Bitcoin. Bitcoin. Bitcoin. It seems like everyone today, from the media to your neighbor, is talking about this trendy crypto-currency. However, we believe the most amazing part about Bitcoin is hardly the currency itself; it is the blockchain technology behind it and its business use.
What is blockchain technology? Blockchain is a shared ledger of transactions between parties. Transactions are stored in blocks and each new block of transactions is verified by multiple sources to confirm that the transactions are legitimate. However, private uses of the same technology, called permissioned distributed ledgers can be used with preauthorized terms and only invited members. These transactions are inherently secure because the blockchain is encrypted. Similar to the way EDI makes ordering and payment between customers and suppliers efficient, blockchain technology can revolutionize just–in-time ordering and receipt of parts and raw materials.
The Manufacturing Environment
How might blockchain work in manufacturing? Here is an application case to help illustrate:
Imagine a company’s production equipment is connected to its internal network. As production occurs, the equipment knows which raw materials are used based on a scan of a barcode or a bill of materials built into its programming. When raw materials for the production run for that machine reach the preset minimum quantity, the machine can order additional parts. Blockchain technology is then used to place the order to the supplier and remit payment. Smart contracts can be included which allow the companies to set up pre-determined terms.
The private blockchain set up between the supplier and its customers eliminates the current need for purchase orders and sales orders. It eliminates the need for the vendor to create an invoice and the customer to enter an accounts payable invoice into their accounting system. It also eliminates the check or EFT payment.
Other future uses of this technology include tracing specific materials from a supplier through the production process and into finished goods. This technology can also be used to track the vendor source of any defects and to detect counterfeit goods. On the transportation side, Maersk, the largest container shipping company in the world, is already testing blockchain to eliminate paperwork in the container shipment industry.
Who else is working with blockchain technology now? The major players such as IBM and SAP are among those providing blockchain solutions. IBM has use cases available on their website. SAP has released SAP Leonardo, which incorporates blockchain technology. Both companies have joined other corporations from technology, finance, and industry to form an alliance called the Blockchain Research Institute that is conducting research projects on how blockchain will transform vertical industries. In addition to companies like these, we expect there to be innovation from software startups and mid-market software companies.
At Blue & Co., we are excited to follow emerging blockchain developments so we can assist our manufacturing clients with analyzing the potential benefits and use of this technology within their organizations.
For further information, contact Nancy Orben, Senior Manager at email@example.com or 513-834-6906.