Connections for Success

12.12.17

Smart Factories and Blockchain: Stay on the Cutting Edge of Technology
Kenneth L. Tornheim

Most manufacturers have already applied classic business management concepts, such as just-in-time production and continuous improvement initiatives, in order to enhance cash flow and efficiency. However, these efforts might not be enough to stay competitive in a technology-driven marketplace. Smart factories and blockchain technologies are expected to revolutionize the manufacturing industry in the 21st century.

Creating Smarter Factories
The Manufacturing Leadership Council (MLC) has identified several important issues facing manufacturers during the next year. Smart factories are a pivotal part of the MLC’s agenda in a data-driven future.

The MLC envisions that factories of the future will embrace the potential of evolving production models, materials and technologies. This requires digitization of procurement, production and engineering processes. As a result, smart factories will be more cost-effective, responsive, automated and sustainable than factories today. In addition, management will be able to analyze the manufacturing process using cross-functional data, which will enable management to adapt quickly and seize new business opportunities.

For example, a smart warehouse might be equipped with sensors that automatically detect when materials, parts and accessories need to be ordered. The system would send an alert to the procurement department to order more materials or it would communicate directly with a supplier about ordering the items. If the company owns more than one warehouse, the system might also identify other warehouses that have specific items in stock.

Defining Blockchain
On the other hand, blockchain is most commonly associated with Bitcoin transactions. However, its potential uses extend far beyond digital currencies. Blockchain is essentially a distributed ledger that is shared among thousands of computers (or nodes), rather than being housed on one central server.

Blockchain provides safeguards against errors, fraud or tampering, which helps to engender trust with supply chain partners. The technology is encrypted and requires digital signatures to protect participants’ identities. Moreover, it is not controlled by any single party.

Widespread implementation of blockchain is several years away. In the meantime, it is important for manufacturers to learn about the technology and brainstorm how it can add value to supply chain transactions. Over the long run, blockchain may eliminate the need for third-party payment processors.

Taking the Plunge
Technological change is a moving target that will require ongoing financial investment. Before upgrading your processes and systems to take advantage of emerging smart-factory or blockchain technology, it is important to crunch the numbers and evaluate your options. Your CPA can help you address the financial side of the equation.

For more information, contact Ken Tornheim at ktornheim@orba.com, or call him at 312.670.7444. Visit ORBA.com to learn more about our Manufacturing and Distribution Group.
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