Technology also will play major role in protecting pharmaceutical supply chain
Blockchain can help power the process to monetize Big Data and will play a role in the FDA’s regulations to limit pharmaceutical counterfeiting by increasing security of the drug supply chain, said experts Smart Manufacturing gathered at Westec 2019 for an exclusive blockchain-tech roundtable.
Blockchain can open the door for manufacturers to be paid for their data, Simbachain CEO Joel Neidig said. The company’s namesake product is a cloud-based, smart-contract-as-a-service platform, he said.
“Manufacturers generate a ton of data,” he said. “There’s a lot of Big Data and artificial intelligence and people wanting to consume that data. Blockchain is a way of being able to share that data, and then getting a return on that data, for basically an incentive to share that data.”
As more industries and regulatory bodies that oversee industries seek greater traceability and validation of products and components, new applications for blockchain emerge. For example, the FDA’s Drug Supply Chain Security Act requires increasing amounts of traceability and verification for pharmaceuticals, with the earliest provisions required in 2015 and more added through 2023, including provisions that go into effect this month requiring that wholesale distributors buy only products encoded with product identifiers.
The main issue in pharmaceuticals is when still-usable drugs are returned to the wholesale distributor, said Ganesh Wadawadigi, chief solution owner for digital supply solutions at software giant SAP. In the past, that return process has been a key opening for counterfeit drugs to enter the supply chain.
“In the pharmaceutical industry, regulations are coming into play where all of the salable returns of drugs have to be verified that they are authentic before they are put back into the supply chain,” he said.
Blockchain can help companies in a supply chain share information in ways they can trust, said Dennis Delgado, chief design officer at SyncFab. His firm offers machining services secured by blockchain and “blockchain as a service” for the manufacturing supply chain.
“Blockchain is helping open up that silo of data that exists in the supply chain right now,” he said. “Every company in a supply chain has their own aggregated information that they keep in house. But how do you share that between different entities and in a way that you can trust? That’s the missing part that I see with Industry 4.0 and smart manufacturing: the sharing of data in a way that’s more secure and that I can trust that it’s getting to the right partners.”
Opportunities for blockchain include manufacturing processes that involve multiple parties, misaligned incentives, machine-as-service and intellectual trade, said Tom Tichy, co-founder and CTO of Steamchain. His firm produces a machine-as-a-service platform of the same name.
“The machine generates data,” he said. “The blockchain ingests the data and transforms that data into financial transactions that are then distributed to the stakeholders for that particular machine. It could be the OEM. It could be the bank that financed it. Maybe some service providers are involved, as well. All these people have a stake in that machine performing up to the specification and running as smooth as possible.”
Without blockchain, multiple people need to be involved to send spreadsheets back and forth, verify data, verify payments, ensure that everyone is following the same rules and arbitrate disputes, Tichy said.
“With blockchain, you don’t have these problems because the algorithm takes care of the consensus—so everybody knows what the right answer is. We have this ability to negotiate a smart contract,” he said. “Each one of the stakeholders gets to execute the same probe. They get to share the data. They get to own the data. They get to audit the data. So, everybody knows what everybody’s angle is.”
Blockchain can help rectify errors in shipping and receiving, where there are often discrepancies between the quantity ordered and the quantity delivered, Wadawadigi said, referencing one of SAP’s customer use cases. “That has implications downstream when you are servicing the retail customers but also when it comes back to settlement. It delays settlement and you don’t have enough data to prove what really happened. With the use of blockchain information, they plan to level this information as soon as possible so they can bring in any discrepancies that stem from a mismatch of what was ordered and what was received. The cash flow is going to drastically improve, and that’s one of the value areas they’re looking at.”
And, with smart contracts, everyone gets paid when they achieve the performance goal.
“You know if this user received a certain part on this date, a certain action can occur with a smart contract validating receipt of payment,” Delgado said.
‘No brainer’ can be positive or negative
Blockchain has some issues to overcome.
“I go to a lot of suppliers, for instance, and when I mention the word ‘blockchain,’ they say, ‘Oh, I don’t want to get paid in Bitcoin. I want U.S. dollars’,” Delgado said.
The industry needs to “come up with new ways to speed up efficiency to existing processes to make blockchain a viable option,” Tichy said. “If we make it in a way that improves everybody’s bottom line, I think we will be here in five years talking about what a total no-brainer blockchain was. But if that fails, we might as well be talking about how it was a total no-brainer that blockchain didn’t go anywhere.”
As manufacturers seek to leverage blockchain to differentiate themselves, gain a competitive edge and prove that they are trustworthy, the emerging technology needs to become more efficient in ways that clearly improve the bottom line of early adopters, panelists said.
“At the end of the day, we have to evaluate how blockchain or an application of this technology improves your bottom line,” Tichy said. Manufacturers will not implement blockchain “just because it’s cool,” he added.
“Manufacturing blockchain provides a suite of tools that individuals can access today,” Delgado said. Worthwhile components include tracking and tracing of parts and materials for recalls, certification and validation.
Impact felt in two key areas
Blockchain is already making a mark in two key areas: the secure ability to track and trace materials among partners along a supply chain and the ability to validate users, he said.
Manufacturers must consider several factors as they decide whether to begin using blockchain. They also must consider which blockchain protocol will benefit their business, Wadawadigi said.
“It basically boils down to use cases where you have multi-party collaborations and there’s not enough transparency between different parties involved, which leads to inefficiencies and higher costs,” he said.
To help decide whether to integrate blockchain into supply chains and production, Wadawadigi said, manufacturers can consider these factors:
- At least three entities should be involved.
- A lack of transparency among those entities should be leading to multiple issues, such as varying product quality, delayed shipments and delayed payments to suppliers.
- All the players need access to write data onto the blockchain.
Too much transparency is possible
Full transparency isn’t always the goal.
“Transparency is a great thing, but sometimes you have too much transparency,” Tichy said. “Maybe you don’t want other people to know how well or not well your business is doing. In that case, privacy is very important in your choice of blockchain. There are some blockchains with privacy provisions baked right in. There are others that don’t have it.”
Within a blockchain, users can set up a hierarchy of access for writing and reading data, Delgado said.
“You’re not going to have the intern sending out invoices to your biggest competitor or biggest company that you’re working with,” he said. “So it’s really defining the tiers of how your hierarchy works within your business—and allowing certain access permissions for those entities” that match how you run your company overall.
Speed has been a concern, but speed capabilities are improving Wadawadigi said.
“The technology is being developed so rapidly, and there are so many improvements coming about,” he said. “So, in the pharmaceutical-returns example, in the last 12 months, this capability we’ve seen of Multi-Chain protocol we’re using has gone up several magnitudes.
“At this point in time, one can write almost hundreds and hundreds of transactions per second into the blockchain network. This trend is going to continue. As these blockchain networks grow, the technology is going to evolve to address these capability issues.”
Integration with current tech examined
Another key issue is how blockchain technology will integrate will software and technology already in play, Delgado said.
“How can this seamless integration occur so that the normal day-to-day doesn’t change,” he said. If manufacturers take a “top-down” approach and “toss this technology to their normal workforce, nobody is going to use it.”
Individual manufacturers also must focus on which form of blockchain will benefit their business, Wadawadigi said.
SAP last year began initiating industry consortiums bringing together its customers in each sector, he said.
“We look at a design thinking process to go through what would be an ideal situation in (each and every) industry,” Wadawadigi said. “If you are just tracking the provenance of a particular food item or a component that goes into an OEM product, then you don’t need smart contracts.
“In those cases, a Multi-Chain protocol might suffice. But if you have international trade or logistics kinds of processes where you need to automate decisions based on particular conditions, then you need smart contracts. That’s where we build our applications on Hyperledger fabric.”
There is no one-size-fits-all blockchain solution for manufacturing, Delgado noted. “Right now, it’s a collaborative effort using different types of blockchain aspect features to meld it to your use case.”
NIST writing interoperability standards
To address overall interoperability, NIST is working over the next several years to define standards, Neidig said. Meanwhile, consortiums and working groups in various sectors, such as automotive and aerospace, are defining how blockchain will be used within their sectors, he said.
Companies, especially small and medium sized enterprises, that are interested in blockchain should consider joining one of the consortiums for their industry, Tichy said.