What Does Blockchain Have to Do With Omnichannel Retailing?
While the apparel industry has been focused on delivering a seamless omnichannel experience for the better part of the past decade, new transformative technologies are emerging as further disruptors. In fact, blockchain is gaining momentum in retail, transforming the source-to-consumer supply chain by adding new layers of security, automation, inventory visibility, and transparency.
Blockchain has received a lot of attention in the context of the financial industry (i.e. bitcoin) and through a few recently publicized food recall pilots that demonstrated its traceability value. Let’s take a deeper dive into what blockchain means specifically for the apparel sector and how it can be used to enhance omnichannel operations.
Two key features define a blockchain — an immutable distributed ledger and smart contracts.
At its core, a blockchain is a distributed ledger, a.k.a. a shared database, that in theory, anyone, anywhere can use to transmit data securely. Many industry veterans already know that shared databases have benefits — such as the ability to provide real-time product knowledge, inventory visibility and more. Blockchains take the concept of shared databases to a new level. Instead of linear, batch-oriented transactions, a blockchain uses a non-linear and decentralized format that eliminates the single point of failure (i.e. no single point to hack into) we have seen with traditional data exchange systems. In a distributed ledger, information is immutable, meaning it cannot be modified or deleted. If amendments to a transaction are needed, all parties have visibility into what is replicated, shared and synchronized across multiple geographic locations. This decentralized structure makes the data resilient, trustworthy and secure.
Blockchain also supports “smart” contracts, meaning an automated execution of terms, conditions and business rules. Currently, retail agreements are largely manual and based on proprietary systems. A smart contract can automatically enforce terms and conditions as defined between trading partners. A trading partner literally cannot write a business transaction to the blockchain ledger if they are not complying with the rules specified in the smart contract. For retail, this means far fewer item substitutions, more certainty around what is being shipped and when, and fewer discrepancies downstream. Retail’s reconciliation problem would be more than alleviated with these unique features that blockchain can provide.
These core aspects of blockchain are exciting for retail, as we could possibly see a tenfold increase in current marketplace security, efficiency and transparency in our lifetime.
An Important Prerequisite
For the past few years, technology providers, such as IBM and Microsoft, have been focusing on taking blockchain from being a public ledger (which is how it supports bitcoin) to an enterprise solution designed to solve supply chain problems. Enterprise blockchains support multiple levels of permissions for robust security around who can write to and read from the ledger.
Despite its widespread publicity, blockchain is still very much in its infancy. During this critical developmental stage, companies who are pioneering blockchain technology need to focus on one very important prerequisite to ensure a successful end game — systems interoperability. Simply put, a lack of interoperability across trading partners means supply chain visibility will be nearly impossible.
For example, if a retailer pilots blockchain’s effectiveness to trace the cotton being used for a line of t-shirts, its internal system needs to be able to communicate with its cotton suppliers’ and contract manufacturers’ systems with a high degree of automation and accuracy to enable full end-to-end supply chain visibility. The trading partners involved need globally unique product identification (not proprietary identification numbers) and a uniform way to capture how the product changes hands throughout the supply chain. Without supply chain visibility, none of the efficiency promises that come with blockchain will be effectively delivered.
If history tells us anything, blockchains will only be successful through industry-wide collaboration on a standards based-framework. This is the same way that the barcode evolved into a fixture very much engrained into all retail operations today. Leveraging the foundation of GS1 Standards, which are globally recognized and used, a blockchain can record specific information about a product’s transformation and journey to the consumer. Because not all companies are going to select the same technology partner to implement blockchain, standards are an invaluable way to streamline the transmission of data on a blockchain. Standards work to not only make product information exchange more efficient on a blockchain, they also expedite the physical event visibility data that is critical as the product moves from the early phases of development all the way through to the point of purchase.
Specifically, a standard called EPCIS (Electronic Product Code Information Services) can complement blockchain and amplify its abilities. EPCIS is already being used successfully in big pharma to transmit granular detail about a product’s chain of custody — which is particularly helpful for companies committed to complying with new safety requirements designed to combat the spread of counterfeit products. In retail, as consumers scrutinize products based on their origin, sustainability, production processes used, and so on, EPCIS and blockchain can tell the story of the product’s journey with a high degree of certainty, accuracy and validity.
These features are also what lends blockchain to an IoT-enabled retail landscape. EPCIS and blockchain can support an IoT implementation by more efficiently transmitting data used for the more personalized experiences we are all predicted to gain as consumers ― this reaching into consumers’ homes for upselling, cross-selling, automated replenishment and other exciting possibilities.
Don’t Forget the Data
Blockchain, while disruptive and intriguing, is not the answer to all supply chain challenges. Many of those challenges start with poor product information, or, more specifically, outdated business processes that lead to poor data quality. No matter what business process blockchain will address, quality data is foundational to success.
Data needs to come from a trusted source and be properly structured for the automated, immutable transactions throughout a blockchain. The reality is that there is a “garbage in, garbage out” cycle affecting supply chain data across industries. Imagine that a supplier fails to disclose the presence of wool in a product. The absence of information about a potential allergen, such as wool, might cause harm to consumers, or at a minimum, damage a brand’s reputation if a consumer publicly reveals their mistake. In a blockchain scenario, this incomplete data is simply expedited — the error exists regardless of whether or not a company is using blockchain. It underscores the need to focus on the building blocks first.
While there is no clear path yet for how blockchain will ramp up to the ubiquity that is predicted, one thing remains clear. Now is the time to be at the forefront of a potentially transformative technology. Stay educated on blockchain’s developments, and most importantly, create a foundation of interoperability on which to build blockchain success.
Melanie Nuce, the senior vice president, corporate development, GS1 US, has more than 20 years of experience in retail technology. She oversees a team that investigates new technologies, partnerships and investment opportunities to increase the relevance and reach of GS1 Standards in e-commerce, mobile, social media and supply chain business processes. More information is available at www.gs1us.org.