Co-authored by: Sathish Sundareswaran
When someone thinks of the word “blockchain”, the first thing that comes to their mind is “bitcoin” or “cryptocurrency”. No doubt, it was bitcoin’s success which brought blockchain technology into the limelight. But blockchain is its under-the-hood technology and has many more applications beyond just bitcoin or cryptocurrency.
So what is blockchain? In very simple words, it is a decentralized or distributed ledger where data in the form of transactions or records are stored on the ledger. All these records/transactions are immutable, i.e., no one can modify or change the data once recorded. Typically, hundreds of transactions are added in one block. And each new block is linked or chained to the previous block, thus creating a chain of blocks. Every participant or node in the blockchain network always holds a copy of the ledger. So even if someone changes the data in their ledger without following the well-defined rules, the other participants or nodes will discard that change, as that change is not validated as per the rules. This basically helps to create a system where there is only a “single source of truth” of data that everyone can trust. This makes it easy for one entity or organization to do business with other entities or other organizations, without involving any mediator whose sole objective is to establish trust among two parties. Blockchain technology provides the concept of a “smart contract”, which is nothing but your business application and intelligence.
To understand how blockchain technology can bring a revolution or a transformation into business, we need to first understand the various challenges or problems that industries like automotive, off-highway equipment, pharma and manufacturing are facing today.
Take the example of the automotive industry. According to World Trademark Review , the economic cost or loss due to fake or counterfeiting of automotive parts will reach a scale of USD 2.2 trillion. Counterfeiting not only contributes to economic cost or loss but also puts the lives of people in the vehicle at risk, and can damage the reputation of the automotive OEMs. New technologies like 3D printing of parts has made it even easier to produce fake parts, which has aggravated the problems.
Another classic problem the industry is facing is of recalling their products or vehicles in the market. Companies usually spend huge money in recalling their products, which eats into their profit. Product recalling needs to be as accurate as possible. However, most of the OEMs sometimes use window-based methods that are more like a trial-and-error method, where the accuracy of recalls are poor. The pharmaceutical industry is another good example of counterfeiting where the fake drug market size is in the order of $200 billion .
Blockchain helps in addressing the problems of counterfeiting. There are various blockchain core engines or blockchain platforms like Hyperledger, Corda, Multichain, and Ethereum provided by companies like IBM, R3, etc. These blockchain platforms come with SDKs that can be used for developing applications. Some blockchain core engines or blockchain platforms focus on certain applications. For Example, Ethereum provides good support in developing applications related to cryptocurrency, Corda provides many in-built modules for finance-related applications, whereas Hyperledger is widely used for enterprise applications.
Below is a high-level simplified use case [Fig 1] and a simplified blockchain architecture of blockchain applications [Fig 2] implemented and deployed for one of the world-leading off-highway equipment OEMs to prevent counterfeiting of service parts. This resulted in an increase of ~$2 million to their topline. The Hyperledger Fabric platform is used to developed blockchain applications.
Fig. 1 - Simplified use case for counterfeiting of service parts
Fig. 2 - Simplified blockchain architecture for use case under consideration
Here, each and every part which is produced by Tier 1 or Tier 2 suppliers. Information about the parts like serial number, supplier code, location, date, timestamp, etc., are recorded as a transaction on blockchain through an automated process. The suppliers’ node has its own ledger to record the transaction.
Similarly, while transporting, information about loading and unloading is recorded on blockchain at the transporter’s node. Information is also recorded when parts are received by the OEM’s parts distribution center and its dealers in a ledger owned by the OEM’s node. The ordering node validates all transactions before writing them in the blockchain. The customer is provided with a mobile-based app. When the customer buys the part, they can either scan the QR code on the part or enter the parts’ serial numbers in the app. The app connects with the blockchain network to get the status of parts, and then informs the customer whether the part is genuine or not. In case of a fake part, the customer can notify the OEM over the app. This way, the customer is assured of getting the genuine part from the OEM.
Below is the list of few other applications that some organizations have implemented or have piloted recently. When blockchain technology is integrated with other Industry 4.0 technologies like analytics and artificial intelligence (AI), it can provide a bigger advantage in terms of increasing organizational efficiencies. And, we will see this trend in the near future.
- Counterfeit parts - AL FVL Spring 2020 https://automotivelogistics.h5mag.com/al_fvl_spring_2020/counterfeit_parts
- $200 Billion Pharma counterfeit drug https://www.packworld.com/home/article/21102806/200-billion-pharma-counterfeit-drug-market-growing-by-20-per-year