Collaborative Tracking
How are Electronics Manufacturers Using Blockchain Technology?
Three options for leveraging the secure digital ledger.
by Quentin B. Samelson

In last month’s introduction to blockchain technology,1 we noted how the technology offers a way to automate and simplify multiparty processes that are time-consuming, resource-intense, and therefore costly. We often summarize this sort of process as “high-friction.” But pioneers in applying blockchain to improve multiparty processes learned early that it wasn’t enough to find a process that was slow or frustrating. There needed to be a quantifiable performance (often financial) benefit as well. This wasn’t always easy to establish. Unlike applying automation to improve internal processes, the “friction” in multiparty processes occurs outside an organization. As a result, the costs and performance issues caused by that friction may not be captured well enough inside the organization to understand its true impact.

Perhaps it’s understandable, then, that the most successful early blockchain applications were often driven by companies large and sophisticated enough to not only recognize, but quantify, the opportunities and to have enough influence with their partner companies that those partners were willing to collaborate on a solution. Indeed, a recent article in MIT Sloan Management Review2 states, “The biggest challenge to companies creating blockchain apps isn’t the technology – it’s successfully collaborating with ecosystem partners.”

Early Use Cases

In the electronics industry, the earliest proof-of-concept blockchain applications generally revolve around processes between an initiating (usually large) company and its partners. The initial company generally sponsored the development of the application, and its partners were generally willing to participate in the improved process. For example:

  1. A major computer OEM leveraged blockchain technology to enable a “buy/sell” process among its component suppliers, third-party manufacturers (EMS providers), and itself. This sort of buy/sell process has been automated before with more conventional technology,3 but blockchain was clearly superior due to its ability to let multiple parties view the same transaction but keep some data (like pricing) private between authorized parties (FIGURE 1). The older, conventional technology had to model the process as a series of separate two-way transactions; blockchain permitted a much more efficient, single-transaction approach.
  2. Another large electronics company noticed both its accounts receivable and accounts payable processes were often blocked by simple discrepancies between invoices and purchase orders or contracts. Using blockchain to ensure there was only one shared record removed the majority of discrepancies. (The payoff in addressing these processes is different: Removing impediments in accounts receivable helps a company get paid faster; eliminating disconnects in accounts payable reduces overhead.)
Figure 1. Use a blockchain-shared ledger to manage a separate financial flow
Figure 1. Use a blockchain-shared ledger to manage a separate financial flow (supplier to OEM to EMS) and physical flow (supplier to 3PL hub to EMS) with a smart contract that automatically executes the financial transactions when physical actions have occurred. Use a blockchain-shared ledger to manage a separate financial flow (supplier to OEM to EMS) and physical flow (supplier to 3PL hub to EMS) with a smart contract that automatically executes the financial transactions when physical actions have occurred.
Figure 2. The Responsible Sourcing Blockchain Network was set up to improve the knowledge of how critical materials like cobalt were sourced
Figure 2. The Responsible Sourcing Blockchain Network was set up to improve the knowledge of how critical materials like cobalt were sourced, and to provide tracing of goods made with those materials.
Adapting Use Cases from Other Industries

Additionally, electronics companies began to hear about applications originally developed for other industries, especially ones dealing with tracking shipments and understanding the origin, or “provenance,” of purchased items. The first prominent shipment-tracking application was developed by IBM for Maersk, and a food-provenance project for Walmart grew into the IBM Food Trust application. These prompted extensions in two very different directions:

  1. To improve the responsible sourcing of raw materials, a group of electronics and automotive companies formed the Responsible Sourcing Blockchain Network4 to promote the use of blockchain to trace raw materials all the way back to the source (FIGURE 2).
  2. Once the Food Trust platform was established, other companies recognized electronic “trackers,” which physically accompany a shipment, add a new level of useful data to the existing track-and-trace capability, providing detailed information on the quality of the produce shipped and linking the quality data captured during shipment to the transactional data captured as the shipment passed from source to destination. Thus, blockchain platforms offer new markets for electronics devices that support data collection.

On the other side of the electronics industry, companies that market big, rack-mounted equipment for data centers and telecommunications often struggle with the process of onboarding local contractors to assist with installation. To make matters worse, the new “vendor” qualification process often subjects those contractors to high costs and delays. The ability of blockchain to permit secure sharing of pre-validated data spawned an application called “Trust Your Supplier.” Companies that rely on local contracting firms recognized much of their qualification process was common and – once validated – could be reused. Blockchain provides the ability to reuse that pre-validated qualification data without revealing the identity of the previous customer(s) of the contracting firm, and only after the contractor has given its approval.5

Electronics companies now have three basic options to leverage blockchain technology:

  • They can be the “founder” of a new, unique capability to be employed with their own network of trading partners. If the idea has broad applicability, this could grow into a new platform like the ones mentioned above.
  • They can join an existing network to solve an industrywide problem that they are also experiencing. As mentioned, networks already exist to assist with logistics, responsible sourcing, local contractor qualification, and other industry issues.
  • They can leverage existing blockchain applications to “convene” their own network.

Convening a network of your own comes with a unique set of opportunities and challenges. More on that last idea in next month’s article.

References
  1. Quentin B. Samelson, “What is Blockchain, and How Can It Solve Problems for Electronics Manufacturers?” PCD&F/CIRCUITS ASSEMBLY, June 2021.
  2. Mary Lacity and Remko Van Hoek, “What We’ve Learned So Far About Blockchain for Business,” MIT Sloan Management Review, Feb. 3, 2021.
  3. One company built a buy/sell process using a combination of BPM software, RosettaNet B2B transactions, and its own ERP system.
  4. More information on the RSBN at ibm.com/blogs/blockchain/2020/12/blockchain-and-sustainability-through-responsible-sourcing or rcsglobal.com/blockchain-traceability.
  5. More information at trustyoursupplier.com.
Quentin B. Samelson is senior managing consultant, Electronics Center of Competence and Member of the IBM Industry Academy at IBM (ibm.com); qbsamels@us.ibm.com.