In addition, there is frequently no standard way of documenting, storing and transmitting information, especially when dealing with global supply chains that involve many jurisdictions. According to East Asia Forum.org: “A single cross-border trade transaction involves the exchange of an average of 36 different documents and 240 copies of such documents”. Distributed ledger technology, known as blockchain technology, has the potential to improve, modernise and fortify supply chains by providing transparent and secure product tracking at every stage. The audit trail is visible in real-time and documented as blocks in a chain, so there is no guesswork along the supply chain as to when goods are shipped, who has handled them or when they will arrive. Greg Cline, head of research for Aberdeen Group's  manufacturing, product innovation and engineering practices section, explains: "Many manufacturers are enthusiastic about blockchain's potential capacity to authenticate items going through the manufacturing supply chain." So, given the highly transactional and frequently multi-step nature of business process services, the potential uses of blockchain technology in manufacturing are substantial.

Source: msrcosmos.com

What are the benefits that blockchains offer manufacturers?

Although blockchain technology may have been initially developed to streamline cryptocurrency transactions its underlying principles are adaptable to the manufacturers, such as:

• reduction of administrative expenses and entrance obstacles - blockchain technology might significantly lower the threshold for new entrants by reducing the cost of maintaining a manufacturing business. The blockchain-enabled business model of "machines as a service" (MaaS) allows firms to save money by leasing rather than buying machinery. This new form of conducting business will make it easier for up-and-coming manufacturers to obtain their goods to market without the need to borrow large capital sums.

• persistence and firmness - as a result of COVID-19, manufacturers have been obliged to review their supply chains and methods of production. Blockchain technology is able to help strengthen the resilience of a manufacturing company, even whilst there is no silver bullet for dealing with disasters such as a worldwide pandemic. The decentralised nature of blockchain technology ensures that blockchains can function even if a single node fails or a single participant leaves the network. When it comes to building a robust business strategy, the consistency provided by blockchain technology is invaluable to manufacturers.
  
  

• trust and openness are strengthened - businesses that wish to earn the trust of various third parties such as suppliers, distributors, shareholders, staff, and potentially the end customer, are able to offer greater transparency using blockchain technology. Distributed ledgers store data in a single, immutable copy that all nodes can access in the network at all times. 

• improved security - blockchains store data using intricate cryptographic coding to ensure the security of the information that they hold. Blockchain's openness is matched with stringent safeguards in the form of cryptographic signatures on each transaction. Since the network's storage is also distributed, the ledger and the information it contains are safer against cyberattacks as not all the data is held in just one location.

How blockchain is used in manufacturing

• verifying the origin of materials

Falsified products and fraud in the supply chain have been a problem for many manufacturers for years, whether it be horsemeat being used for human consumption or corrupt medical supply chains. Hence, manufacturers are looking to blockchain technology to build an immutable ledger of assets and products. With the use of blockchain technology, a distributed digital ledger can be created which solves issues with the distribution and dissemination of data in a decentralised supply chain. A safe, permissioned database is available to vendors, but no single organisation claims sole custody of the information contained inside. As a result, the possibility of fraudulent data alteration by some vendors is greatly reduced. In addition, the inaccuracies and delays that come with paper-based audit trails are eliminated with the use of blockchain technology in manufacturing. Those in the manufacturing business may now check the provenance of their materials and keep fake goods out of the supply chain. An immutable audit trail is achieved while the danger of fraud is decreased.

• supply chain management

One of the most time-consuming and essential business activities for manufacturers is supply chain management. Using blockchain technology, factories can track more accurately the whereabouts of raw materials, components and finished goods. Blockchain's definitive end-to-end path for parts and products enhances track-and-traceability, whereby improving accuracy and reducing production mistakes.  Japanese manufacturer, Toyota, is now able to tracks auto parts across multiple jurisdictions, factories and suppliers, sharing information on a real-time basis with manufacturers, banks, distributors, insurers, government authorities and customers by using blockchain technology - thus reducing recall rates and increase safety.  

• automated contractual terms (smart contracts)

The introduction of smart contracts made possible by blockchain technology has revolutionised the manufacturing industry. Smart contracts are computer codes that may be found on a blockchain, eliminating the need for paper contracts or fragile digital reproductions of paper contracts. The use of smart contract enable greater automation of many of the current paper-based systems which manufacturers have historically relied upon, so streamlining otherwise intricate corporate procedures. The terms and conditions and data stored on a blockchain may be utilised to offer more accurate inventory tracking, supply chain monitoring, payment timing and processing in a highly transparent manner to engender greater levels of trust in the manufacturer. By switching from manual to automated procedures, businesses may save time, energy and money. 

• quality assurance and regulatory compliance

As a result of its inherent security and capacity to monitor a single version of a piece of information, blockchain technology can be helpful for a manufacturing a company's quality control and regulatory compliance demands. Blockchain technology may reduce errors in the quality control process by using machine-level monitoring and exact track-and-trace of materials and components. As a result, there are  fewer product recalls and less material goes to waste, both of which drive higher levels of profitability. A second advantage is that the blockchain ledger cannot be altered. This includes machine information, production methods, raw materials, and more. Internal and external auditors can utilise these records to verify safety precautions (all legal requirements) as well as helping to monitor companies’ ESG credentials. 

The adoption and growth in the infrastructure which enables cryptos to become even more mainstream shows no sign of abating. Mastercard has sponsored a survey of 35,000 people and found that 91% had heard of crypto and half were interested in using crypto to mail payments, and recently CNBC has reported: “Mastercard and Visa have both been signing up new partners and become even more involved in the crypto sector”. Mastercard has teamed up with crypto firm Bakkt to let banks and retailers offer crypto-related services.  Visa, has more than 70 crypto partnerships and has now agreed a deal with FTX to offer crypto debit cards in 40 countries. Not to be left out, American Express has revealed it is exploring how to allow stablecoins to be used on its network. Smaller payment platforms are also engaging with stablecoins - for example, Jack Dorsey (founder of Twitter and reportedly worth over $7billion) has a payment business called TBD, which has tweeted: “We’re partnering with [Circle] to solve some of our biggest money challenges, including decentralized, global on-and-off-ramps between fiat and crypto worlds that can power global use cases from cross-border remittances to self-custody of stablecoins.” Here is a list of other payment platforms offering crypto-related services, but relatively few banks exist which have been prepared to offer on ramp/off ramp crypto services i.e. enable one to buy or sell crypto using a bank account.

An often-cited question is: “How can I use my crypto?” Well surprisingly, there are literally millions of merchants around the world that accept Visa or Mastercard. Furthermore, via their platforms one can spend crypto using a crypto debit card, such as Crypto.com. Alternatively, there are a host of smaller firms alongside many global companies that accept Bitcoin as a form or payment - 99bitcoins.com lists some of them here. So, for retail investors, it is relatively easy to spend crypto. But you may also question: “Why should I care about crypto?” The fact is, crypto is merely a rounding error and valued at $1trillion - when you compare it to the asset management industry that is worth over $100 trillion, or the real estate sector that Savills cites is worth $326trillion. Well, digital assets have certainly been on the radar for the world’s biggest custodian bank, BNY Mellon, with $43trillion of assets in custody. Furthermore, it has just launched a crypto custody service enabling its clients to hold crypto and have the same protection as if they were holding cash, equities bonds or any other asset. Having surveyed 271 institutions, BNY Mellon has recently issued a report, “Migration to Digital Assets Accelerates” - and the results may surprise some. The research shows that “70% of respondents would increase their digital asset activity if services like custody and execution are available from recognized, trusted institutions. Despite the market downturn, 88% are moving forward with their plans. The study further indicates that almost all institutional investors (91%) are interested in investing in tokenized products”. 

Institutions and digital assets

Source: BNYMellon

As BNY Mellon has revealed, whilst the headlines are often about crypto, possibly the real reason behind why (along with many other global financial institutions) are building an infrastructure for digital assets is less about crypto and more about the digitalisation of the financial services sector as this is where the real money is. We have already seen asset managers such as JP Morgan, Abrdn , Kohlberg Kravis Roberts and Franklin Templeton announce they are to digitise funds. Back in 2018, the World Bank issued its first digital debt instrument and now SWIFT has recently made an announcement that it has “successfully shown that central bank digital currencies (CBDCs) and tokenised assets can move seamlessly on existing financial infrastructure”. With a financial infrastructure that encompasses over 11,500 institutions globally, does this means that digital assets could be bought, sold and stored on a Peer2Peer basis i.e., without the need to involve a third party? If this is the case, then, as we see the financial services sector digitally transforming its products and services, many firms will need to revaluate their business models - so, could this be the real agenda?