehicle’s maintenance history remains connected to the physical version, even when there is a change of ownership – a very useful and practical data management service that automotive companies can provide to their customers.
This evolvement of digital twins, using blockchain technology, shows how manufacturers can increase data credibility and protect public safety; it also has value for regulators, fleet owners and drivers who need access to trusted data on used vehicles.
What could blockchain mean to the logistics industry?
Logistics involves working collaboratively with multiple stakeholders – partners, suppliers, customs and border controls, as well as clients – to optimise the supply chain and maintain a complex flow of information.
Digital twin information can be shared among stakeholders, organisations, teams and countries. It enables all parties to keep track of products and their corresponding information as they are sourced, shipped, purchased, used or consumed. Blockchain has the potential to improve security, drive transparency and trust, and achieve greater efficiency and sustainability.
Digitalising manual processes, such as customs documentation that rely on physical data entry and paper-based documentation, would improve both visibility and transparency across the industry. And adopting blockchain technologies at an international level would significantly reduce friction across the global supply chain.
Blockchain can also accelerate the flow of physical goods, enable tracking of a product’s lifecycle and ownership transfers from origin to display, even as it changes hands between the manufacturer, logistics service provider, wholesaler, retailer and consumer, creating a trusted relationship between each participant.
As blockchain continues to evolve, markets are expected to adopt its potential with increasing speed over the coming years. Overall market demand is expected to rise drastically due to investments from the finance industries, continued development of blockchain and growth of major vendors. This is the right time to explore how this technology can enable ground-breaking innovations, the obstacles that must be overcome and the likely value and tangible rewards that can be delivered, especially as it will inevitably form part of the logistics landscape.