The team at RAZR Hub explain why there is a new set of opportunities for future industrial manufacturing and its called blockchain.
Blockchain technology facilitates two or more entities that may or may not know or trust each other to securely exchange value over the internet without including a third party and is a foundation for distributed ledgers offering an innovative platform for decentralized and transparent transaction mechanism in industries and business enhancing trust and traceability within any transaction of data, goods and financial resources. This is the technology that powers the Internet of Transactions.
At the heart of blockchain technology are Smart Contracts. Smart Contracts can be described as “bundles of coded logic or procedures which sit beside the entries in the ledger.” If the preconditions of the contract are satisfied, the agreed upon business operations will automatically commence and do not require additional human interaction.
The benefits of using smart contracts are numerous and while the majority of research projects are still focused on the technology itself and applications in the finance industry, the interest to exploit blockchain in to the manufacturing industry is increasing.
Transaction cost reduction and increased transparency are two key elements achieved through increased digital efficiency by cutting out the middleman. Reducing the settlement time for example will not only yield in a quicker transfer of assets, but also reduce the default risk in case the counterparty is not paying.
The consensus view is that blockchain can fundamentally demonstrate huge efficiencies within industrial ecosystems and as discussed in the following practical examples specifically relevant to the RAZR Hub ecosystem:
Part 1. PAYMENT TRANSACTIONS
Cross boarder payments within a global industrial activity are a fundamental cost function and a decentralised payment system taking advantage of cost efficiencies signifies a strategic use of blockchain technology.
Although information moves around the world instantly, a single payment from one country to another is slow, expensive and unreliable and a typical international payment, takes 3-5 days to settle, has an error rate of at least 5% and an average cost of $42.
Worldwide, there are $180 trillion worth of cross-border payments made every year, with a combined cost of more than $1.7 trillion a year.
Until now, selling, buying or exchanging assets has required an intermediary such as a bank, marketplace (physical or digital), credit card company, or third-party booking service. Blockchain technology, allows assets to be transferred from one party directly to another, with no middleman. The transfer is validated, permanent, and completed instantly. Value is now able to move around the world as information does.
This feature can create direct cost efficiencies for globally centric operations.
Part 2. SUPPLY CHAIN MANAGEMENT
Supply chain visibility is a key business challenge, with most companies having little or no information on their own second and third tier suppliers. End-to-End supply chain transparency and visibility can help model the flow of products from raw materials to manufacturing, testing and finishing goods, enabling new kinds of analytics for operations, risk and substantially.
The vast majority of today’s supply chains are sequential and siloed and since large amounts of data are copied and passed up and down the chain via batch processing, data takes a time to propagate throughout the supply chain. This slows down operations that are driven by the data, and causes a supply-demand mismatch, creates excess inventory, out of stocks, and high logistics costs when stock needs to be moved quickly for replenishment. For Supply Chain Directors a re-imagining of the supply chain strategy for the configuration of future business needs and processes that answers the following operational questions:
• Do multiple parties need to access the same data or write to the data store?
• Do all the parties need assurance that the data is valid and has not been tampered with?
• Do you rely on an intermediary that adds no value? Or do you rely on a complex unreliable process to reconcile the transactions of multiple parties – when all should have the same data? Or is there a system available today that does what you require?
Aligning supply chain with present and future strategy is a fundamental challenge as the promise of a data-driven, ‘smart’ approach as a redesigned supply chain network that delivers high levels of service where needed and drives cost efficiencies where possible.
Achieving secure, high-performance supply chains requires the marrying of performance and permissibility with the transparency and trust of blockchain technology, by combining blockchain with a proven network platform, companies today can integrate blockchain with supply chain networks.
It looks like the future to us…