Blockchain in the field

In my last article, we outlined a few ways how distributed ledger technology, or the blockchain, is poised to transform the Aerospace and Defence (A&D) industry. Between verifying partner identifies, certifying parts and connecting allies, blockchain, we wrote, “can increase transparency and contribute to the A&D industry’s higher purpose of safeguarding Canadians and our allies.” In this article, we want to look at some blockchain applications that are already having a transformative effect.

Over the decade since the 2008 publication of the seminal paper, “Bitcoin: A Peer-to-Peer Electronic Cash System,” blockchain has progressed from being overhyped and disparaged to now firmly in the implementation phase. The succession of “blocks” in a distributed ledger, you’ll recall, contain distinct information about a given record or series of transactions that can be made public, private or permissioned. Once the blocks are broadcast to the network, they are subject to verification and protected using cryptography before being added to the chain.

Worldwide spending on blockchain solutions is forecast to reach $11.7 billion in 2022, according to the International Data Corporation. And respondents to KPMG's 2019 Technology Industry Innovation Survey collectively moved blockchain from #7 to #4 on our top 10 transformative technology list. Blockchain’s ability to connect systems and processes across multiple entities makes it an innovation catalyst, efficiency accelerator, and purveyor of trust and transparency.

So, where is transformation happening now? Mainly in two cases: export classification and logistics.

The distributed leader

Export classification is analogous to assigning a parts number, but it is critical, especially in the context of A&D, where various treaties govern where certain products—weapons, ordnance, aircraft, guidance systems, and so on—can and cannot be shipped. Blockchain, however, offers the enhanced capability to identify and retain:

• A product’s classification at the time of creation
• Export licenses
• License conditions and re-export requirements attaching to the product and flowing to the foreign recipient
• Chain of custody

Conventional means of tracking these requirements throughout a product’s lifecycle involves immense amounts of easily misplaced paperwork; after a few years, it became extremely difficult to determine what can be done with it—not to mention where that weapon, aircraft or guidance system currently is. The blockchain changes all of that.

Meanwhile, driven by rising margin pressures, shifts in buying behaviors, increased regulatory governance, volatility in key cost drivers such as fuel and maintenance, and geopolitical factors such as tariffs and regional politics, blockchain is fast becoming the foundation of logistics. Organizations are increasingly adopting the technology and forming consortiums, and investments are increasing in service-specific and data-driven applications, which will facilitate even faster and trusted information exchange.

In the context of A&D, this applies directly to the tracking of sensitive goods. Blockchain makes it possible to consistently track information from the point of origin through successive points of distribution, ensuring that shipments are whole and untampered with throughout the process, and that any efforts at forgery are neutralized.

With blockchain, in other words, we can be more compliant and more secure in our data transmission, allowing us to track and trace everything with full understanding of all the parties involved.

While technically it’s still early days for blockchain in the A&D sector, the horizon is clearly in view. Distributed ledgers are revolutionizing the way we conduct business all over the world—and, in this regard, the business of A&D is no different.

This article was first published in the Canadian Defence Review Magazine in June 2019.

Authors include myself, Grant McDonald, Aerospace and Defence Industry Sector Leader and Frankie Davenport, National Program Lead, Blockchain, both of KPMG in Canada.

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