Technology Q&A: Understanding blockchain in the tire industry

Question & answer with Sage executive vice president Nick Goode about the potential impact of the fast-emerging blockchain technology on manufacturers and suppliers of tires and technical rubber products:

ERJ: What exactly is Blockchain?

NG: Blockchain is essentially a distributed ledger stored across multiple locations that can maintain increasing records (or blocks) which are time-stamped and linked to previous blocks in a way which cannot be undone. 

It is, therefore, a method of recording data – anything that needs recording and verified as happened. Once data has been recorded, it cannot be changed, only added to, and updated on the entire network.

Transactions of any kind can be complex and time-consuming. Blockchain has the potential to help any industry that deals with transactional data, replacing the traditional paradigm with an alternative that is transparent, verifiable and tamper-proof.

ERJ: What are the main drivers for its adoption in the tire & rubber industry?

NG: In tire manufacturers, for instance, it essentially provides a more secure, less admin-heavy method of managing the movement of goods and money across the whole business – with suppliers, customers and partners. 

The digitisation of finance has raised concerns around security and record-keeping – blockchain is an effective way to eliminate those concerns without adding dramatically to existing workloads.

For manufacturers, including those in the rubber industry, much attention on blockchain centres around how it can work for supply-chains. In the tire industry, the supply-chain can operate across multiple organisations and countries, which can make transparency and efficiency hard to manage.  

The benefit of using blockchain in supply-chain management is that it helps data to be more interoperable, meaning companies can share information with manufacturers, suppliers, and vendors in an easier way. 

This, in turn, reduces delays and disputes while also reducing the number of goods that get stuck in the supply-chain. It also provides a single point of consensus — disputes regarding transactions are reduced because all entities on the chain have the same view. 

ERJ: What are the main barriers to adoption in these industries?

NG: As positive as the benefits are, there’s still an issue of cultural change to be overcome. Many tire manufacturers have been running their finances and supply-chains in the same way for decades, so introducing new technology will be a transition. 

In addition to cultural aspects, there are many technology, network and ecosystem aspects that need to be figured out. For example, a blockchain is only valuable if you can get everyone in the ecosystem to embrace it.

Organisations need to ensure that they educate staff on the potential benefits and give them plenty of opportunity to feedback on how the process is benefiting customers. Technology on its own is not enough to achieve change – you have to enfranchise staff as well.”

ERJ: So how easy is it to incorporate a blockchain system into existing set-ups?

NG: Blockchain can be integrated with other technologies to maximise the benefits to tire and rubber product manufacturers. For example, it has the potential to automate payment processes through smart contracts, where payments are triggered as products ships, improving transparency and lost invoices.

“It could also provide more information to buyers purchasing in volume with multiple manufacturers and stages of processing, providing visibility and verifiable data about what they are buying, where they are buying, and what they are paying.

“Although these things can already be achieved with spreadsheets, blockchain provides an additional level of security and traceability, ensuring that essential documentation can be trusted. This helps to improve customer relationships, as well as reducing the opportunity for procurement fraud.

ERJ: Finally, what is your advice to tire & rubber companies starting down this route?

NG: Introducing blockchain isn’t a question of completely overhauling the way your company works – it’s about reaching for best practice. Blockchain can help your business prioritise security and ensure that all transactions are properly tracked – to the benefit of all.”

ERJ: Thank you