Blockchain benefits for Lean manufacturing

Blockchain can provide benefits to larger manufacturers looking to improve their Lean operations and reduce waste.

By Becky Morgan February 1, 2019

While Lean blockchain makes no sense as a phrase, people are asking if blockchain is something that Lean organizations should be using.

The answer, as with most things, is: “it depends.”

Blockchain is designed to create a secure source of transaction history that cannot be edited. The big idea behind blockchain (which is not the same thing as Bitcoin!) is trust. Or the lack thereof.

For example, if a company sold product to a company in a different country, and they agreed to buy it. No matter the name of either company, you do not trust each other to actually perform. The purchaser won’t pay until they receive it, and you won’t ship it until you are certain you will be paid. E.g, the rise of the middle man.

This lack of trust creates friction in the process and adds costs. A blockchain approach to data verification and storage eliminates that friction. Technically, it replaces it with much less friction that costs little and is fast. A perfect example of a “smart contract” blockchain application.

Most companies have complex software to record important data. Most, however, don’t believe their own data, much less someone else’s. The data in each company is centralized and controlled by it. Think of the amazing amounts of waste that we have because we don’t trust the other organization, much less its data. So, what to do?

Blockchain is a distributed ledger (recording of transactions that exist identically on many computers) database that requires verification of every “block” of information to be added before adding it. And the “blocks” of data are chained one to the next through some fancy math to ensure that it is indisputable and immutable. It is impossible for anyone to edit a block. When errors are made in a transaction, a block is added to correct it.

Benefits of Blockchain for Lean organizations

So why would any Lean organization care about Blockchain?

Some wouldn’t. Blockchain is fairly simple application programming, but is not easy to design and implement. It brings value when relationships have a small set of specific attributes. It is a hammer that should not be used on screws, C-clamps or other types of fasteners. Just nails.

Yes, every company suffers from the monumental waste emanating from lack of trust, but you don’t need a howitzer to kill a fly. So when would a howitzer (blockchain) make sense?

For example, if you bought a nice diamond, you’d like to know it’s not a blood diamond. That means knowing with certainty exactly which mine is the source of that diamond. That means 100% transparency.

Everledger is an Australian company that developed the blockchain application the diamond industry uses to record everything about a specific diamond, from the rock in the mine to your hand. Blockchain is the digital tracking of the physical asset. There has to be some way to link your specific diamond as part of a rock in a mine to the data about it. In diamonds, there is a physical marker that makes it possible to do so. Everledger interacts with machine visioning to ensure the diamond being machined is your exact diamond. Blockchain secures the data.

Some assets have much simpler lives. Ohio is beginning to examine the potential for auto titles via blockchain. That would save amazing time and resources for everyone involved – the owner, the seller, the lender, the insurance company and more. Some banks are already using blockchain for loan application and processing; real estate and insurance are other industries moving in that direction.

Those service organizations that are also Lean will benefit from blockchain. Even if they don’t know what waste is, blockchain will eliminate much of it.

Blockchain benefits for manufacturers

Small companies should focus on the Internet of Things (IoT) first and keep an eye on blockchain for the long term.  Larger companies need to step up to the plate and understand it well enough to make an informed decision about the near-term role of blockchain in your industry and your business. Blockchain, while the platform for Bitcoin and other cryptocurrencies, is an important development in data creation, storage, and protection for any number of practical business scenarios.

Companies that are truly Lean thinking will want to become familiar with evolving blockchain capabilities. There is massive unseen waste that it may help you eliminate.

But Lean blockchain? Please. It’s simply another tool that may help an organization utilize resources and serve customers better.

This article originally appeared on Target Online. The Association for Manufacturing Excellence is a CFE Media content partner.

Author Bio: Becky Morgan, president of Fulcrum ConsultingWorks, Inc., is an operations strategist working with leaders of mid-sized manufacturing companies.