The manufacturing sector is a significant contributor to global GDP, and that is particularly true in America. Manufacturers were responsible for $2.33 trillion to the U.S. economy in Q1 of 2018 alone, the equivalent of 11.7% of the nation’s economic output. Additionally, 1 dollar in manufacturing output contributes roughly $1.89 to business growth in related sectors. And with 12.75 million jobs sustained by the U.S. manufacturing sector, it is significant in and of itself for keeping employment and the national economy humming along.

Like many sectors, though, manufacturing’s apparent health is not necessarily indicative of future success. According to Deloitte, the industry will call for 3.5 million new jobs over the next decade in order to sustain its growth trajectory, but approximately 2 million will not be filled due to a lack of skills in the workforce. Supply chains grow ever more complicated and entangled as the economy continues to globalize, and a lack of skills in the sector will only make managing those supply chains an increasingly expensive and headache-inducing task.

If employees aren’t thrown a bone and competent replacements don’t continue to arise, this will undoubtedly affect bottom lines in manufacturing. This is why some are projecting the blockchain as a solution to simplify supply chain management and hopefully maintain production levels, if not create greater efficiency than the industry currently experiences.

Supply Chain Management/Auditing

78% of supply chain managers worry about supply chain disruptions, and anxiety can be particularly high in manufacturing, a sector which has an outsize reliance on materials. It’s easy to see why they are on edge; between 2014 and 2017, supply chain waste and abuse fraud risk spiked from 25.2% to 35%. For the third year out of four, Deloitte reported that consumer and industrial product professionals reported the highest level of supply chain abuse of any industry, with 39% of respondents reporting at least one case of fraud in the prior 12 months.

Manufacturers have fixed their eyes on technology, including blockchain, as a means to minimize supply chain disruption and quell their supply chain-related uneasiness. By 2020, an estimated 60% of major manufacturers will be reliant on digital platforms, which will be responsible for supporting functions that are directly responsible for 30% of their revenue. And by 2021 the array of new technologies will be embedded in the manufacturing sector, with 20% of the top manufacturers depending on some combination of AI, IoT, cognitive systems, and the blockchain. Trust plays too large a role in manufacturing supply chains, but the blockchain could change this. Companies are working to perfect systems by which all participants on a supply chain refer to and update a single record. These systems will allow manufacturers to curtail product loss and provide an unprecedented measure of provenance to those who they pass the finished product along to. It will also play a major role in regulatory compliance, which has heightened importance since the passage of the Drug Supply Chain Security Act and the Food Safety Modernization Act.

Companies Trying to Solve This Problem

Skuchain – Using “Brackets” or smart contracts for manufacturing to increase transparency of supply chain data.

Sharing and Compensating 3D Printing Designs

Additive manufacturing, also known as 3D printing, has yet to achieve mainstream adoption, but the industry’s momentum is heading in the right direction. Just over 500,000 desktop 3D printers have been sold so far in 2018, with these hobby-level machines serving as an indication that more people are testing the waters of additive manufacturing. This represents 52% year-over-year growth, a pace greater than the 38% growth recorded in 2017. At this rate, 1.5 million 3D printers will be sold in 2020, though these trends tend to fluctuate.

That said, the industry still faces some hurdles. Right now, 28% of additive manufacturers utilize the technology to accelerate product development, while only 16% use 3D printing to offer customized products. This represents a significant missed opportunity, as the potential marketplace for low-level additive manufacturers to design and create proprietary designs could be substantial. Another issue at hand is the treatment of 3D-printed guns. They are a hot-topic issue, spurred on by the revelation that at least 1,000 people downloaded designs for 3D-printed AR-15s when they were made available by a company called Defense Distributed.

The ability to provide a secure platform upon which 3D-printing designs and instructions could be purchased or shared between parties for free or at a very affordable price — with a measure of necessary oversight as a precursor — is one of the blockchain’s promises for the technology. Such a marketplace would allow 3D manufacturing designers a paying audience to sell their designs too. Because the blockchain has proven a good fit for handling financial transactions, it would be capable of not only storing immutable, irreplicable designs, but also facilitating the actual sale and transfer of those designs.

Companies Trying to Solve This Problem

Genesis of Things – Building blockchain rights management for 3D printing and manufacturing.

Lowering Barriers to Entry for Smaller Manufacturers

Renewed dedication to the American manufacturing sector has created new opportunities for smaller manufacturers to gain a profitable foothold in the domestic market. The United States’ PMI, a composite index conceived by J.P. Morgan that measures the strength of the manufacturing sector, nearly hit a seven-year high that was set in December 2017. According to CNBC, the 327,000 new jobs created in the manufacturing sector between July 2017 and July 2018 were the most in any 12-month period since April 1995.

Those new jobs were a symptom of greater output by manufacturers, who totaled $6 trillion in gross output last year. 18,000 jobs were added in September, an indicator that opportunities for individuals and new businesses in the sector are greater than it has been in quite a long time. Manufacturers, purchasing organizations, suppliers, and procurement brokers collectively make up the nuts and bolts that keep the broader manufacturing sector chugging along, and inefficiencies in these sectors, along with the newfound output revival, mean that there are cracks that innovators can fill, taking advantage of a healthy business climate.

Utilizing the blockchain is one way to create value for a business seeking to make their name in manufacturing. A reported 58% of manufacturing companies utilized blockchain technology in 2017. Those who utilize it wisely — whether it is in supply chain, order tracking, maintenance, elsewhere, or all of the above — may gain the competitive advantage they need to keep pace with the big dogs of the manufacturing industry.

Companies Trying to Solve This Problem

Hijro – Creating decentralized networks to empower manufacturers and supply chain companies.

Ensuring the Validity of Transactions / Reducing Systemic Failures

Manufacturing is not immune to data breaches, and these breaches take many forms. Under Armour, one of the largest athletic apparel manufacturers on the planet, announced in May that its MyFitnessPal app had been breached by unknown parties, compromising usernames, emails, and passwords of as many as 150 million users. Under Armour shares dropped by 3.8% as a result, and a lawsuit was filed against the company in June.

This is just one example of an industry-wide, and even cross-industry, trend toward data hacking. Manufacturing, so reliant upon supply chains, may be particularly vulnerable, as 39% of executives surveyed as part of a Deloitte assessment reported being the victims of data breaches in the previous 12 months. Of that 39%, 38% reported losing between $1 million and $10 million; the hackers are going for the most valuable stores of information, and hitting them hard. The most common forms of data stolen from manufacturers is personal (32%), company secrets/proprietary information (30%), and personal credentials (24%).

The beauty of the blockchain is that it requires the approval of all parties in a single chain to approve data entry and changes to the ledger. While this may sound cumbersome, it is the pillar of blockchain security, as it spreads the potential vulnerabilities from a single access point across the entire network. Because manufacturing requires near-constant communication between suppliers, and a single data breach could compromise the operations of each party, this level of security could prevent fraud leading to both minor and catastrophic systems failures.

Improving Trust in Products Through Public Data

According to one estimate, the cost of fraud globally in the manufacturing sector is $3.7 trillion, though that figure could easily rise as hackers continue to become more sophisticated and effective. According to the same report, the median cost of fraud for individual manufacturers is $194,000, which would qualify as a significant blow to any company’s revenue sheet. Corruption, which artificially drives up the cost of doing business, was an issue for nearly 50% of the manufacturers surveyed. Billing scams, also the result of poor or ineffective oversight and accounting systems, affected nearly one-third of those surveyed.

Fraud in the manufacture and shipment of food and ingestible products is particularly dangerous, and can cause unique problems with health, even death. In America, one company that scours global supply chains for evidence of fraud interacts with instances of fraud in about 70% of the cases reviewed. In China, that figure is closer to 100%.

Manufacturers are subjected to extensive parts-certification processes, and there’s no reason that consumers shouldn’t be made party to such information. The blockchain’s decentralized ledger technology could allow this information to be shared, but not compromised or altered. This information about supply chain provenance could be accessed in a matter of seconds, which is critical when a product is as sensitive as food or as costly as a supply of raw materials from overseas. Ultimately, manufacturers could establish their credibility as reliable, ethical suppliers of goods and services, in turn garnering stronger customer loyalty.

Companies Trying to Solve This Problem

IBM & Maersk Partnership – Using blockchain to improve provenance and transparency.

Provenance Project – Helping create a more transparent product journey with blockchain.

Authentication of IoT Devices in Manufacturing

The Internet of Things — the many connected devices and sensors that allow Big Data to be collected — is impacting most industries, and manufacturing is far from an exception. In fact, manufacturers rely more heavily than most on utilizing logistical data to dissolve inefficiency and raise profits. This is illustrated by the fact that, between 2016 and 2017, IoT network connections in manufacturing grew by 84%; the second-place growth industry, energy, saw only a 41% increase.

IDC has predicted that by 2019, 75% of large manufacturers will have updated their operations with IoT devices to mitigate risk and speed up the time with which they can bring products to market. That’s an impressive figure, especially considering Verizon’s finding that only 73% of all executives are currently researching or deploying IoT solutions. Again, these figures reveal how disproportionately critical the Internet of Things is and will continue to be in the manufacturing sector.

As is the case with any IoT network, the integrity of data being collected is as important as the fact that the data is being collected at all. Providing a secure network by which IoT devices can be authenticated, monitored, and through which information can be securely passed along and immediately shared is the primary use case intersection of blockchain tech and the IoT for manufacturing.

Companies Trying to Solve This Problem

Xage – Security layer for industrial IoT.

Filament – Using blockchain to increase IoT connectivity.

Better Tracking of Maintenance Work

“Downtime” in manufacturing, which is often due to maintenance issues, is a difficult cost to calculate. In fact, over 80% of companies are unable to calculate the true downtime cost (TDC) effectively. Unplanned downtime, which is the specific category often attributed to equipment failure, is even more costly than anticipated downtime. According to an Aberdeen Research report, 82% of manufacturing companies have experienced some form of unplanned downtime over the past three years, with that kink in operations costing as much as $260,000 per hour.

For manufacturers relying upon older equipment, these work interruptions can be more frequent and more costly. In fact, the maintenance cost difference between two relatively new production plants built only ten years apart could be as much as 100%. And with many estimates projecting American manufacturing sectors such as the automotive industry to decline sooner than later, sectors really cannot afford to be spending invaluable time and money on outdated maintenance systems.

The blockchain provides an interoperable, single-source ledger that all parties (assuming they are participating) on a supply chain can consult to achieve real-time updates. Think about when you order a pizza and Domino’s provides real-time updates as to the order’s status. Take this concept and apply it to manufacturing maintenance updates, and you have a system that is better equipped to identify and monitor maintenance progress, ultimately using that data to root out inefficient contractors and/or processes.

Securing Critical Data / Logs

In one 12-month period, 87% of manufacturing businesses were affected by some sort of fraud, a greater proportion than any other industry sector. Vendor or procurement fraud accounted for 23% of those cases. A later survey found that an even higher proportion of manufacturers — 91% — had experienced fraud, an indication that not only is the problem not going to solve itself; it’s getting worse.

According to Kroll, which conducted the latter study, a complete lack of global oversight over Latin American suppliers to the global car industry had created significant liabilities in terms of fraud. In another case, professional sports jerseys were being counterfeited so well in China that the faux product was indistinguishable from the real one. This case of inventory fraud is one example of a prevalent trend that harms trust in manufacturers and cheats consumers and suppliers out of their hard-earned dollars. Lack of singular oversight, poor recordkeeping systems, and other flaws in the industry’s infrastructure resulted in approximately $3.7 trillion in losses to the global manufacturing sector annually, including $120,000 in median losses to U.S. manufacturers.

Considering how vulnerable the manufacturing sector is to fraud, the implementation of blockchain technology to create an immutable, tamper-proof record for members throughout the manufacturing supply chain will create immeasurable savings.

Local, Direct-to-Consumer Platforms

The network of manufacturers and the machinists who they rely upon to provide critical parts is densely populated, and the majority of manufacturing-related entities are small in stature. Of 251,774 firms within the manufacturing sector in 2015, all but 3,813 were considered “small”. And while large contractors take on a proportional, and often disproportionately large, portion of manufacturing supply contracts, those who are seeking out local or specialized machinists require intelligent systems to navigate their options.

Whether a business is trying to find the most qualified machine shop for each part they require, or is merely trying to find the best value for individual parts across an array of several potential suppliers, the blockchain is allowing machinists and manufacturers to connect on a more efficient, widespread network. Startups have tailored the blockchain as a platform that matches manufacturers and businesses to parts suppliers, allowing purchasers to review several quotes and choose the machine shop that best fits their budget. Production progress can be reviewed in real time, and smart contracts ensure that no money is transferred until all the requirements of the contract are fulfilled.

Production Part Approval Process (PPAP) and Sourcing of Materials

PPAP, the acronym for the Production Part Approval Process, is an 18 element test for ensuring that parts meet requirements for their respective industry. Though this process was first utilized in the automotive and aerospace industries, it has become a staple of other manufacturing sectors. The growth of the world economy has made this quality litmus test all the more important, as orders grow larger and flaws in a single batch of parts carry greater consequences.

Global economic output is expected to hit a growth rate of 3.1% in 2018, and much of that growth continues to be contingent on the efficiency of international and intercontinental trade. Through an expected investment of $267 billion in the Internet of Things by the manufacturing industry by 2020, technology will continue to bring nations’ economies closer together, but the logistics of shipping materials — and ensuring their quality before they ship — remain a challenge.

For each step of the PPAP, the blockchain can serve as an interoperable storage locker for necessary certifications, allowing manufacturers and suppliers to have clearer oversight into the tests being performed and their results. There is no document more consequential in this process than the Part Submission Warrant (PSW), which documents the cumulative results of the part approval process, and is the ultimate record of how well a part passes certain quality checks. By implementing this oversight and creating uniformity of PPAP tests, the blockchain can contribute significantly to the evolution of manufacturing processes.

Companies Trying to Solve This Problem