Busting the Blockchain Myth in Manufacturing

01 Nov
blockchain in manufacturing

Busting the Blockchain Myth in Manufacturing

Maggie Slowik (Senior Research Analyst, IDC Manufacturing Insights)

The blockchain buzz has been around for a while, and for an industry like manufacturing, which is an avid adopter of a wide range of digital technologies, it is far from being an anomaly.

However, somewhere over the past three years, it has lost momentum and missed the opportunity to show its potential as a true disrupter technology in manufacturing. In this blog, I’m sharing some of the findings I presented at the IDC Blockchain DX Insiders Event in London this September.

Where Blockchain is Today — The Hard Facts

According to our recent IDC European Vertical Markets Survey, 18% of European manufacturers are currently active in blockchain adoption, ranging from identifying use cases to developing pilots and moving pilots into production. This level of adoption is right in line with the average across all industries in Europe.

However, if we look at how blockchain performs compared with other technologies among manufacturers, it is admittedly the one least adopted, trailing far behind robotics and IoT, for instance. Not surprisingly, our survey further highlighted the fact that 20% of European manufacturers struggle to articulate the impact blockchain could have on their organizations, which reflects many of the conversations we have had with manufacturers in the region. Other factors that weigh into the resistance are perceptions of high cost and a lack of infrastructure and knowledge, but perhaps most importantly, blockchain “competes” with technologies that deliver similar if not the same benefits, such as ERP, PLM, document management applications, and collaboration platforms that have secure information exchange capabilities.

Reasons for Investing

Manufacturers are under pressure to incorporate transparency and traceability as part of their value proposition. Until recently, this was mostly driven by regulatory and consumer pressures, but it is increasingly becoming a way of enhancing competitive differentiation, and in some markets, customers and consumers are already willing to pay a premium to have the assurance of full traceability.

In fact, IDC data points us in this direction, too. According to our latest Blockchain Spending Guide, manufacturing will be among the fastest growing industries adopting blockchain by 2023, even ahead of financial services, which is currently one of the top blockchain investors and the industry where we have seen many uses cases unfolding of late.

Signs of Mature Use Cases

While manufacturing may not have the quantity of blockchain use cases, it certainly has the quality. Take the example of aircraft maintenance as an example. Airlines such as Airbus are using blockchain to transform the way they record maintenance activities. Blockchain replaces databases and spreadsheets and creates a digital record of scheduled and unscheduled maintenance activities on each plane. This allows the airline operator to know exactly which task was performed on which aircraft, and by which technician at every maintenance interval.

Blockchain can also improve collaboration across the aerospace ecosystem, allowing all participants — including distributors, operators, and maintenance technicians — to add their own blocks to create a comprehensive history of the component, which informs the maintenance process. This gives the operator full visibility of the history, status, and exact location of each component. The result is improved maintenance quality at lower overall cost.

How to Look at Blockchain With the Right Mindset

  • Education is still needed. Technology buyers are inundated with digital technologies, and while blockchain is not new, its functionality and benefits are still misunderstood. So is what it means in terms of investment, education, and change management effort. Technology vendors can and should play a big role in clearing the misperceptions that exist.
  • Data is required, and a lot of it. The best business case for blockchain are long and complicated supply chains that are driven by the quality and safety of products. Some of the best examples include those where blockchain was driven by the original equipment manufacturer, rather than initiated by a supplier.
  • Identify unique use cases. This is not to say that smaller organizations shouldn’t consider blockchain, but vendors and technology buyers alike have to demonstrate the business value it can bring. For instance, if a manufacturer already has applications providing the same or a similar benefit, then blockchain hardly delivers extra value, but in some cases, it may make sense to combine blockchain with other technologies to solve specific business problems. Some ERP providers, for instance, have already incorporated blockchain layers into their solutions.

To learn more about IDC’s research for the manufacturing industry or about Blockchain in Manufacturing, contact IDC Manufacturing Insights Europe.

Digital Transformation in Manufacturing

Write a Reply or Comment