Vanguard Magazine

14 DECEMBER 2018/JANUARY 2019 www.vanguardcanada.com such behaviour and, using dynamic smart contracts, could be financially liable for these counterfeit parts. Establishing prov- enance 'from cradle to grave' also counters the threat of vulnerabilities in off-the-shelf products that could be exploited by adver- saries. This technology offers other advantages as well. Because control or verification is executed by consensus rather than a central body, from a security standpoint, there's no single point of failure or vulnerability. Blockchain's system of tracking and verifi- cation can also provide more opportunity for small companies to compete for military contracts without watering down oversight. In the supply chain of tomorrow, estab- lishing the origin and traceable ownership of all assets and components through their entire life cycle will be standard practice for high-value assets. Combined with IoT sensors, this real- time supply tracking also promotes en- hanced life-cycle management by offering predictive and preventive maintenance ca- pabilities. Preventive maintenance Currently, maintenance is based on a gener- alized schedule by asset type and is often re- active. What's more, a specific asset's histo- ry is not usually considered when planning maintenance and servicing. This methodol- ogy leads to frequent asset breakdowns and unplanned service events, translating into higher overall maintenance costs. Ideally, an organization would want to be able to predict when particular components might fail and proactively replace them be- fore this happens. Decentralized ledgers of- fer a solution that can track the history and maintenance life cycle of each component within the assembly of an asset and provide full transparency into maintenance records of each component of each asset. Data is collected at every stage of the as- set's life cycle, including repairs and ser- vicing, hardware/software updates and failure events. In addition, IoT sensors can capture data on usage, performance and environmental conditions. The result is a fully transparent audit trail of maintenance and usage data. (See figure 2) Combined with deep learning algo- rithms and predictive analytics, this data provides the ability to track components that are failing or have a high probability of failing, identify statistical trends and lo- cate assets so they can be proactively re- paired before any downtime or additional maintenance is required. implementation challenges Blockchain does have its limitations. The scalability of a blockchain is limited by the trade-off between transaction volume and processing time. Operating costs are high and unpredictable, tending to increase with block size and transaction type. And there's the issue of sustainability: block- chains can be extremely energy intensive. For example, bitcoin mining operations today consume almost the same amount of energy per year as the country of Austria. But new models are being developed to make distributed ledger system technolo- gies faster, less costly and more sustainable. Instead of a chain of blocks, next-genera- tion technologies are using different types of data structures, such as directed acyclic graphs, to increase scalability and alleviate transactional bottlenecks. Yet there are some factors to consider when implementing decentralized ledger technologies as part of a supply chain so- lution. One of the biggest challenges is data stan- dardization and scope–how to get suppliers on board and speaking the same language. For end-to-end tracking and traceability, all suppliers need to be on the blockchain. How do you get all vendors to contribute their data or value to the ecosystem in a standardized way? In addition, vendors still have to be validated according to standard- ized controls or security protocols before being boarded as a trusted supplier. It's also essential to ensure interoperability between different systems. For example, if you order a piece of equipment from a vendor oper- ating on a different blockchain, you want to be able to connect your supply chain to theirs, to plug in and have visibility into all supply chain nodes so you can track and trace the equipment being shipped. This leads to a second challenge: user adoption. The strength of computing power and security of a blockchain is pro- portional to the number of participants in the network. What incentives can you provide, financial or otherwise, to get all suppliers on board and make sure they act honestly within the system, inputting all their data and being 100 per cent trans- parent? How can you make it in their best interest by creating a win-win situation? Meanwhile, all these technologies are evolving within a very new and uncertain regulatory environment. Regulation, yet to be formalized, may impact numerous areas within a blockchain, including smart contracts, stored information, access and ownership. How governments deal with cross-border digital data under new trade agreements and new international reporting requirements could also have ramifications. Getting to a proof of concept Given these challenges, how can government defence departments capitalize on decentral- ized ledger technology growth to improve their asset supply chain tracking and preven- tive maintenance? Defence departments will need to think carefully about their digital strategy and take action to advance their IoT and decentralized ledger capabilities by in- vesting in proofs of concept (POCs). Organizations can start with a feasibility assessment to identify problem areas within their current supply chain. This exercise may help the organization identify a group Blockchain After ten years of use, the component is proactively replaced based on increased failure probability Component is manufactured and installed in asset assembly Component is serviced after one year of use and shows signs of accelerated degradation due to weathering Component is installed in asset located in region with extreme cold weather conditions Component is assigned a more frequent service schedule every six months Figure 2

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