Abstract
The manufacturing industry is rapidly changing due to widespread adoption of information and communication technologies. This new landscape, described as the fourth industrial revolution, will be characterized by highly complex and interdependent systems. One particular aspect of this shift is horizontal integration, or the tight coupling of firms within a value chain. Highly interconnected and interdependent manufacturing systems will encounter new challenges associated with coordination and collaboration, specifically with regards to trust. This purpose of this chapter is to explore the potential of blockchain to address these challenges. Survey data collected from manufacturing professionals suggests that the perceived nature of trust and resource value can be bounded and controlled. Concepts from game theory, systems theory, and organizational economics are used to augment this research data and inform a collaborative manufacturing blockchain model and architecture.
TopIndustry 4.0 And Horizontal Integration
For nearly a decade, industrial nations have been allocating funds for the reinvigoration and advancement of the manufacturing sector (Kang et al., 2016). With the belief that new technologies and cheaper computing can inject new levels of global competitiveness in an aging industry, nations like the United States, China, and Germany have launched strategic initiatives, participated in private/public consortiums, and funded incubators with the hope of achieving the promise of advanced manufacturing. Not surprisingly, these initiatives are remarkably similar to one another (Kagermann, Wahlster, & Helbig, 2013; Kang et al., 2016; National Science and Technology Council, 2012). Governments recognize that achieving the vision of advanced manufacturing will require participation from industry, academia, and entrepreneurs working together to exploit the collision of information, communication, and operational technologies.
The German initiative, “Industrie 4.0,” is a good illustration of what these industrialized nations are working toward. Self-described as a “vision” where products control their own production, the authors of the first official Industry 4.0 publications describe a future enabled by the convergence of cyberphysical systems and the Internet (Pfeiffer, 2017). The Platform Industrie 4.0 working group, a government-led group of academics, industry partners, and government officials, has gone many steps forward from just describing a vision. In 2013, the working group published a final report detailing many aspects of Industry 4.0, including three features that must be implemented to fully benefit from the fourth industrial revolution (Kagermann et al., 2013). One of these features is horizontal integration across the value chain.
Key Terms in this Chapter
Collaboration: The process of two or more entities reaching a common goal or outcome with joint benefits and/or costs. This process requires more than just orchestrated actions. It usually involves sharing resources, information, and costs associated with reaching the goal.
Industry 4.0: The fourth industrial revolution characterized by the convergence of cyberphysical systems and the internet of things (IoT).
Smart Contracts: Name given to executable code stored on a blockchain. Smart contracts behave like transactions in that they must be mined and appended to a block. They can store simple code, which deterministically executes predefined logic.
Provision Point: A quantifiable limit that must be reached in order for a public good to be created. If the provision point is not met, regardless of the resources previously invested in it, the public good will not be created.
Horizontal Integration: The tight integration of processes, resources, and information between entities in a common value chain. Horizontal integration refers to the interdependence that emerges from such tight integration. It must be implemented systemically rather than contractually.
Payback Mechanism: Any feedback mechanism that compensates individuals who have invested in a public good that fails to be provisioned. Payback mechanism design is a risk reduction technique to incentivize the provisioning of public goods.