BlockchainBy Mike Schmidt, AEM Industry Advisor Editor

Whenever an emerging technology like blockchain experiences a meteoric rise in popularity and begins to be widely adopted across a variety of industries, it’s only natural for the equipment manufacturing industry to seek out an answer to one pressing question: “What does this mean for us?”

Investing in technology for technology’s sake doesn’t do anyone in the industry – or the markets it serves – any good. Therefore, it’s critical for equipment manufacturers of all types and sizes to put in the time and effort to assess the suitability of an emerging tech trend like blockchain and determine whether or not it brings enough value to justify investment and adoption.

“It all comes down to understanding where your return on investment opportunity is for revenue or savings around the technology, how it fits existing business processes and – this is a big one – if your partners are willing to integrate,” said Mark Rentmeester, former director of cloud applications and data practice for Concurrency, a Milwaukee, Wisconsin-based business and technology professional services firm.

Rentmeester shared his insights on blockchain and explained how equipment manufacturers can assess if the technology is a fit within their organizations at AEM’s most recent Product Safety and Compliance Seminar held earlier this year. And during his presentation to attendees, he noted there is a basic set of criteria to determine if blockchain is suitable for an equipment manufacturer. It is:

  • Do you have multiple parties that need access to the same shared data set?
  • Do those parties update the data?
  • Is there a requirement for verification?

Learn more about the impact of disruptive trends and technologies by signing up for an AEM Thinking Forward event in a city near you.

The Evolution of Blockchain

In order for equipment manufacturers to accurately determine whether or not blockchain can bring value to their respective organizations, they must first have a strong understand of what the technology is and how it has evolved in recent years.

Ultimately, said Rentmeester, blockchain is best defined as a “secure, shared distributed ledger.”

More specifically, blockchain is secure because it uses cryptography to sign transactions, which creates a positive identity for parties transacting in a process. It’s shared because any number different parties transacted together all have access to data sets. And it’s distributed because no one single source or one database can be lost or compromised.  

“On one level, this is the technology that supports cryptocurrency and Bitcoin – just simply a means of tracking the transfer of assets and the exchange of value between parties” said Rentmeester. “But on another level, what we’re seeing is that data model can be expanded to store other information that’s part of important transactions – whether it’s safety-related data, inspection data or something else.”

And while blockchain is often referred to a single platform or technology, it’s really a set of technologies that exist across a wide spectrum. And, according to Rentmeester, it can be helpful for equipment manufacturers to think about the concept in terms of Blockchain 1.0, Blockchain 2.0 and Blockchain 3.0. As he described to attendees at AEM’s Product Safety and Compliance Seminar:

  • Blockchain 1.0 is simple ledgers
  • Blockchain 2.0 is platforms revolving around smart contracts and the ability to deploy those contracts to execute a process
  • Blockchain 3.0 centers around additional cloud services to blockchain platforms and the ability to support offchain processes, as well as the creation of data standards allowing for companies to agree on the data sets and shared processes being built

“Today, we are approaching the midpoint between 2.0 and 3.0,” said Rentmeester. “And what we’ve seen over the course of the past year is this process is accelerating.”

Benefits – And Potential Hurdles – to Adoption

For those equipment manufacturers looking at potential benefits from investing in the technology, they include: 

  • Transparency to reduce friction, disputes and fraud
  • Improved visibility and chain of custody tracking
  • Improved inventory levels and capacity utilization
  • Reduced operational and transaction costs
  • Increased revenue by faster response to changing market demands
  • Reduced risk in handling warranty, safety and product recall events

However, in order to help realize those benefits, organizations must be able to answer the following questions prior to investment:

  • How will participation extend to lower supply tiers?
  • How does the cost of adoption compare to the potential benefits gained?
  • Are the current integration and process automation a better option instead?

“It's important to remember, however, that adoption doesn’t necessarily mean a case of replacing existing systems and technology with something completely different,” said Rentmeester. “In a lot of cases, it means adding on a shared, verified data layer on top of a system in place today – data you are already sharing with your partners that can be verified across the parties involved to create a verified history.”

 

 

 “Today, we are approaching the midpoint between (Blockchain) 2.0 and 3.0,” said Mark Rentmeester, former director of cloud applications and data practice, Concurrency. “And what we’ve seen over the course of the past year is this process is accelerating.”

 

Blockchain technology and its ability to be leveraged by organizations in the equipment manufacturing industry has come a long way in the past year or so, but hurdles to widespread adoption still remain. Whether it’s scalability to match the level of transaction volumes in current systems today, addressing confidentiality and privacy concerns, interoperability, maintenance, etc., said Rentmeester, there is an “arms race” between platform providers to improve and evolve their offerings to best meet the needs of potential customers.

The Blockchain Blueprint

Consider the early 2000s. It was a time where there were distributed systems between companies, and eventually a shift occurred from old client server systems and on-premise systems to web services, and the ability to communicate between organizations with web services (and now APIs) served as a fundamental transformation in the ways in which data was shared and integrated.

“Our view is that blockchain is another paradigm shift of that level, where we will now have other decentralized models, but companies are able to work against the same shared data or build a shared process where they are integrating at that level,” said Rentmeester.

Equipment manufacturers should take the following approach to blockchain technology, he continued:

  • Start with a discovery phase and determine potential use cases or opportunities
  • Develop a position or strategy
  • Implement a roadmap to adoption where organizational goals are achieved
  • Assess the viability of a prototype or pilot adoption

“Eighteen months ago, companies were really just trying to get their heads around blockchain, but now we’ve already seen the first wave of companies get off the ground and really look to take the next step with their enterprise goals,” said Rentmeester. 

Join Us Next Year

For more industry focused education on product design, standard and regulation compliance, and hazard communication processes, consider attending the 2020 Product Safety & Compliance and Product Liability seminars, which will be held April 27-30 in Itasca, Illinois.

For more information, contact Nathan Burton, AEM technical and safety services manager, at nburton@aem.org or by calling 414-298-4126.

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