IoT 101: How blockchain transforms manufacturing, supply chains

IoT 101: How blockchain transforms manufacturing, supply chains

Blockchain in industry: the facts, the hype, and the reality. Kayla Matthews and Internet of Business editor Chris Middleton present a primer for decision-makers in industry, manufacturing, and the supply chain who are new to blockchain and need basic information.

Our report contains numerous links to further reading on key topics.

Internet of Business says

While artificial intelligence (AI), industrial robotics, and the Internet of Things (IoT) may dominate the manufacturing news, another technology, blockchain, is also helping to transform the sector and its associated processes. These include supply chain, inventory management, quality assurance, and supportive business functions.

Blockchain is a distributed ledger technology, a continuously expanding chain of records – blocks – that are linked and secured via cryptography, creating a networked audit trail of transactions, or actions that have been taken.

Because each block, ledger, or record usually contains a cryptographic hash of the preceding one, together with a timestamp and data about the transaction, the system is resistant to tampering and modification. Hashgraph is a similar distributed system.

Typically, blockchains work using the processing and mirroring power of distributed/peer-to-peer computing systems, which is both the technology’s advantage and, some argue, its inherent problem.

Advantage blockchain?

The theoretical advantage is that tampering with any one record creates a ledger entry that differs to all of the verified copies that are shared across the network.

This is why blockchain’s many proponents believe it could become the bedrock of a new data commons. Such a system would challenge the concept of proprietary data and organisations such as Google and Amazon, which can be regarded as powerful data landlords.

The disadvantage is that this type of distributed processing is typically slower and more resource intensive, given the processing and energy needed to both encode and decode strong encryption, plus the inherent lag in any distributed network.

And that means that the cost (of every type) per transaction may be higher, which is why hackers are stealing processing power from other people’s computers to mine for cryptocurrencies.

Tales from the crypto

Blockchain and cryptocurrencies, such as Bitcoin, Ether, and Monero, are intrinsically linked concepts, leading some to claim that cryptocurrencies may become the natural transaction medium of the connected world. But this is assuming that the same levels of trust that many see in blockchain can be shared in the volatile, complex, and uncertain world of cryptocurrencies.

Internet of Business has explored both the advantages and the challenges of cryptocurrencies, currency mining, and valuation in several recent reports:-

In essence, therefore, the blockchain challenge comes down to a tradeoff between security, trust, and transparency on the one hand, and utility, speed, and energy on the other.

Blockchain in manufacturing and supply

Because blockchain theoretically builds trust, transparency, and networked verification into every record, manufacturers and distributors are attracted to the technology.

For example, blockchain can not only be a distributed system of record proving that financial transactions have taken place, but also that other types of action, such as product testing and verification in highly regulated or sensitive environments.

And with the promise of payments being increasingly built into the system and automated at every stage too, a long-term future in global supply chains could be on the cards.

A number of different types of business are already using blockchain to run supply chains of every kind, as explored in a number of recent Internet of Business reports:-

When combined with location-based technologies, such as GPS, Sigfox, and RFID tags, the potential for creating automated systems in which goods tell you where they are, what condition they are in, who has received them, and whether they’ve been paid for opens up.

These issues have also been explored in recent Internet of Business reports:

In supply chain management, blockchains have already proven to be a viable means of tracking goods during shipment, registering product-specific certifications or declarations, and recording other crucial data.

Manufacturers that rely heavily on the IoT can also use blockchains to verify connected devices and timestamp data for cross-referencing.

Consultant Sean Culey has suggested that these technologies, together with robotics, AI, analytics, and autonomous vehicles, create a new model for manufacturing and supply: ‘PAL’ value chains; smart supply chains that can be personalised, automated, and localised.

Culey suggests that 3D printing and smart robotics could be core to this increasingly automated, customisable, and locally-based approach to manufacturing – a challenge to monolithic global supply chains and cheap-labour-based outsourcing.

Companies such as Adidas, for example, are creating small ‘Speedfactory’ facilities around the world, which are capable of producing a single pair of shoes to a buyer’s specifications, and delivering them nearby.

Other tech-savvy ventures are exploring the application of blockchain technology and 3D printing, such as this facility, which aims to connect thousands of 3D printers to create a blockchain-based network hub.

Meanwhile, the Moog aircraft control systems group is using blockchain-based systems to ensure the safe 3D printing of aircraft parts.

According to Brigid McDermott, VP of blockchain business development at IBM, “Eighty percent of the world’s corporate data resides in silos. Blockchain gives you that confidence that you can control your information and grant access only to those you want to grant access to.”

IBM’s Watson division is itself working with the technology to save IoT data onto private blockchains, in order to share it with an ecosystem of business partners.

Clock in, pay up

Other companies are deploying the technology in a very different way: as a means of paying employees as soon as they clock in to work on the factory floor or industrial sites, and stopping payments when they clock out.

For example, blockchain-based payroll start-up Etch is using location services to save employees from clocking in and out of their shifts. Payments are processed immediately, rather than once a month, with every minute that an employee is onsite credited to their account in real time. Elsewhere, some connected vehicle service providers are adopting a similar blockchain-enabled approach to paying drivers.

This is the same type of system used in new forms of urban bike-hire schemes, in which riders pay for a bike as they ride it, and payment stops when they leave it in a public place to be picked up by the next customer. Sigfox low-power location tracking technology allows customers to locate nearby bikes via a smartphone app.


The energy sector is also part of this innovative mix. Smart microgrids are growing in popularity as a means of creating more sustainable and adaptive energy resources. LO3 Energy is a company that describes itself as “reimagining how energy can be generated, conserved, traded and shared”.

For example, the company has developed a blockchain-based technology for trading in solar energy within local communities. Its Brooklyn, New York-based microgrid deploys smart meters alongside smart contracts for tracking and managing energy transactions on the grid.

Those pros and cons in full

Potentially, blockchain technology adds new layers of functionality to manufacturing and supply, including:

Transparency and decentralisation. Not only does blockchain build partner trust through verifiable transactions, but the peer-to-peer structure also decentralises the platform and makes it possible for any user to view any transaction.

Improved risk management. Although embracing blockchain is not without risk, it gives users the power to control many traditional risks in return. Real-time monitoring of the supply chain makes it possible to identify and resolve potential issues before they take hold on a larger scale.

Verifiable records. Since every transaction on a blockchain is time-stamped and independently verified by multiple sources, the records it produces are indisputable.

But blockchain isn’t perfect. There are cybersecurity drawbacks to consider. Other potential downsides include:

Data storage and speed limitations. While blockchain is, in theory, an infinitely expanding resource, each block within a chain has a 1 MB data limit.

Current blockchains can only process seven transactions per second. In some applications, this wouldn’t be a problem, but in financial services, for example, data volumes are too high and too fast for blockchain to be a viable alternative – yet.

High overhead costs. Blockchain isn’t cheap. Manufacturers who lack the necessary infrastructure will face additional installation costs in the beginning and — because blockchain requires extra processing power — above-average utility costs over time.

Some companies, like Silicon Valley’s SyncFab, are actively trying to make the technology more affordable and attainable.

Overly rigid systems. Arguably, any system that pays a worker for every second on site, or in a vehicle, is a system that human beings may feel locked into or afraid to leave. In this sense, blockchain (and cryptocurrencies) may be best regarded as optimised for widespread, networked automation.

Next-gen security threats. Although a primary feature of blockchain technology is improved cyber-security via replicated and encrypted records, the platform is still exploitable via advanced hacks.

So, despite the hype on the one hand, and the alarm bells ringing on the other, blockchain technology is already transforming the manufacturing, supply chain, and distribution sectors in numerous ways.

Recent news of a partnership between IBM and Maersk, for example, which focuses on a blockchain-based, IoT-connected logistics platform, suggests that industry will see more and more new blockchain applications emerge in the near future.

Research Kayla Matthews. Technology reporting Chris Middleton.

Chris Middleton is editor of Internet of Business. Kayla Matthews is a senior writer for MakeUseOf, and a contributing writer to Marketing Dive, Manufacturing Business Technology Magazine, and You can follow her blog Productivity Bytes for more. 

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