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Industry 4.0 blockchain obstacles and adoption in manufacturing supply chains

By VentureOutsource.com Staff


Industry 4.0 will see artificial intelligence and blockchain playing prominent roles in the enterprise manufacturing supply chain. Numerous blockchain startups are targeting support of the global movement and tracking of $2 trillion worth of goods and services annually by 2023 according to Gartner.

The anticipated result will be better supply chain management, smart contractual platforms, digital currencies and tighter cyber security whether its between OEMs and EMS providers, OEMs and their suppliers and end-market customers, EMS providers and their customers, vendors and suppliers, and players in the greater supply chain ecosystem including banks and lenders, and more.

Manufacturing supply chain back-end costs

One of the most attractive use cases for blockchain involves reducing and cutting back-end costs and yielding high ROIs by moving record-keeping and logistics to a decentralized, immutable, trust-enabled blockchain platform according to a report by Oliver Wyman and Oppenheimer & Co.

Logistically, sourcing and moving raw materials and components, and product and finished goods inventory (FGI) to end consumers could involve tens if not hundreds, even thousands of participants. Large, global EMS providers like Foxconn, Flex and Jabil each manage 200,000+ various vendors and suppliers.

Supply chains are complex. Aside from the fact there is a significant lack of transparency and efficiency in how products’ logistical journeys are recorded and managed, the enterprise can also leverage better control over accuracy of tariffs compliance and management of HTS, UNSPSC codes.

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Today, large portions of the supply chain are administered through paper-based management and/or captured in antiquated databases or spreadsheets.

Blockchain enable the enterprise manufacturing supply chain to essentially create a supply chain operating system.

Below is a cost-benefit/risk analysis of blockchain adoption per a research report by J.P. Morgan.

Benefits of blockchain adoption

Costs reduced: Infrastructure costs reduced in data management, reconciliations, settlement, administration, etc.

Efficiency improved: Speeding up processes by permitting transactions without the need of a trusted third party.

Liquidity increased: Scope to reduce settlement periods could promote lower capital requirements.

Security enhanced: Cryptography ensures ledger is immutable, and permissioned platform provides added security.

Regulation friendly: Provides greater transparency with an auditable transaction log and mitigates counterparty risk.

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Obstacles to blockchain adoption

Cost:benefit analysis: Managing a trade-off between short-term investment vs. long-term potential gains.

Free rider issue given collaboration necessary: Sharing investment burden within and across industries may prove challenging.

Legal & regulatory: Legal issues with use of smart contracts, and need for regulatory approval for full adoption.

Technical hurdles: Challenges relating to scalability, data privacy, technology standardization, etc.

Security breaches: Cyber threat could be disruptive and corrupt the blockchain network.




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