However, UK manufacturing is in decline. In the 1970s, manufacturing accounted for 27% of the UK’s GDP, but by 2018, this share had dropped to just 10%. According to the most recent figures from the Office of National Statistics (ONS), the UK’s manufacturing industry shrank by 0.4% in November 2018, while factory orders have been decreasing at a steady rate. For a sector that employs approximately 2.6 million people, this is troubling news, which is why many manufacturing giants are turning to technology for solutions.
Over the past few years, blockchain has been cited as a potential fix for the manufacturing sector – a way to improve productivity, cut costs and save jobs. But this so-called miracle cure is still woefully misunderstood by everyone from engineers to factory workers.
What is blockchain?
Blockchain is trying hard to shake off its association with the controversial crypto-currency Bitcoin. And while it is true that these two digital technologies often go hand-in-hand, they are by no means conjoined.
Put simply, Bitcoin is the product, and blockchain is the supply chain. While Bitcoin relies on blockchain to get its crypto-currency from A to B, blockchain is completely unreliant on Bitcoin. This means that blockchain can be easily adapted for use in any industry where products are created and distributed.
Blockchain is essentially a piece of coding that creates secure lists of transactions in ‘blocks’ of code. Once a new transaction has been entered, it is instantly stored in a block, and can never again be altered or tampered with. These blocks of information can be reviewed and shared at any time.
In effect, what blockchain does is create a secure, cloud-based ledger of transactions, no matter how big or small.
The benefits of using blockchain in the manufacturing industry
1. Cuts costs (and adds value)
By using blockchain as a digital supply chain, most businesses will find that they can completely eliminate a huge swathe of admin from their existing business model. This has the side effect of speeding up supply chain operations, as there will be fewer delays due to human error or administration build-up.
In addition to this, blockchain can be used to more quickly trace and track certain products, allowing for speedier product recalls and the smoother movement of goods – both of which will significantly reduce costs across the entire supply chain.
2. Higher accuracy
Blockchain allows all types of data to be stored in an easily-accessible and totally transparent format. Because blockchain is a universal system, this same format can be used the world over, making it ideal for multi-national companies.
Furthermore, by locking away information in secure blocks, any errors can be instantly identified and corrected in real time, reducing any delays due to mistakes in the supply chain.
3. Future-proofing
Whether we like it or not, the manufacturing industry is changing, and blockchain represents the first step towards the automation of future supply chains. By implementing and using blockchain now, businesses can give themselves an edge over the competition in an increasingly high-pressure environment. Blockchain integration makes a business seem forward-thinking and agile, making it stand out in a sector that is sometimes accused of being stuck in the past.
The challenges of using blockchain in the manufacturing industry
1. Education
There is still a lack of understanding of the benefits and correct usage of blockchain in manufacturing. The technology is only ten years old, and many STEM studies have only recently begun to include it in their curriculum. This means that some firms could have trouble finding and training blockchain technicians from within their existing workforce, and may need to bring in extra staff to manage the transition. Additional training will be required on a regular basis as the technology’s uses expand.
2. Business model changes
Blockchain will change the way that business is done, by altering the core business model of the manufacturing world. For older firms, this change could be difficult, as it may involve making staff cuts in administration and supply-chain management, or retraining these staff members in the nuances of blockchain. This may be unacceptable to some businesses, although the overall savings may convince them that this is a risk worth taking.
3. Cyber risks
Blockchain is widely believed to be hack-proof, but the rise in cyber-crime suggests that it is only a matter of time before this view changes. Any company that is reliant on cloud-based technology such as blockchain should also have a contingency plan to deal with cyber threats. These plans can be costly and time-consuming to install and must be reviewed on a regular basis.
