On-demand Supply Chains and Moog’s VeriPart Project

Modern commerce relies on speed and immediacy. Consumers can now pick up their smartphone and place an order without ever having to stand up from their seat. Such speed strains supply chains – both B2B and B2C – trying to keep up with the frenetic pace.

Moog Inc., a global manufacturer of high-performance parts, recently launched a new service called VeriPart to address these dynamics. We did a nice case study on them in the Animal Ventures Asset Chains report recently. The new service is charged with refining metal additive manufacturing (3D printing) process and streamlining its particular supply chain needs. VeriPart strives to create an efficient logistical framework to leverage the rapidly expanding marketplace for 3-D printed, on-demand manufacturing.


On-demand Manufacturing Poses Particular Issues

Despite the potential held by 3D printing, the market is still too niche to rely on traditional production and inventory models for financial feasibility. As a result, Moog tasked its VeriPart project with creating an on-demand production capacity that is cost-efficient and secure.

Entirely reliant on digital communication and design, VeriPart also needs to establish a way to certify and authenticate the specific design files associated with their 3-D printed product line. Moog needs to create a system that allows them to track and validate all of their 3D printed products across the different stages of their life cycles. Since VeriPart operates outside of standard production lines and supply chains, they are unable to rely on traditional control processes but must invent new ones specifically for on-demand manufacturing and distribution.


New Parts, New Business

In addition to its technical undertaking, Moog needs to create a business model that finds value in on-demand supply chains. One where specialized parts aren’t manufactured and delivered according to their traditional supply chain but, instead, 3D printed on an as-needed basis.

Moog must also retain the value of their intellectual property held in their unique, specialized parts. Whenever proprietary designs are being purchased and distributed entirely through web delivery, Moog must ensure the integrity of their designs. Such integrity is vital for the safety and security of the end-user as well as protection from design theft.


Creating a New Decentralized Marketplace

The uniqueness of the project requires, in essence, the creation of an entirely new decentralized marketplace. Blockchain technology will securely verify transactions within that marketplace and deliver digital files while maintaining absolute trust in each participating party. Since the framework will consist of outside artisans and manufacturers that 3D print the parts, the new marketplace must also be adaptable and scalable while retaining security and reliability. Since aircraft manufacturers and pharmaceutical companies comprise a substantial portion of Moog’s client base, the blockchain-based framework must also satisfy significant regulatory requirements. Their trailblazing approach means they are inventing infrastructure as they go.


An Investment Worth Taking

Assuming Moog is successful with VeriPart, the company will have effectively positioned itself to dominate the metal additive manufacturing space. And eventually it will be able to expand the logistical framework to many other sectors and customer bases.

Blockchain technology is the foundation to all of the associated transactions and file deliveries. The framework significantly streamlines their administrative processes involved in supplying their highly regulated clientele. The on-demand nature of the manufacturing will reduce costs as well. The sunk costs involved with housing idle inventory will disappear as products become strictly made on an as-needed basis. Soon an autonomous, shared single supply chain, with on-demand manufacturing will become the new norm in commerce and society.

Realizing the Potential of Blockchain

Realizing the Potential of Blockchain

A Multistakeholder Approach to the Stewardship of Blockchain and Cryptocurrencies

Blockchain, or distributed ledger technology, could soon give rise to a new era of the Internet even more disruptive and transformative than the current one. Blockchain’s ability to generate unprecedented opportunities to create and trade value in society will lead to a generational shift in the Internet’s evolution, from an Internet of Information to a new generation Internet of Value. The key to enabling this transition is the formation of a multistakeholder consensus around how the technology functions, its current and potential applications and how to create the regulatory, cultural and organizational conditions for it to succeed.

Global Supply Chains Are About to Get Better, Thanks to Blockchain

When an E.coli outbreak at Chipotle Mexican Grill outlets left 55 customers ill, in 2015, the news stories, shutdowns, and investigations shattered the restaurant chain’s reputation. Sales plummeted, and Chipotle’s share price dropped 42%, to a three-year low, where it has languished ever since.

At the heart of the Denver-based company’s crisis was the ever-present problem faced by companies that depend on multiple suppliers to deliver parts and ingredients: a lack of transparency and accountability across complex supply chains. Unable to monitor its suppliers in real time, Chipotle could neither prevent the contamination nor contain it in a targeted way after it was discovered.

Now, a slew of startups and corporations are exploring a radical solution to this problem: using a blockchain to transfer title and record permissions and activity logs so as to track the flow of goods and services between businesses and across borders.

With blockchain technology, the core system that underpins bitcoin, computers of separately owned entities follow a cryptographic protocol to constantly validate updates to a commonly shared ledger. A fundamental advantage of this distributed system, where no single company has control, is that it resolves problems of disclosure and accountability between individuals and institutions whose interests aren’t necessarily aligned. Mutually important data can be updated in real time, removing the need for laborious, error-prone reconciliation with each other’s internal records. It gives each member of the network far greater and timelier visibility of the total activity.
In a nutshell, this is a global system for mediating trust and selective transparency. Its advocates say it will take the internet’s empowering potential to its next level. Although much attention and money has been spent on financial applications of the technology, an equally promising test case lies with global supply chain relationships, whose complexity and diversity of interests pose exactly the kinds of challenges this technology seeks to address. The technology can reveal hitherto hidden information and allows users to attach digital tokens — a unique, negotiable form of digital asset, modeled on bitcoin — to intermediate goods as they progress along the production, shipping, and delivery phases of a supply chain and as title to them passes between different players. This could give businesses far greater flexibility to find markets and price risk, by capturing the value that they have invested in the process at any point along the chain. What we end up with are dynamic demand chains in place of rigid supply chains, resulting in more efficient resource use for all.

Various endeavors have already started. Provenance, a UK-based startup, tells prospective clients they can use its blockchain-based technology to “share your product’s journey and your business impact on environment and society.” Walmart is working with IBM and Tsinghua University, in Beijing, to follow the movement of pork in China with a blockchain. Mining giant BHP Billiton is using the technology to track mineral analysis done by outside vendors. The startup Everledger has uploaded unique identifying data on a million individual diamonds to a blockchain ledger system to build quality assurances and help jewelers comply with regulations barring “blood diamond” products.
Advances in chip and sensor technology, which can translate data from the automated movement of physical goods, should greatly enhance these emerging blockchain systems. It could be especially powerful when combined with “smart contracts,” in which contractual rights and obligations, including the terms for payment and delivery of goods and services, can be automatically executed by an autonomous system that’s trusted by all signatories.

But this technology’s potential traceability and automation benefits don’t just pertain to things; it could also keep human beings in check. Staff and supervisors from different vendors can be granted special, cryptographic permissions, which, when placed into a blockchain environment, would appear as unique, traceable identifiers — preferably encrypted, to protect the employee’s personal information. This would allow all members of a supply chain community to monitor the activity of each other’s credentialed staff. Chipotle, for example, could see in real time whether a properly credentialed person in a facility owned by one of its beef suppliers is carrying out appropriate sterilization and disinfection procedures.

This kind of provable, transparent credentialing will be especially important for additive manufacturing, which is central to the dynamic, on-demand production model of the so-called Industry 4.0 movement. A team from precision parts manufacturer Moog Inc. has launched a service it calls Veripart, which seeks to overcome a challenge that the director of its additive manufacturing and innovation unit, James Regenor, described to us in these terms: “How can the maintenance crew on a U.S. aircraft carrier have absolute confidence that the software file they downloaded to 3D print a new part for a fighter jet hasn’t been hacked by a foreign adversary?” This underscores one of the most compelling arguments for blockchain technology: Without its solution to the trust problem, the sophisticated, decentralized, internet of things–driven economy that many are projecting might well be impossible.

These potential efficiency improvements, enabled by hitherto unavailable information, suggest blockchain technology could deliver vast savings for companies everywhere. But there are formidable obstacles to overcome first.

One challenge lies in the development and governance of the technology. Ideally, to encourage free access, competition, and open innovation, global supply chains would have the option to anchor to a public blockchain that no entity controls. In other words, data extracted from commercial and production activity would be cryptographically recorded in open ledgers. But, inevitably, private, closed ledgers run by a consortium of companies will also arise, as their members seek to protect market share and profits. Both imperatives pose challenges. For one, achieving global economic capacity for the most significant public blockchains, digital-currency service bitcoin and smart contract platform Ethereum, is constrained by divisions in their open-source communities, making it difficult to agree on protocol upgrades. Second, there needs to be interoperability across private and public blockchains, which will require standards and agreements.

Another big obstacle: the law. A complex array of regulations, maritime law, and commercial codes governs rights of ownership and possession along the world’s shipping routes and their multiple jurisdictions. Marrying that old-world body of law, and the human-led institutions that manage it, with the digitally defined, dematerialized, automated and denationalized nature of blockchains and smart contracts will be difficult.
Even before governments can be convinced to support this effort, and to do so in a globally coordinated way, industry must agree on best practices and standards of technology and contract structure across international borders and jurisdictions. In Hong Kong, the recently formed Belt and Road blockchain consortium seeks to bring order to this process by adopting internet governance approaches pioneered and tested by ICANN (Internet Corporation for Assigned Names and Numbers), the organization that manages domain names. As an international, private sector–led body, ICANN has already proven itself to be an effective global administrator and adjudicator.

These challenges must be weighed against the demands of a global economy that hasn’t properly recovered from the financial crisis of 2008 and is fueling disintegrating, isolationist forces in the U.S. and Europe. Any system that promises to counter those trends by removing the intercommercial frictions that curb trade while also enhancing transparency and control for businesses and their customers is inherently worth exploring. It’s why an increasing number of investors, businesses, academics, and even governments are starting to view blockchain technology as a much-needed platform for economic renewal.