Written by: Sushant Sudame
- Recent mishaps in the Commercial Aircraft industry have cast a cloud over aircraft safety and trust with manufacturers. This has resulted in airlines canceling orders, and passengers choosing to not fly when given the option. Regulators across the globe are questioning the data and product development transparency. All this has impacted shareholder value in a big way.
- There seems to be a need to fundamentally change the way in which the Product Lifecycle and its data is managed to earn trust of regulators and customers alike.
- This paper proposes some avenues to improve trust and safety and potentially save costs by using blockchain technology. At the end, this paper discusses a proof-of-concept application developed at a company exhibiting its effectivity.
A. Blockchain Architecture :
The following graphic explains Blockchain architecture in a nutshell:
Depiction of Blockchain Data Architecture
The core functions of blockchain data begin with generating a first (genesis) block that is time-stamped and may include certain transaction data/metadata or state-of-data information. These blocks of data are chained together via a cryptographic hash of the data. The data layer represents where data can reside on the blockchain, primarily either storing data on the blockchain itself (on-chain storage) or storing the data in a different source but including a pointer or using a distributed application as an intermediary (off-chain storage). The core functions of the blockchain should also assess certain Design Considerations (in far right box in the figure), including whether the blockchain is public, private or consortium, the consensus mechanism to be used, the type of permissions structure, where data should reside and how it should be managed, and the governance of the blockchain (who are the users, peers, validators, nodes, etc.). Finally, a feature layer including blockchain-enabled technology options, such as the use of cryptocurrencies/tokens, digital wallets, smart contracts, and distributed applications, can also be added if needed.
B. Aerospace: Background and Challenges
The commercial aerospace market across the globe is booming. With its rise in developing countries’ middle class, more people are demanding air travel. This has led airlines to place unprecedented orders with original equipment manufacturers (OEMs) like Boeing and Airbus. OEMs are therefore coming up with aircrafts with better efficiency and innovative technology to match the needs of customers, making it a huge market. Further, the commercial aerospace market size extends beyond delivery to airlines to include aftermarket services, maintenance, and repair. To stay ahead of the game, OEMs and suppliers need to be on the cutting edge of technology with better ways to manage product lifecycle development.
Product Lifecycle in most aerospace companies is siloed by departments: engineering, supply chain, production assembly, quality, finance, airline/customer delivery, aftermarket, maintenance, etc. To track the development progress, each department uses a different external application that suits it best. These applications are oriented towards people and departments, and not towards product. Information flow is, therefore, fragmented and often buried deep inside a haystack, leading to large overheads. Lack of cross-connectivity leads to complex audit processes and more questions from regulators and airline customers. Therefore, during fatal incidents like aircraft crashes, trust with customers, shareholders, and regulators plunges. Safety, which is of paramount importance, is questioned. With increasing costs, companies tend to compromise on these key elements of the product.
C. Enterprise-wide Private Blockchain Application Aligning with Product Lifecycle:
Envision a product oriented blockchain application in which product development data get recorded as product passes through lifecycle. This application, with encrypted data structure, will be ledger/transactional in nature and have provenance-based architecture. Fidelity of access will depend on the role and department. The application can be a standalone blockchain application or a layered application that points to the data in currently existing systems. Having private provenance-based architecture, all development data can be connected to the associated part and assembly numbers. This association will be valuable to identify cause for manufacturing challenges, in-service failures, less-than-expected life, etc. Access will be granted to auditors, regulators. and customers as needed to improve transparency and earn trust. Value added across some (not all) stages of product development are briefly discussed below.
- Engineering: Provenance-based architecture will be extremely useful to track engineering development of parts which typically involves: Design evolution, Data Analysis, Testing, Flight Test, Customer Communication, Change Records, and Customer and Regulatory Compliance. In most companies currently, this data is handled differently across function. Part provenance will eliminate this complexity. Additionally, multiple-system tracking makes the data vulnerable to hackers. There have been incidents of engineering IP getting hacked. “Blockchain’s security features protect against tampering, fraud, and cybercrime. If a network is permissioned, it enables the creation of a members-only network with proof that members are who they say they are and that goods or assets traded are exactly as represented.” . Blockchain application design will resolve these challenges.
- Operations: Blockchain will connect data cross the value chain to provide transparency and real-time sharing across all parties. This helps with boosting trust, increasing knowledge, and minimizing risk. Transparency will surface waste or redundant processes. It will reduce the need for exhaustive studies to identify critical and key processes. Process maturities will be made obvious. Further, transparency will not only help monitor key processes, but also point out waste and processes that need attention. This will eventually evolve into better standard work and create cost savings.
- Assembly: Station Assemblies will have seamless connectivity to underlying parts, their defects, any delays, etc. Ledgers logged in lower assemblies will be accessible to higher assemblies. By nature, the “data” will detect variances in assemblies. These variances will point to product improvement opportunities.
- Supply Chain: Blockchain will add greater visibility and efficiency across the entire supply chain to deliver value to customers and trading relationships . Provenance architecture will help maintain and develop supplier records, history, expertise, etc. More value can be added with the use of RFIDs and barcodes to track assets and inventories. This leads to reduced delays, improved lead times, and precise tracking of shipment/ deliveries from suppliers and to customers.
- Delivery: Products delivery can be tracked to exact aircraft installations and airline deliveries. This will provide extremely valuable recall and safety information at managers’ fingertips. Airline customers can be provided access to part of the application to increase trust.
- In-service/Aftermarket: The application can also be extended beyond enterprise to plug-in in-service maintenance and repair logs. This will help in identifying root cause when a certain failure or in-service issue arises. Combining this with data analytics and machine learning may identify more potential issues.
- Support Organizations: Legal and finance organizations can track costs across lifecycle. Increased transparency will improve internal/external audit trail, increasing trust with stakeholders like customers and regulators.
Just like any ERP application, cost is the main barrier for developing and deploying blockchain applications. Many companies/divisions are averse due to the price tag involved. However, it should be noted that the value, at minimum, can also be realized by developing a blockchain layer on top of the current application layer to start. This can eventually be scaled by replacing current applications.
D. Hybrid, Tokenized Blockchain Application for Supplier Identification and Development
The current process of searching for, evaluating, and developing suppliers incurs large costs. Many OEMs default to suppliers they worked with before, which may not be cost effective. On the other side too, becoming a supplier or even making it to a customer’s list of potential suppliers has a high barrier to entry. It involves large capital investment, followed by obtaining certifications with the goal of catching the attention of customers. Interaction with customers starts with scoring facetime with a point of contact, exhibiting capabilities, site visits, gathering potential requirements, etc. There are also sales and marketing costs. All these barriers make entry less attractive.
These opposing forces on both sides can be removed to an advantage. Large companies/OEMs can implement a Hybrid Blockchain with Proof-of-Work (PoW) based tokens combined with digital contracts. On a high level, the process can be envisioned as large companies putting out digital contracts citing various criteria. Suppliers then “work” towards the terms of digital contracts through PoW processes.
Since the contract requirements are out there, potential suppliers will need to match them and align their operations/investments/technologies to get on customer’s radar. In other words, suppliers will exhibit their “work” by establishing identity in the form of certifications, expertise, experience, etc., and eventually by satisfying contract requirements. For example, large customers will see that Supplier X supplied similar certified parts to some other party before. In general, each step taken by supplier to abide by digital contract will increase tokens it has. Customers will have list of eligible suppliers to choose from with all underlying data.
In a nutshell, PoW based tokenization Hybrid/Private can be used to build credentials and trust for the new entrants, giving them their much sought “Entry” into the door. On the other side, it will help customers identify new suppliers across the globe, lower costs, and diversify risks.
Permissioned consortium with access/private architecture is apt for the close-knit aerospace industry. Each OEM, supplier, and customer will provide for a node. The blockchain application will need participants to have an invitation or permission to join. “The access control mechanism could vary: existing participants could decide future entrants; a regulatory authority could issue licenses for participation; or a consortium could make the decisions instead. Once an entity has joined the network, it will play a role in maintaining the blockchain in a decentralized manner.” Private networks can not only be permissioned, but also restricted in who can see the blockchain. Individual proprietary blockchain applications can be internally layered to leverage value to maximum extent.
Consortium can adopt either of the following consensus algorithms: Proof of Stake (PoS) or multi-signature. The multi-signature mechanism will help more players enter the market, increasing competition and innovation while keeping costs low. In PoS architecture, the consortium can be controlled by a select few, thereby driving up costs and hurting the industry. Choice of mechanism can therefore influence trust and reliability of the consortium. In either case, due to (comparatively) fewer industry players, an algorithm like practical Byzantine Fault Tolerance (PBFT) may be layered to resolve disputes amongst nodes.
Consortium will lead to increased credibility and trust with end customers. While it will create a barrier to entry for newer companies, it will also prevent any fraudulent activity within the industry.
F. Elements and Peripherals
Elements like immutability & irreversibility are requirements for all proposed blockchain networks, thereby increasing liability. These elements are directly linked to trust and transparency. Unlike passwords, secret/private keys associated with accesses and transactions cannot be changed. Once lost or stolen, the transactions associated with the keys are lost forever. Therefore, these attributes become critical parameters in designing blockchain framework.
Like all systems, blockchain applications will have limitations. Design should account for points of fraud or errors such as manual data entry points, or whether material actually gets onto a truck. These potential errors and frauds can be minimized by increasing automations and using tools like barcodes, IoT devices, tracking systems, etc. Resources allocated can be directly proportional to value created.
G. Business Case Example of Blockchain Application
In one study with a company, an internal business process was selected to develop a blockchain Proof of Concept (PoC). The involved business process was importing metal into the country, processing and developing it into a part, and then exporting to another country for final assembly.
The original process involved various departments: engineering, manufacturing, legal (for import, export, and customs paperwork), accounting and finance (for taxations). Value was created between importing the metal and exporting the finished part. Created value was calculated and was taxed in the country of processing. However, value was tracked differently across departments, each having different parts provenance structures. It not only increased paperwork but also increased likelihood of overestimating value and hence overpaying taxes, thereby increasing part cost.
The PoC blockchain application was developed to optimize tax position by correctly capturing value addition between import and export of hardware. The application ensured seamless connectivity across various departments by storing data in Blockchain Ledger format, thereby assuring integrity of finished product for internal (audit, quality) and external customers (government customs, final assembly). It improved transparency for audit reviews and reviews during custom filings. Further, customs filings were automated by developing e-contracts, thereby increasing trust with regulatory agencies for e-records from the company. The application could then be extended for further downstream stakeholders like Aftermarket, MRO and airlines (ultimate customer).
Converting this business process into a Blockchain application:
- improved logistical turnaround by eliminating overheads like multiple MS Excels, tracking, and emails
- eliminated manual steps in internal office operations
- eliminated manual custom filing processes
- improved trust with regulatory authorities
- improved trust with internal auditors
- optimized tax position for potential cost reduction
A simple implementation of blockchain was justified by not just creating monetary value but also other non-monetary benefits like trust with auditors and regulators.
H. Policy Implications
Most aerospace components are designed for potentially fatal once-in-a-lifetime events based in probability. Product superiority boils down to Safety and Trust (which comes with transparency). Blockchain has value to deliver exactly this.
However, like all systems, blockchain application will have limitations and is vulnerable to “garbage in, garbage out”. Blockchain application design should account for points of fraud or errors. These potential errors and frauds can be minimized by increasing use of automation (bar codes/IoT) tools and cross-verification algorithms. Some design elements like immutability/irreversibility will need to be thoughtfully implemented.
As in any industry, a consortium form will be more impactful than an individual form. In an Aerospace Consortium form, a tokenized public blockchain system can be implemented to similar effect to save costs. In any form (private, public, or hybrid), immutability, provenance, and traceability of transaction data, will only help in governance (internal and external audits), reducing costs for the companies, and developing a better product for the end customer.
- Fit For Purpose – Mackey_et_al-2019-BMC_Medicine
- Blockchain for Dummies: Manav Gupta; 2017 IBM Limited Edition