Blockchain technology has found industrial applications with clear business benefits. Independent entities with common interests and pain points have improved their operational performance by sharing trusted, immutable data with rapid visibility. Applying Blockchain in industry provides the infrastructure for applications to manage owner-ship, which includes:
- Identify the asset
- Identify the owner
- Secure transfer of the asset from one owner to another
- Visibility by all participants
The decentralized governance in blockchain removes the need for a central authority or third-party intermediary like a broker. These types of entities typically silo the data with limited access by others and require manual methods for sharing (FAX, email or letter).
Blockchain provides immediate electronic access providing high visibility among the participants. The multiple layers of encryption, logic and a distributed database assures validation and data integrity so that shared information can be trusted even if some of the participants maybe untrustworthy i.e., industry competitors.
Best Practices with Blockchain in Industry
Many proof-of-concept (PoC) trials and pilot programs are generating clear business benefits for the participants and justify their investment. ARC has examined 24 pilot programs in the aerospace, automotive, chemical, food & beverage, logistics, mining, oil & gas, pharmaceutical and power industries. By examining these PoCs, the primary goal in terms of business value could be determined for each one.
Grow Revenue with Trust Selling
Driven by regulatory compliance or end-user interests, being able to provide proof of materials’ origin improves the value and margin of the end-product. Blockchain is used in the mining industry for rare earth minerals to prove conflict-free and ethically sourced. Diamonds can be identified as authentic and not a synthetic. In the food and beverage industry, blockchain provides proof that the food has wholesome sources, so it can be sold at a premium price. Knowing parts are authentic and not counterfeit applies to the aerospace industry. The automotive industry is considering “digital birth certificates” for a trusted vehicle history for cars.
Mitigate the Growing Risk of Recalls
The more well publicized PoCs involve track and trace in the food supply chain. The supply chain from farm to table has come under more detailed scrutiny by the US FDA and other regulatory bodies due to improved access to healthcare data and analytics. Recently, food borne illnesses in 1 person per million were detected and drove a recall – a good thing for the general population. But, for businesses the average direct cost of a food recall is $10 million. Companies have responded by adopting blockchain for track and trace to identify the source and focus the recall on only contaminated products to reduce the recall’s cost. In the pharmaceutical industry, blockchain helps to purge counterfeits and manage returns which are a growing cost that now exceeds $15 billion annually worldwide.
Reduce Friction in Shipping
Shipping documents include letters of credit, invoices and inspection certificates. Often, manual systems using FAX, email or postal are deployed. The TradeLens consortium replaces siloed Electronic Data Interchange (EDI) systems and now has over 90-member organizations including shippers, shipping lines, freight forwarders, port and terminal operators, inland transportation and customs authorities like the Dutch Customs and the US Homeland Security. In Oil & Gas, blockchain is used for trading oil from well to production. Other industries on this path include chemical for feedstock and mining for precious metals.
Don’t let the drama affecting cybercurrencies that continues in the general news media discourage you from considering the underlying blockchain technology. Pilot programs deployed in industry have identified some “sweet spots” in shipping, supply chain and recalls with participants improving their revenue and margins.
More information: Blockchain in Industry