WZL x GCX x IOTA — Status Report 05

Conclusion on Micro-Payments, Secure Audit-Trails and Zero Marginal Costs

Background: Finetool Machine with Coils. Image: © WZL | Christian May & Semjon Becker
Co-Authors: Semjon Becker, Ashri Anggia

Previous Stories

Retrospective: Fine-blanking

We use XFT 2500 speed built by Feintool AG as our test bench for Proof of Concept (PoC) in an industrial fine-blanking field. It is used to mass produce safety-critical components, such as clutch parts, brake carrier plates or even belt straps.

Video 1: Fineblanking at the WZL of RWTH Aachen University. Video: © WZL

Management Summary

The following video shows the official aftermovie of the WZL x GCX x IOTA PoC in cooperation with grandcentrix GmbH. The result is a prototype for the mass production of safety-critical components with the focus on transmuting data and information into an economic resource. For this purpose, we have investigated the limits and possibilities of Micro-Payments and Secure Audit-Trails. The video is only available in German with English subtitle.

Video 2: Internet of Production — data as an economic resource in a manufacturing economy. Please enable subtitles! Video: © WZL

Micro-Payments and Secure Audit-Trails

At the start of the PoC, we hand-picked certain data produced from the real manufactured components for storing it as a digital twin that resides in the Tangle network. (see Status Report 01). As the project progressed, further concepts such as Micro-Payments and Secure Audit-Trail were also tested (see Status Report 04). Those reports represent a supply chain from manufacturer to end-user or customer, as shown in Figure 1.

Figure 1: Micro-Payments & Secure Audit-Trail. Image: © WZL | Daniel Trauth & Semjon Becker

Assumptions

  • The supply chain begins with a machine tool manufacturer. In this example, we use fine-blanking machine as our press manufacture, but this can also be a milling machine or plastic injection moulding machine manufacturer.
  • These machines are used by one or more producers to manufacture individual components.
  • Furthermore, we assumed that an original equipment manufacturer (OEM) assembles the individual components into a finished assembly, a product, and does not sell them directly to the customer.
  • The trade is done by the retailers.
  • The end of the supply chain is the end customer who uses the assembly or product.

Definition of Micro-Payments

The term Micro-Payment refers to a payment method for small sums of money, which are primarily known when digital goods are purchased. Depending on the region and culture, amounts between $0.01 to $5 can be referred to as a Micro-Payment. Based on recent developments, however, Micro-Payments are particularly useful when it comes to amounts that cannot be economically transferred with the conventional means of payment. This is due to the fact that the transaction fees are higher than the value of the transaction itself. Since Distributed Ledger Technologies (in this instance IOTA) can be used to send fee-less transactions, amounts of less than $0.01 are now economically feasible. In a supply chain case, Micro-Payments must be at the beginning of a value chain, since the added value there is lower in the first step compared to the entire assembly. Irrespective of this, Micro-Payments require a rethinking of production. The conversion of a physical payment into a digital one for the sole purpose of modernising value creation will not suffice, see Chapter Pay Per Click and Subscription Models in a Manufacturing Economy.

Definition of a Secure Audit-Trail

The increasing demand from industry and trade for more transparency across the entire supply chain, combined with the clear clarification of responsibilities for interventions and changes, is leading the automotive industry in particular to monitor interventions closely. Unauthorised interventions and changes in highly sensitive goods and substances can sometimes have extreme effects on the condition and quality of the product. In order to minimise and detect quality losses, intervention protocols recorded in the audit trail for downstream stages in the supply chain can be requested and viewed at any time. Manipulations will be next to impossible due to the qualification prior to commissioning of the systems. Accordingly, an audit trail is a quality assurance tool and serves to control and record changes made in processes. In contrast to known monitoring systems, which continuously monitor certain processes, audit trails focus on monitoring changes and deletions made across the entire supply chain. Thus, interventions in processes for downstream levels in supply and value chains are understandable, controllable and fully visible. Based on Figure 1, a Secure Audit-Trail extends from production to the end customer and can be expanded as necessary, e.g. by extracting raw materials using environmentally friendly methods.


The WZL x GCX x IOTA PoC Micro-Payment Process

The 3rd video shows the result of the WZL x GCX x IOTA PoC. The aim of the prototype was to extract selected machine data during the production of safety-critical fine-blanking parts, transfer them to a digital twin and then store them in the IOTA Tangle in a tamper-proof manner. The digital twin thus becomes part of a Secure Audit-Trail in which each participant in the supply chain can check the condition of the machine during production and ensure that the requirements have been met. Some manual steps in this video can be automated in the future via machine-to-machine communication.

Video 3: Result of the WZL x GCX x IOTA PoC — Micro-Payment of a Digital Twin. Video: © WZL

A machine-to-machine communication will also enable Micro-Payments and Subscription Models in a Manufacturing Economy. Currently, Micro-Payment is performed manually and simulates a machine’s access to the digital twin. Access to only one digital twin will undoubtedly be possible with small amounts of money, but since fine-blanking is a mass production process, Subscription Models and As-A-Service models must be possible too. We are already working on As-A-Service model with our FEM-as-a-service extension, where the XFT 2500 can calculate a digital Finite Element Analysis (FEA) twin based on the actual measured machine data using a FEA server, which is paid / triggered via IOTA.


Pay-Per-X and Subscription Models in a Manufacturing Economy

Pay-per-x (Micro-Payments) and Subscription models (periodic Micro-Payments) are widely used in the digital economy, for example buying a newspaper article versus a newspaper subscription. However, this cannot easily be transferred to the manufacturing industry and the main reason for this is marginal costs.

Marginal Cost

In the production of industrial goods, the production-independent costs (fixed costs) are allocated to all units produced. Fixed costs are, for example, rents, salaries and costs for machinery and equipment. These costs also exist if no unit is produced. If goods are now produced, additional costs, e.g. for the raw material, must be invested. In economics, marginal costs are those costs that arise for the production of an additional unit. In this example, the amount for the raw material. If an additional unit is produced, the costs for the material have to be paid once. If 10 more pieces are produced, it is ten times the material costs.

Due to discounts and learning curves, “economy of scale” effects dominate this industry. This means the more units produced, the lower the fixed costs. At the same time, however, fixed costs cannot be lower than marginal costs, which is why there is a trade-off that has been limiting industrial production for years.

Digital goods, on the other hand, have no marginal costs. If a newspaper article is published on the publisher’s website, theoretically no further costs arise for the download of the article by an additional reader. This means that fixed costs can be reduced completely, since no marginal costs limit the fixed cost degression. The advantage of digital products is that it can be particularly low-cost for the customer and at the same time the margins can be particularly high for the producer.

Zero Marginal Costs in Manufacturing?

The challenge now is to enable zero marginal cost models in the industry that has historically been managed exclusively on the basis of fixed cost degression for years. This zero marginal cost, considered as digital transformation or disruptive transformation, is the real challenge of industry 4.0 and the Internet of Production. The AWK is one of the largest production technology congresses in Germany and Europe. While most conferences present the current state of the art, the AWK aims to shape the future of production technology with pioneering work. More than 1000 guests from industry and politics are expected to attend on May 13–14th, 2020. Until then, the WZL x GCX x IOTA PoC is to be developed into an integral use case with real business models, focusing on the first zero marginal cost infrastructure for manufacturing of fine-blanked parts.

Figure 2: The plenar talk during the Aachen Machine Tool Colloquium AWK 2017. Image: © Fraunhofer IPT

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Acknowledgement

I would like to thank everyone involved in this project for their incredible support. Especially the team from grandcentrix GmbH: Sascha Wolf (Product Owner), Christoph Herbert (Scrum Master), Thomas Furman (Backend Developer), and all gcx-reviewers and gcx-advisers; some testnet-nodes-operators, who were intensively used for above transactions: iotaledger.net; the team from WZL: Ashri Anggia (Software Developer), Julian Bauer (Service Innovator), Semjon Becker (Design Engineer and Product Developer), Dimitrios Begnis (Frontend Developer), Henric Breuer (Machine Learning Engineer, Full-Stack Developer), Niklas Dahl (Frontend Developer), Björn Fink (Supply Chain Engineer), Muzaffer Hizel (Supply Chain Engineer and Business Model Innovator), Sascha Kamps (Data Engineer, Data Acquisition in Data Engineering and Systems Engineering), Maren Kranenberg (Cognitive Scientist), Felix Mönckemeyer (Backend Developer), Philipp Niemietz (PhD student, Computer Scientist), David Outsandji (Student assistant), Tobias Springer (Frontend Developer), Joachim Stanke (PhD student, Full-Stack Developer), Timo Thun (Backend Developer), Justus Ungerechts (Backend Developer), and Trutz Wrobel (Backend Developer), and WZL’s IT.


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Image: © WZL | Peter Winandy