Is the Defence industry ready for blockchain?

What is Blockchain?

At its core, blockchain is a digital record of ‘blocks’ of information, that link together to form a ledger, or ‘chain’. The ledger is decentralised and can be viewed and accessed by all approved users. Any time the data is changed, all users in the network validate it before it is added into the chain with a time stamp. Once incorporated into the chain, this data cannot be amended or reversed. For this reason, the main advantages of blockchain technology are increased visibility, traceability and efficiency.

Data held in blockchain is different from that held in the cloud, in that data recorded using blockchain technology is immutable and cryptographically signed, or validated, by approved users. This guarantees the information is correct and hasn’t been tampered with. Blockchain enables trusted ownership of data, decentralised across an ecosystem. While the public cloud does have private, secure data hosting capabilities and the ability to control access, this data is heavily concentrated with a few huge vendors.

How could Blockchain be leveraged in Defence?

The two main benefits of this technology in the Manufacturing arena sit within supply chain management and ‘smart contracts’.

Across the supply chain, blockchain generates transparency and traceability, recording each stage of a product’s life from raw material to customer delivery. This ensures a component’s authenticity, as well as providing an end-to-end pathway, complete with licencing and condition of usage information, for that product through the supply chain. For many organisations that currently have little visibility beyond first tier suppliers, this also gives the ability to identify and contain any quality issues much more efficiently.

Traditionally, Manufacturing organisations have relied on strong relationships, auditing and documentation to manage their supply chain effectively, resulting in inflated costs (BCG, 2019). However, blockchain can now be used to push responsibility for accurate data back to the primary sources, i.e., the suppliers themselves. With Blockchain, information is traced and recorded at each step, providing a clear audit trail for approved users to see, significantly reducing the need for such manual methods, and providing much improved warranty management. This also means that Defence suppliers will have the information available to respond to regulatory compliance requests much more readily.

Smart contracts are pre-programmed transactions, with a ‘when…then…’ structure, that enable the automatic execution of specific actions once the pre-determined condition is met. This adds certainty to the outcome, whilst reducing time taken and removing human error from the equation for repeatable tasks. They are also able to initiate the next transaction once the right conditions have been met (IBM, 2022), whether that’s making a payment or triggering a despatch instruction. This makes for much more efficient and accurate contract administration, but because all records are shared and can’t be individually edited, it also means supply chain relationships are more transparent and information records are much more secure.

What complexities should be considered?

For now, Blockchain technology is unable to manage real-time data, so if you’re looking for a way to automate machinery, for example, this isn’t it. Also, because of its complex, secure structure, it isn’t suitable for advanced analytics (PropelPLM, 2022).

Additionally, being a relatively new and complex technology, it is still fairly expensive, and the full supply chain benefit relies on all members of the supply chain being able to take part, forming a connected ecosystem. Many smaller Defence industry suppliers lack the technology and person-power to adopt blockchain, leaving partial or incomplete chains of information. However, larger OEMs can tackle this by setting up the required technology and Blockchain platform themselves and then inviting their supply chain to opt in.

It is also important to note that, being an emergent technology, there are some countries that don’t yet recognise Blockchain technology as a legitimate means of handling sensitive or classified data. Equally, some countries do not recognise smart contracts as being legally binding. With that in mind, organisations should check the regulatory and trade requirements of the regions they operate within, and those of their customers, before diving into an investment in Blockchain technology.

Blockchain can revolutionise the Defence sector

That said, the landscape in Defence is changing. In 2020, a whitepaper with the title ‘Potential Uses of Blockchain by the US Department of Defence’ was written by several Department of Defence (DoD) contractors and examined how the US DoD might use blockchain to protect sensitive R&D data against Cyberattacks (Digit, 2020). In a similar vein, the US army has shown interest in using Blockchain to make supply chain improvements for the marine aviation industry (investing.com). The UK’s Ministry of Defence has also been reportedly investigating how Blockchain can be used to improve the trustworthiness of a network of sensors on security cameras (Reuters, 2019). Separately, there are some organisations, such as defence electronics manufacturers, that have been investing in Blockchain to eliminate counterfeit components from entering their inbound supply chain. It is estimated, in the semiconductor industry, that $7.5 billion is lost in revenue each year because of counterfeit parts, according to the Semiconductor Industry Association (SIA).

The benefits of Blockchain technology in achieving efficiencies and transparency throughout incredibly complex supply chains are clear. These benefits continue in-service with the potential to support performance improvements, warranty administration and quality tracking throughout the product lifecycle. However, nervousness around data security, appropriate application and the decentralised nature of stored information is still broadly unresolved across the Defence sector.

Relatively few manufacturing organisations, circa 3% (CRI), have invested in Blockchain as a solution for their own business, but several big hitters in the Defence industry are exploring and recognising its potential in relation to specific applications. Given it is an emerging technology in a highly regulated industry, many Defence manufacturers are reluctant to take the plunge before their primary government customers publicly authorise the use of Blockchain. That said, significant interest in its capabilities is building, and Blockchain provides exciting future scope to shake up the foundations of the sector to release significant value for those on board.

To read more blogs in the Intelligent Industry: Journey to The Manufacturer events series, see quick links below:

Still flying high after Farnborough International Airshow 2022 – Mike Dwyer reflects on the successes of the Farnborough International Airshow and looks forward to what we have planned for The Manufacturer events in Liverpool on 16th and 17th November.

The challenges of adopting Industry 4.0 – Do you have the vision? – Graham Upton explores the challenges organisations face when adopting Industry 4.0.

Enabling the future of Manufacturing by focusing on people – George Hull shares his perspective on why the future of the Manufacturing sector is exciting but complex and explores the importance of focusing on people to champion best-in-class technology and processes.

Designing a sustainable future for the electrified automotive value chain – Billy Cavanagh highlights the major future issues for original equipment manufacturers (OEMs) and companies across the electric vehicle (EV) battery value chain, and what solutions they should proactively implement to mitigate their impact.

Imagining Tomorrow – The Future of Manufacturing in a Changing World – Susie Dixon explores the future of manufacturing in a changing world.