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Manufactory Whitepaper V1.0 – March 2019

Ó 2019 Manufactory Research Limited | All Rights Reserved

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MANUFACTORY Whitepaper | March 2019



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Contents EXECUTIVE SUMMARY ......................................................................................................................... 3 THE PROBLEM ....................................................................................................................................... 4 THE SOLUTION ...................................................................................................................................... 5 THE MARKET ......................................................................................................................................... 6 THE BENEFITS ....................................................................................................................................... 8 THE COMPETITORS .............................................................................................................................. 9 THE BUSINESS .................................................................................................................................... 11 THE TEAM ............................................................................................................................................ 14



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Executive Summary Vision

Manufactory is creating the future business model for the manufacturing industry using Industry 4.0 and Blockchain technologies. Why now? Manufacturing CEO’s are anxious about their ability to cope due to manufacturing demand increases.

Problem

For any manufacturer, under and over estimating demand leads to lost revenues. The largest inefficiency in any manufacturing supply chain is in its inability to be flexible for global demand.

Industry 4.0 is seen as a key enabler with 9 out of 10 factories investing, however only 13% of them are seeing the benefits because a combination of technologies is required to create the full value impact.

Solution

We will build a platform based on Decentralised Ledger Technology (DLT) that allows factories and machines to make autonomous data driven decisions.

Founders

Both of the founders have a broad spectrum of experience in starting and growing technology start-ups. This includes 3D printing and data analysis technologies that have both disrupted the manufacturing sector.

Early Hires

We have an eight-person advisory team which focuses on Manufacturing, hardware and Internet of Things (IoT) specialists and also covers legal and accountancy.

Market

$907bn annual Total Available Market (TAM) for Industry 4.0 which is driven by global manufacturing efficiency and global competition.



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The Problem lobal Manufacturing is currently going through a technical revolution which has become known as “Industry 4.0”. There is increasing focus on smart factories and intelligent manufacturing systems that have a greater integration between the

physical and digital processes, thus creating “Cyber Physical Systems”.

But, is industry 4.0 delivering on its promises? Despite investment the industry is still seeing widespread issues, including:

• Outdated or unreachable technology • Supply chain transparency and trust • Unproductive centralised supply chains • Non-conformance management • Manufacturing process control • Constrained capacity planning • Lack of machine health monitoring • Energy efficient use of assets

Although there are clearly advances for a manufacturing company that invests in Industry 4.0, research reveals that only 13%1 of the companies are getting the value that they believe they should. Combining the relevant technologies is key to success and could translate to a £1.2 billion saving for the sector.

Industry 4.0 alone is not providing the benefits that it should be.

1 Source: Accenture Industry X.0 Combine and Conquer, https://www.accenture.com/_acnmedia/Accenture/Conversion-Assets/DotCom/Documents/Global/PDF/Dualpub_26/Accenture-Industry-XO-whitepaper.pdf

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The Solution The solution to these complex issues is the combination of Industry 4.0, Artificial Intelligence (AI) and Blockchain technologies into a global manufacturing platform that utilises the following technological innovations:

Blockchain By digitising Manufacturing Quality Systems using the Blockchain we will create a registry and catalogue system for recording, tracking and monitoring any component across all supply chain members. Therefore, creating a digital passport and audit trail for any manufactured part.

Smart Contracts Manufactory will disrupt the traditional manufacturing supply chain structure by engaging a transparent smart contract eco-system. This will enable the system to act autonomously, ordering tooling materials and making production decisions. Smart contracts will also be used to create a trusted environment between suppliers and buyers, eliminating the trust and compliance issues that exist today.

Internet of Things (IoT) and Machine to Machine (M2M) communication A key enabler to the Manufactory project will be the design and production of a universal Blockchain connector. The smart hardware device will provide Blockchain transaction capability to any machine.

The device will also allow machines to communicate with each other giving them the ability to make decisions and react to changes in capacity. Therefore, allowing buyers to dynamically scale the supply chain to meet requirements.

Artificial Intelligence (AI) By monitoring the environmental and machine maintenance event data, machine learning algorithms can be applied to predict any maintenance issues that may arise. Combining this with an energy management system will allow the machinery to be utilised in the most efficient way possible. Feature inspection outcomes can also be combined to ensure that machine capability and quality is constantly improved and is not impacted by environmental factors.

Manufactory will disrupt the manufacturing industry in its current form and be the enabler for the creation of conscious, decision making factories.



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The Market Industry 4.0 and IoT has seen high adoption rates and has been a rising area for investment for large organisations. The companies that are investing are focusing on the capture of data that will identify factory inefficiencies and detect areas for improvement.

Total Addressable Market (TAM) A Price Waterhouse Cooper (PWc) report2 on Industry 4.0 commitment states that investment is already significant and global industrial companies will invest $907 billion per year until 2020.

TAM = $907 billion (£704 billion) *

Serviceable Addressable Market (SAM) With only 13% of manufacturing companies exploiting digital for greater efficiency, this leaves 87% that are not, which gives us a SAM of $789 billion.

However, blockchain adoption rates are also a factor. Implementation is currently considered to be at the early adoption stage. Based on this the market penetration rate it would be considered to be 16% rising to 50% over the next few years.

Assuming a linear market penetration rate based on Blockchain adoption, this would give a market size of $395 billion.

SAM = $395 billion (£307 billion) *

Serviceable Obtainable Market (SOM) Due to the nature and vision of this project it won’t be limited by geographical reach and therefore cannot be limited to the UK market alone. As the project develops and becomes known about, more competitors will be launched.

Targeting a global market place and assuming that the current competition rises to 10 over the next 3 years with equal market share, our SOM will be $36 billion.

SOM = $36 billion (£28 billion) *

* Exchange rates taken on 21st January 2019 (1.29 Dollars to 1 GBP)

2 Source: Price Waterhouse Cooper (PWc), Industry 4.0: Building the digital enterprise: https://www.pwc.com/gx/en/industries/industries-4.0/landing-page/industry-4.0-building-your-digital-enterprise-april-2016.pdf



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Market Drivers The manufacturing sector is a fast-growing market which is expected to reach $1 trillion by the early 2030’s. Global competition is becoming fiercer, however there are unprecedented opportunities to optimise production processes.

Governments and private sector businesses from high labour cost economies are investing in Industry 4.0 to increase their industrial base that has been occupied by low labour cost areas. Vice versa, low labour cost regions are investing in Industry 4.0 to maintain their competitive edge.

Industry 4.0 projects are seeing Government-funded schemes such as R&D, subsidies and tax incentives increasing for start-ups and SME’s. This is in recognition of the need to improve the efficiency of our factories.

Large manufacturers need end-to-end transparency throughout their supply chains to enable optimised data driven decision making.

Challenges Despite significant activity in the manufacturing sector relating to Blockchain and Distributed Ledger Technology (DLT), a number of factors are making an impact on adoption rates:

• Reputational issues with Cryptocurrencies are restricting blockchain investment decisions and causing concerns.

• A lack of available talent with the relevant blockchain expertise. • Development of regulatory frameworks, legislation and industry standards are

progressing at a slow rate. Although the United Kingdom is considered to be at the forefront of addressing this issue.

• New business models will present themselves. • Organisations will have to rethink their processes to maximise output. • Understanding of the new technology. • Changes in company culture will be required. Company departments will become

interconnected.

Although these are challenges, the team also see these as opportunities to be a leader in this technology sector. By working with the right organisations, we can help to alleviate these barriers to entry.

Market Size Assuming a Business to Business (B2B) penetration rate of 0% to 10% over the first 3 years, we can expect to have a total market exposure of £2.8 billion globally.



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The Benefits

For Buyers Buyers have the complex task of sourcing, approving and ordering manufacturing capability and sometimes taking a chance on a new supplier without knowing their full history or potential. The Manufactory eco-system will enable buyers to match exacting specifications with the perfect supplier capability.

The Manufactory smart contract will also allow them to automate tasks such as ordering, payments and logistics easing the burden on the buyer and creating better performing industries and supply chains.

For Manufacturers Connecting to the Manufactory eco-system will give manufacturers the ability to monitor the efficiency of their equipment with a high level of granularity. Enabling them to identify bottlenecks immediately and react accordingly, this will give the manufacturing system greater flexibility to react to changes in demand. They will be selected for projects for their performance and technical ability rather than just the price and be given opportunities that they would not normally be considered for.

The Manufactory business model will positively impact their growth and exposure to the market, creating more efficient methods of doing business and higher levels of trust between parties.

For Entire Industries The Manufactory project will provide entire supply chains with end-to-end transparency and capacity planning tools that will change the fundamental way of doing business for entire industries. For example, the Aerospace industry would have huge benefits from adopting secure Blockchain tools to manage and control high value inventory levels as well as providing complete audit trials for every component that goes into an aircraft.

For Future Generations of Manufacturing Engineers The Manufactory community of practice clusters will provide industry expertise and advance the knowledge of the manufacturing industry as a whole. Facilitating knowledge transfer from these experts to all manufacturers will increase the efficiency of the global eco-system and ensure the future of manufacturing by building a complete knowledge base for the next generation.



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The Competitors There are few companies that can be directly compared with this project due to other projects focusing on only the Blockchain aspect of the solution. The team of manufacturing experts and advisors with the knowledge and experience to know exactly what is required by a project such as this will also give this project its uniqueness.

The following companies and projects have been identified as being similar in concept or mission to the Manufactory project.

Direct Competition Productivist

The Productivist project is based in Dubai and France. Its core goals are to build upon their existing Freelabster.com platform by integrating it with the Blockchain and providing an Intellectual Property protection solution.

Although the whitepaper mentions all types of machinery (via service providers) it is clear that the main focus for them is Additive manufacturing (AM or 3D Printing) and not subtractive manufacturing technology where Blockchain and its benefits are yet to be realised.

The Freelabster.com website provides an interactive platform which pairs consumers with 3D printing service providers creating a virtual marketplace. The business model is based on service provider platforms using the PROD token to deliver their services. It currently has 3,500 certified 3D print services registered with its platform which gives the project a good foundation for its ICO.

SyncFab

SyncFab is operating from California in the United States and has been providing its supply chain management platform since 2013. The main use of the platform is the same as Freelabster.com but it provides more processes including subtractive manufacturing and welding.

Their location in Silicon Valley gives them an advantage for attracting funding and also to cater for the American market which is currently not available to ICO’s in the rest of the world. This is due to the ongoing stance on legal nuances which limit US investment. Along with the United States laws on Intellectual Property and Export Control, this can also be a hindrance to the project as they will find themselves restricted to the US market and segregated from the larger global manufacturing market.

SyncFab has strong industrial partnerships with key US manufacturing trade bodies and associations as well as Blockchain alliances. It also has an existing platform to build upon for its ICO, which has reached its soft cap. The project is now well into its product development with full Blockchain integration planned for this year.



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Indirect Competition Protolabs & 3D Hubs

Both Protolabs and 3D Hubs are very similar in nature but neither use Blockchain, AI or Industry 4.0 technology. They both provide a CNC manufacturing service rather than providing a solution that all manufacturers can utilise to their advantage. Their web platforms allow for rapid automatic quotations and provide a worldwide network of manufacturing facilities to ensure they can meet demand.

They are considered indirect competitors due to them only providing CNC machining and 3D printing services.

Barriers to Entry Due to the small amount of companies operating in the sector barriers to entry are relatively low from the sales aspect. However, the technological and pioneering nature of the project could present itself as a challenge due to lack of customer knowledge and securing the skillsets required to carry out such a plan.



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The Business Manufactory is a start-up business and has been incorporated with Companies house in the UK with the name ‘Manufactory Research Limited’ with the company number 11624773.

Use of Proceeds The proceeds from funding will be used in the following ways:

• Marketing activities to raise awareness of the project in readiness for the ETO. • Engage with software developers. • Develop a Minimum Viable Product (MVP). • Research and development for a universal machinery connection device. • Business operational setup. • Equity token platform engagement and setup. • Legal and professional fees.

Intellectual Property It is the intention of the founders that any intellectual property that the project creates will be registered with the appropriate bodies to increase the value of the company. Currently the name ‘Manufactory – Building the Manufacturing Blockchain’ has been trademarked in association with manufacturing software.

Revenue Sources There will be four revenue streams to the business, which will evolve with the development of the company roadmap, details below:

i. Use of the Manufactory software platform – Micro payments will be taken from each transaction.

ii. Use of decentralised applications on the blockchain platform – Blockchain as a service (BaaS) business model.

iii. Capacity available from the Manufactory facility – we will build a facility that utilises and demonstrates the full functionality of the software platform. This capacity will be available to anyone to produce components.

iv. Consultancy Services – The team will be experienced with conducting an equity token sale and with developing a Blockchain system. This knowledge can be transferred to other businesses for which we can charge a fee.



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Pricing Models Blockchain projects do not fit the traditional pricing models and therefore represent a new business model with the associated opportunities. Each revenue source will require its own pricing model, details below.

Transactional payments

A small micro payment from each transaction on the Blockchain platform will be taken. Although this fee will be very small, the network effect of the system means it will increase rapidly. Allowing users to create decentralised applications will also increase the number of transactions that occur.

Decentralised Applications

Users will be allowed to access the manufacturing data that will exist on the blockchain. This can be done with either publicly or privately available data. For instance, a manufacturer may want to create its own internal Quality management system and restrict the data for internal use only. This application still requires transactions on the blockchain.

Manufactory Automated Machine Shop

The capacity from the machine shop that we will build will be made available to customers. This will act as a showcase facility that will encourage other manufacturers to also use the system but will also create revenue from the facilities capacity.

Sales Strategy The sales strategy will take a three-pronged approach to maximise the number of transactions. Our first strategy will be to target blue chip manufacturers with a large external supply chain. We will look to form strategic partnerships with these businesses and incentivise them to use the Manufactory platform and will therefore require the businesses in the supply chain to also use it. This will be the initial drive for our network effect.

Our second strategy will be to target suppliers to SME such as tooling and materials. Having the suppliers on the platform will encourage small to medium size manufacturers to use the system as we will have removed some of the barriers to entry for them. It will also serve as a demonstration of the efficiency of the platform and savings that they can make.

The third strategy will be to target machine tool manufacturers and help them to create applications for their machine controllers that will interact directly with the blockchain. This will remove the need for specialist hardware requirements on machinery moving forward. It will also mean that every new machine will become ‘plug & play’ and will therefore increase our potential for transactions.



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Sales Traction and Metrics

The key to success for the blockchain platform will be its network effect which will increase the number of transactions substantially. The more manufacturers that are on the platform will mean that more suppliers will want to be on the platform and vice versa.

Measuring the number of users using the platform does not represent the true result of the network, therefore the number of transactions will be used as a key metric to measure success.

Exit Strategy We recognise that any investor in a start-up company, no matter how well it looks on paper, ultimately needs an exit vehicle. Our purpose is to provide the best methods to protect investor's interests, while maintaining the potential growth of our company, the liquidity, and the profitability of future operations.

It is the intention of the founders to raise funds via an Equity token offering (ETO). This will provide a mechanism for investors to sell their shares in the company in a similar way to an Initial Public Offering (IPO).

The team intends to make use of one of the following methods at the appropriate time to allow investors to secure their investments:

• Merger or Acquisition • Management Buyout • Recapitalisation



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The Team

Motivation For over a decade the Manufactory CEO has had an ambition to build a factory that can act autonomously. The emergence of Blockchain and Industry 4.0 technologies has finally enabled this dream to become reality.

Composition The Manufactory team consists of strong, experienced and highly motivated individuals who have a broad spectrum of experience in starting and growing start-ups as well as working for and with blue chip manufacturing companies. The founder’s and advisor’s skillset complement each other with manufacturing, software, technology and finance all seen as key areas of expertise.

Executive Team Ben Bartholomew | Founder, CEO

A Multi-disciplined engineer and entrepreneur with over 26 years' experience in the manufacturing industry from the shop-floor to the boardroom. Always at the cutting edge of manufacturing technology and innovation, including creating and growing one of the first 3D printing bureaus in the UK. Ben has also created manufacturing specific software that utilised big data technology and automation. This revolutionised a blue-chip Aerospace manufacturers production processes, saving millions of pounds. Ben has a strong background in innovative and disruptive manufacturing techniques across a very broad spectrum.

https://www.linkedin.com/in/manufactory/



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Russell Ranford | Co-Founder, COO

An experienced development professional and entrepreneur, with extensive experience of land acquisition, securing planning and construction, with a background of working within local government, large private companies and PLC’s.

Russell has subsequently established a number of successful businesses and continues to guide Consultancy, Development and Property Investment Companies in residential and commercial property markets.

His extensive business management experience and his ability to deliver complex projects will see him adopt a cost aware and pragmatic approach to guiding Manufactory

initiatives.

https://www.linkedin.com/in/russell-ranford-92060815/

Legal & Professional Guy Hopson | Legal | Hopson Solicitors

Guy is an experienced lawyer, recognised for giving advice that is commercially sound, eminently practicable as well as legally accurate. He combines technical expertise and business acumen with the ability to get things done and advises individuals, companies, partnerships and LLPs, professional service organisations, entrepreneurs, privately-owned businesses and charities. Guy is renowned for working hard for his client’s and their best interests whilst being pragmatic and realistic

https://www.linkedin.com/in/guy-hopson-89b41914/



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Mark Minchella | Accountancy | Baldwins Group

Mark started his career with a top four firm in Cheltenham before joining Davies Mayers on its formation in 1992. He Qualified as a Chartered Accountant in 1996 and then joined a top ten firm in Bristol, where he specialised in corporate finance, working on company disposals, management buyouts, debt and equity fundraising, due diligence and flotations for both the AIM market and the Official List. He has substantial experience in working with owner managed business clients where he has advised a portfolio of clients for a number of years.

In October 2017 his practice was acquired by the Baldwins Group, second accountancy firm consolidator in the SME market, offering a full range of accountancy services to entrepreneurs.

Advisory Team Philip Dyke | Internet of Things Specialist and Blockchain Developer | Bespin Research Ltd.

Phil is a knowledgeable and skilled hardware and software design engineer with over 7 years' experience in designing and manufacturing complete solutions for a plethora of electronic devices. His work includes performing all aspects of system design and development for over 22 Internet of Things (IoT) devices from a wide range of industries including manufacturing, remote monitoring and smart devices.

Phil also has a very keen interest in Blockchain development, and his comprehensive experience will be

vital in developing our universal hardware connector and software platform.

https://www.linkedin.com/in/philip-dyke-61717338/



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Jay Bartholomew | Manufacturing Operations Specialist | Defence Manufacturing

Working in the Gas Turbine Industry since 1995, Jay has worked her way up from the shop-floor to become a leader of a specialist factory within the manufacturing industry. With a Master’s Degree from Warwick University in Engineering Business Management, Jay has a deep understanding of manufacturing operations management and the issues that can be caused by a complex manufacturing plant.

Her focus will be to ensure that the Manufactory system will address all the aspects that are required to run a successful and efficient factory.

https://www.linkedin.com/in/jay-bartholomew-948525170/

Tony Bartholomew | Aerospace Manufacturing Expert | Retired

Tony has been at the forefront of Aerospace special process manufacturing for over 30 years. He built the UK’s largest Electro-Discharge machining (EDM) centre which became a first-tier supplier to Airbus. Supplying a critical component on the fastest moving aircraft assembly line in the world.

Tony’s experience in starting and building new technology companies and manufacturing processes will be invaluable to the Manufactory project.

https://www.linkedin.com/in/tony-b-286b7b171

Adrian Bukowski | Manufacturing Engineering Specialist | Gas Turbine Manufacturing

Adrian started his manufacturing engineering career as an engineering apprentice in the Aerospace industry. Having worked his way up from the shop floor to his current position as an engineering management undergraduate. He has worked in multiple specialised areas including managing a laser drilling technology process that is used to produce complex features in high performance gas turbine components. He also project managed a 3D printing process



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that revolutionised the production of sensitive composite parts.

Adrian is also an accredited Lean Six Sigma Green belt practitioner which has led to him producing significant savings in his roles. Adrian joins the Manufactory team as a keen blockchain enthusiast, and his broad knowledge of manufacturing processes and management will be vital as we create the Manufactory community.

https://www.linkedin.com/in/adrian-bukowski-7250ab73/

Liam Palmer | Manufacturing Engineering Specialist | Gas Turbine Manufacturing

An experienced manufacturing engineer, Liam specialises in subtractive machining technology. Liam's role as a process manufacturing engineer has seen him revolutionise methods of manufacture for specialist components in difficult to machine materials. Realising major cost savings and lead-time improvements for manufacturing sub-systems has resulted in him being a respected member of the manufacturing community.

Liam's expertise will be used to ensure the Manufactory project embeds the latest manufacturing best practice into the eco-system.

https://www.linkedin.com/in/liam-palmer-0b93b5153/

Jamie Lafford | QMS Product Owner | GE Aviation

For over 30 years Jamie has worked in the Aviation industry as a Manufacturing Engineer, IT Deployment Leader, IT Program Manager and recently Product Owner for GE Aviation. Specialising in Quality Management & Manufacturing Execution Systems across 17 GE Aviation businesses worldwide.