Blockchain: the Next Disruptive Wave after the Internet?

In the first part of my coverage on the subject of blockchain, I focused on the invention of cryptocurrencies – namely bitcoin in 2008 – followed by a brief history, the foundational elements of cryptocurrencies, blockchain and “smart contracts” – which have already begun making their presence known in business, government, education and with the general public.

At the same time Satoshi Nakamoto invented Bitcoin (or entrepreneur Craig Wright, who has also taken credit – either way, I take my hat off to these Cypherpunks advocating widespread use of strong cryptography and privacy-enhancing technologies that are now helping to change the world for the better) the world was rocked by the financial earthquake of the world’s central banks going into free fall. Lehman Brother went bankrupt; Merrill Lynch, AIG, Freddie Mac, Fannie Mae, HBOS, Royal Bank of Scotland, Bradford & Bingley, Fortis, Hypo and Alliance & Leicester all came within a whisker of doing so and had to be rescued.

Back in 2008 it was only about digital money, and let’s keep in mind money is only an accounting system (banks today manage our money in digital ledgers) that is managed by central banks. Bitcoin had a rocky start with scandals, like Silk Road, a website that was using Bitcoin to purchase drugs, for which those concerned are paying the penalty with imprisonments, having said that those that are now in prison believe strongly in removing the middlemen that want to regulate and tax everything and according to what you read and watch you feel sorry for those that are in fact decent people wanting to make a more transparent world. But, let’s not forget that banks have their own issues with corruption and transparency – the likes of PPI (Personal Protection Plans) and mortgage mis-selling they caused the financial crash of 2008 – the only difference being that those in the banking community have in the main stayed out of prison! The fact is that the Blockchain ledgers, now regulated, offer transparent processes, that will cut out the middle man helping to deliver a more efficient transparent chain that people and businesses can (A) trust in and (B) is what they are looking for today.

So let’s get onto today’s topic. In this second instalment, I want to focus on both the downstream and upstream potential use cases for the fashion supply-chain and, at the same time, look at some of the potential, high-level touch points for the ongoing transformation and digitalisation of the extended fashion value chain.

If you examine the technology stack typically found in a retailer, brand, wholesaler, agent or manufacturer, you’ll see anywhere between 100 and 200 different technology solutions used – the vast majority of which are totally disconnected and rely completely on human intervention to push data from one system to another. In many cases, this is still being done via paper (yes, it’s true especially in the upstream part of the supply-chain). All of these aspects are increasing the time from concept to consumer.

These hundreds of solutions are in the main proprietary systems, meaning that third party solution providers offer implementation, customisations, training and ongoing support and development services. They tend to be closed systems in the main. So, it’s always going to be challenging to connect these solutions together via a set of APIs (Application Protocol Interfaces), tables, XML and other integration methods that are now more and more necessary in real-time.

Therefore, today, the vast majority of the fashion supply-chain operates on a mixture of informal records, which are updated after a certain task or milestone takes place. These updates could be both manual (in the vast majority of cases) or via an automated update from one primary solution – the likes of PLM (Product Data Management) – to another – the likes of ERP (Enterprise Resource Management) – using push and pull notifications coming from automated workflow solution(s) that will notify each of the critical system process owners within the supply-chain of a completed or pending task.

The critical problem with today’s outdated, disconnected, disorganised, frictional process approach is that it causes a great deal of pain to everyone involved throughout the supply-chain – right from the voice of the customer to the designer, planner, colourist, developer, buyer, mill, trims team, components team, packaging team, manufacturer, shipper, retailer, or brand. Essentially, this includes any role owner relying on the thousands of process tracked changes in documents, contracts, orders, certificates, notifications or location(s), or who is involved in the process of bringing a product from concept to consumer. And let’s not forget that today’s current process relies on human-to-human trust!

So what’s the alternative? Of course less friction and a great deal more trust in the accuracy and timeliness of the data. We need a joined up process that will enable all involved to focus on removing waste from our outdated supply-chain processes, helping to reduce the large number of mistakes, improving right-first-time quality, reducing rejections and returns, lowering stock levels, and reducing transportation cost. In short: manufacturing what your customer has ordered right the first time, in less time, and at less cost.

So that’s the Challenge for the RFA Supply-Chain 2.0!

I don’t mean to be negative; we’ve come a long way in the four decades I’ve been involved in the RFA technology sector, but as I stated in my last piece : “With such a rapidly evolving digital landscape, it’s not enough for retailers and brand leaders to be looking at how technology innovation is disrupting their businesses today. They also need to be carefully considering the future to understand what’s on the horizon; they need to begin planning for what’s coming next, now”.

Retail supply-chain leaders must look to the future and identify ways in which they can connect solutions and tasks (in real-time) across the extended eco-system and, at the same time, ensuring all those involved trustin the shared data that will drive our industry ever faster.

So let’s discuss blockchain and how it might be possible for retailers, brands, wholesalers, agents, mills, trims & components, manufacturers, labs, transportation agencies, banks, legal and regulations departments to name just a few that are need to improve the sharing of data. We have already spoken of the challenges of sharing data, so let me move on to how blockchain technology might help fashion retailers and brands, both up and down stream, to help increase transparency across the supply-chain, offering customers information at the point of sale and beyond.

The Potential for Blockchain within RFA

Already we are starting to see the values of using blockchain technology in RFA. Currently, the majority of blockchain solutions are used within what we call the ‘downstream supply-chain’ i.e. via the retailer or brand, direct to the consumer. One such example is 1trueid, a company that uses a distributed and secure system based upon blockchain to create and verify a product’s identity from concept to consumer. The technology can guarantee a product’s authenticity using different technologies (Rain RFiD, NFC, BTLE, PJM). 1trueid can also use it’s technology to continuously market to the consumer on a on-to-one basis, rather than the more common one-to-many approach. Another good example of this would be Provenance, a forward thinking business helping to increase transparency across the supply chain. Recently Provenance, in collaboration with Martine Jarlgaard, “proved blockchain’s potential for forging greater trust in businesses along a fashion supply chain, enabling brands to provide verified information about the materials, processes and the people involved behind the manufacturing process. The first garment ever tracked using blockchain technology was presented at the Copenhagen Fashion Summit’s ‘Solutions Lab’ in Denmark, May 2017”.[1]

Today’s traditional supply-chain technology stacks, in the majority of cases, only share data internally within a single company. Many followers of WhichPLM will have read my articles and posts or heard me describe these operations as working in “PDM” siloes – in other words working in a disconnected landscape that will reduce the efficiency of the overall operation, reduce morale, and may even contribute to the demise of a productive company and it’s culture. Even those that have purchased PLM, often only implement the capabilities of PDM, and can’t break out of the silo mentality.

Using PLM and the IoT together with blockchain will help connect retailers, brands and all extended supply-chain parties. Using blockchain will help streamline all data communications through secure synchronised data ledger interchange in real-time, making it more efficient, trusting and instantaneous. At the same time it will remove today’s ‘friction’ and will help tomorrow’s supply chain leaders, to focus on new challenges like A.I. (Artificial Intelligence), robotics, personalisation and mass customisation to name but a few of the emerging opportunities.

Enabling these advantages are a variety of critical aspects of blockchain that I alluded to in part one of this two part article, like the use of “smart contracts” that came from the Ethereum cryptocurrency’s underlining software. When using smart contracts as part of the blockchain, businesses can lay down their agreed terms of operation – just like they do today using physical contractual agreements or indeed other documents like purchase orders or goods received notes. And lest we forget the hundreds of additional sub-documents and orders for materials, components and packaging that will eventually come together to form the paper trail that today delivers the finished products.

Through the blockchain, smart contracts and agreements are digitised and operate in the same way as a physical contract, with the same set of objectives, deliverables, conditions and disciplines.

Beyond smart contracts, we can also harness the IoT (Internet of Things) sensors that can be installed in a broad range of hardware and even materials (rolls, components & trims) and other key computerised systems. The same information can be recorded at the instant a task is completed or indeed rejected, with no chance of misinterpretation, creating true and total transparency across the supply-chain and without the need for human intervention to update the system(s) and share (or in many cases not share the private elements that you may wish withhold) the facts or truths.

Looking to the Future

You may be wondering why I chose to reference the Internet in the title of this piece. To date, no other technology – not PDM, ERP, CRM, or PLM to name just a few of the primary softwares – has enabled this type of real-time, secure collaboration to take place. It’s still dependent upon truths – until now that is. Using blockchain’s smart contracts will enable the industry to start to connect the dots between extended supply chain partners, sharing only the facts!

So what might the near term future look like?

Currently retailers, brands, agents, manufacturers, and all other supply-chain partners operate on their own unique systems, all with their own customisations and challenges. Most – if not all – communicate via email, or at best some form of supplier portals with limited supply chain visibility, and even for those that use PLM connected to a manufacturer, it’s almost certain that it’s only going to link to tier 1 manufacturers and not to tier 2 or 3 materials, trims and packaging suppliers.

Like I’ve already stated, through blockchain, in the future all supply-chain partners could use a commonly shared ledger that will utilise shared data, providing a ‘single version of the facts’. At the same time it could remove all data redundancy issues, disputes and, more importantly, will make the end-to-end processes leaner, reduce cost and increase quality (based on accurate up-to-date information), efficiency and profitability. Businesses will be able to remodel their end-to-end supply-chains based upon new ways to connect directly with all parties, including the consumers before and after they’ve purchased goods.

The truth comes from agreement, which is built from the actions taken on each task and key milestone within the supply-chain – from the contract placement to the product reaching the consumer and beyond, learning from how it’s being used by the consumer. This 360-degree process will enable all parties to resolve issues, to learn and make tweaks to designs as they receive feedback from each task owner or end users.

It’s also important for me to say at this point that those supply-chain partners that will use blockchain, only need to share the data that’s already part of their contractual agreements today (as is the case today with current requests via email etc.); nothing is going to change, and each party decides what is private to them and cannot be viewed by other supply-chain partners. Just like with PLM or ERP systems, each member will have their own set of privacy controls that are permission based (read write or read only, for example) so, everyone in the supply-chain can rest assured that their company’s details are completely out of reach and safe.

Trust the Process

I’ve written about advantages for key supply-chain partners who may go on to use the blockchain, but there’s another key point that I would like to share and underline as one of the biggest values of the blockchain. Not only can we trust the data across each of the supply-chain partners, but, there’s another group of people that need to trust in what a retailer or brand is saying about the materials, trims, components, the where and how a product was made, and they are the consumers that today are buying with clear consciences. Today the consumer wants to know and to trust all of these details (and a whole lot more, including where the materials came from, who made the product, did they get paid a fair labour rate), and also to trust that a retailer or brand is not just ‘ticking boxes’ when they make their Modern Slavery Act declaration – just one click away from their online homepage, at least here in the U.K. and which will have different titles for the same type of CSR (Corporate Social Responsibility) acts all over the world.

Through blockchain, businesses won’t just gain a lean value-chain that offers greater efficiency, but, also a great deal of trust from their customers.

I hope that this second instalment on blockchain helps to paint a clearer picture of what I truly believe is yet another positive wave of technology, already beginning to be used in other industry sectors, that makes sense for any serious business wanting to enhance both the downstream (which they are doing a good job of in any case) and the upstream that is shouting out for greater transparency, smoother transactions, and lean processes that, operating together, will help to deliver all the benefits listed throughout this piece.

[1] www.provenance.org/case-studies/martine-jarlgaard

Thanks for reading,

Mark.