Blockchain technology is best known for the digital currency Bitcoin. Thanks to this technology, it is possible to carry out transactions using bitcoins without the involvement of a bank. All transactions are transparent to third parties, and cannot be altered, deleted or otherwise manipulated. However, the technology has much broader applications and, according to Matthew Jones, Blockchain Leader at IBM, is set to have a significant impact on the automotive industry. For example, blockchain technology can help improve the supply chain for automotive companies, provide leasing companies with a clearer insight into a vehicle’s maintenance history and wear and tear, and prevent the use of counterfeit parts.
Blockchain is a distributed ledger technology that allows an immutable record of transactions to be shared with third parties. Here, the term "transactions" refers not only to financial transactions, but also to events such as the transfer of an asset between two parties or an update if the status of an asset changes. An asset here can be a physical object such as a vehicle, but a financial loan or a software package.
Important features of Blockchain
Jones sets out several key features of Blockchain technology:
- Access to the shared ledger is manageable - Those using Blockchain technology can control who has access to the shared ledger. Only authorised parties are granted access.
- The shared ledger is copied and shared - Whoever accesses the ledger is given a copy of it. Everyone therefore has access to a copy of the original data, without the possibility of manipulating this data. This increases transparency and ensures that everyone has exactly the same data at their disposal.
- Transactions are encrypted - To ensure that only authorised parties have access to the ledger, transactions are encrypted. Only parties provided with the correct security certificates can decrypt transactions. Details of transactions are thus both secured and protected, and only viewable by parties explicitly authorised to do so.
- Transactions are immutable - With Blockchain technology, sets of transactions are grouped into blocks, which are then written to the ledger. Here, each block contains a component of the previous block, creating an unbreakable chain of blocks (the Blockchain). This ensures that transactions cannot be altered, destroyed or otherwise manipulated, and allows assets to be traced back to their original source.
- The shared ledger is final - The shared ledger is final and can therefore serve as System of Record: the leading source of information. All parties thus have exactly the same information, which prevents misunderstandings and errors in statements with transaction details from different parties.
More transparency
Jones points out that the use of Blockchain technology can create significantly more transparency within companies and their supply chain. This increased transparency offers several advantages:
- As fewer errors occur in statements with transaction details from different parties, companies need to invest less resources and time in correcting them.
- Greater transparency means less disagreement between different parties involved.
- Contracts can be settled faster.
- Information about transactions shared through Blockchain technology are stored in the same data format by all parties, reducing the complexity of using it.
Blockchain technology in the automotive industry
But how can technology be used in the automotive industry? Jones sees several opportunities for this:
Supplier chain
A manufacturing facility usually relies on several suppliers, transport companies and other third parties, with whom planning must be closely coordinated. A Blockchain-based system gives all parties involved transparent access to information. Since this information comes from a shared ledger, it is always accurate. Jones argues that this can improve just-in-time logistics, prevent wrong orders and improve stock rotation.
Finance
A car manufacturer often has to wait several weeks or even months before payment arrives from an importer, distributor or dealer for ordered vehicles. With multiple parties managing different steps in this chain, issuing a letter of credit by the buyer's bank and submitting a Bill of Lading by a car manufacturer are still processes involving a lot of paperwork. A Blockchain-based system provides more transparency and gives more accurate information to the various parties involved. This makes it possible, for example, to process bank documents faster and reduce the settlement time for payments to the car manufacturer.
History of the vehicle
A leasing company typically has little or no insight into its customers' driving behaviour and the maintenance history of their vehicles. A Blockchain-based system makes it possible to record driving behaviour and maintenance history in a shared ledger, accessible to all parties. This increases transparency about vehicle usage and wear and tear, which can help a leasing company determine the value of the vehicle more accurately when the lease ends.
Vehicle and brand experience
A car manufacturer may consider giving customers access to vehicles other than those they have purchased for a limited time. For example, customers who purchased a station wagon could be offered a sports car for a limited number of weekends a year or a camper van during the holiday season. A Blockchain-based system can help car manufacturers securely understand a customer's preferences. Examples include the settings of climate and infotainment systems, as well as the exact position of the driver's seat. Jones calls the profile that can be created from this information a 'Personal Mobility Profile'. Such profiles could also be of interest to parties offering shared cars, for example. Blockchain technology allows Personal Mobility Profiles to be shared securely.
Spare parts
In some cases, garages (un)knowingly fit counterfeit parts into customers' vehicles. These parts usually do not meet the manufacturer's standards, giving them a shorter lifespan than original parts. If a consumer is unaware of the presence of a counterfeit part, reputational damage can occur for the car manufacturer if this part fails prematurely. A Blockchain-based system can help both car manufacturers and consumers trace the origin of spare parts back to the original production date and location. This can curb the use of counterfeit parts.
Are you looking for more information on the potential of Blockchain technology for the automotive industry? Then keep an eye on IBM's blog, where Matthew Jones will be covering the topics described in this article in more detail in the near future. Jones' blog posts can be found here.
By: Wouter Hoeffnagel
Source : IBM
