Blockchain Delivering Supply Chain Visibility for BMW

March 31, 2020 saw BMW Group announce the launch of PartChain, a blockchain-based supply chain management tool, with ten of its suppliers.

The announcement follows a pilot project in 2019 in which the company used blockchain technologies to track the supply of headlights from three locations of the supplier Automotive Lighting to BMW’s Spartanburg plant in the United States and Dingolfing in Germany (BMW has 31 plants in total).

In theory, blockchain technologies can be deployed to track a part along the entire supply chain; not only its delivery to the manufacturer, but all the way back to its creation. BMW’s ultimate objective is to create an open platform so that anonymized information can be shared throughout the supply chain, removing the need for paperwork, reducing ambiguities, and providing transparency to all parties.

COVID-19 has exposed weaknesses in supply chains, with automobile plants closing as the pandemic spreads because the delivery of parts cannot be guaranteed to support just-in-time delivery to the assembly line.

Operating on a just-in-time basis is a delicate balancing act that requires automobile manufacturers to avoid having shortages of parts or too many to accommodate. End-to-End (E2E) visibility is key, with manufacturers needing to understand the availability of parts and raw materials as well as the demand for vehicles to supply dealer networks. Communication along the supply chain is complicated with companies not sharing data and, even if they are open to doing so, using incompatible Information Technology (IT) systems.

Cloud technologies will provide real-time visibility across the supply chain with PartChain running on both Amazon Web Services (AWS) and Microsoft Azure; data won’t be hidden in spreadsheets, emails, or corporate applications. The blockchain technologies will not only provide visibility but also, thanks to the distributed ledger system underpinning the technology, there will be a single version of truth. This is a critical aspect for BMW with the company looking to verify that the data hasn’t been manipulated or tampered with.

Other automobile manufacturers using blockchain to manage their supply chains include Ford, which is partnering with IBM to use blockchain to track cobalt supplies for its electric car batteries and Hyundai Motor Group’s partnering with Blocko Inc. to track used cars.

Supply chain software can go some way toward providing visibility, but unlike blockchain technologies it cannot guarantee the integrity of the data.

BMW’s investments in blockchain technologies are part of the company’s plan to invest EU€30 billion in “future-oriented” technologies over the next five years. However, the company is not doing so in isolation; BMW co-founded the Mobility Open Blockchain Initiative (MOBI) in 2018, which today has 120 member companies across the automotive, mobility, and technology spheres. BMW has stated the company intends to share PartChain with other MOBI members to broaden acceptance of blockchain-based solutions in the industry.

Other blockchain-related activities include a Proof of Concept (PoC) for a blockchain-based Vehicle Identity (VID) standard announced in October 2019. One application of the standard would be to introduce a payment system underpinned by smart contracts. The payment system would be tied to the vehicle, rather than a person or business, and support mobility-based payment models including Smart City applications for congestion pricing and managing carbon footprints plus other usage-based services.

Automobile manufacturers need to invest in both their engineering and technological expertise, as new car designs are as much about the physical components as the software running the vehicle. BMW already employs over five thousand individuals in data analytics roles and is now one of the largest IT employers in Germany.

Blockchain will be a key enabling technology so that automobile manufacturers can become both more efficient (enabling smart contracts along the supply chain) and more agile thanks to having earlier visibility of shortages. Finally, the automobile manufacturers have the bargaining power to instruct their suppliers to adopt the technology.