Apparel Industry Puts Blockchain to the Test to Solve Persistent Challenges
While retail industry innovation efforts may be paused during this unprecedented time of social distancing and economic turmoil, a study involving blockchain, radio frequency identification (RFID), and global data standards provided a glimpse into the potentially remarkable capabilities of emerging technology to help solve supply chain challenges.
Prior to the coronavirus outbreak, the Auburn University RFID Lab, GS1 US and several leading retail companies launched the Chain Integration Project (CHIP). The groundbreaking proof-of-concept demonstrated the effectiveness of using blockchain in combination with RFID to gather serialized product information. Three brands, Nike, PVH Corp., and Herman Kay, as well as two retailers, Kohl’s and Macy’s, contributed live data to the project.
Though blockchain’s potential is still undefined in retail, CHIP represented a small but important step in helping to solve supply chain challenges that have plagued the industry for decades. Here are three reasons why the findings from CHIP provide insight into the potential of blockchain in this sector:
Claims and Chargebacks Are Costing the Industry Too Much
CHIP participants named claims and chargebacks as one of the costliest problems for brands and retailers (it costs them roughly 1 percent of total retail sales, according to the Department of Commerce). There's simply little to no communication of serialized data between the stakeholders involved. Claims are often settled in the absence of sufficient shipment information on both brand and retailer sides.
Though blockchain technology can hold them accountable for their agreements and create more order transparency, trading partners need to focus on the basic tenets of supply chain visibility to fully maximize blockchain for this purpose. Companies pursuing blockchain should have globally unique product identification in place (not proprietary identification numbers) as well as a uniform way to capture how the product changes hands throughout the supply chain, such as RFID. Without supply chain visibility and data completeness, order accuracy cannot be improved.
Serialized Data is Collected But Not Widely Shared
The term “serialized data” in the apparel industry refers to product data carried by RFID tags or QR codes that help users identify and trace individual items throughout the supply chain. While the collection of serialized data has grown in recent years, the overall benefit of item-level visibility is hindered when data isn't shared between trading partners. Doing so can help complete the visibility cycle, improving forecasting and leading to a more transparent and real-time supply chain.
CHIP was an important test for blockchain, as is could not only spur more data sharing, but it could also cast a spotlight on the importance of creating a standards-based foundation to make that achievable. Specifically, CHIP proved a GS1 data-sharing standard called EPCIS (Electronic Product Code Information Services) enabled more flexible transactional data sharing, as it records the what, when, where and why associated with supply chain events.
Legacy Systems Can’t Keep Up With Innovative, Consumer-Centric Business Models
According to the research, the automation of serialized product data exchange using blockchain can potentially eliminate manual labor associated with legacy systems, increasing the productivity and efficiency of the retail supply chain. Legacy systems also typically don’t allow for item-level visibility, so trading partners end up forfeiting much of the granular product data enabled by serialization. Blockchain supports smart contracts, meaning the automated execution of terms, conditions and business rules, and incorporating serialized data into smart contracts could enable a more resilient and responsive supply chain. For retail, this could mean fewer item substitutions, more certainty around what's being shipped and when, and fewer discrepancies downstream. Improved reconciliation is a valuable benefit when consumers are demanding more supply chain transparency and want access to trustworthy information about a product’s journey.
However, because not all companies are going to select the same blockchain technology partner, GS1 Standards are essential to streamline the transmission and interpretation of data. Using standardized product data to uniformly capture traceability events, for example, can enable consumers to verify that shoes from their favorite designer are genuine.
Ultimately, CHIP participants examined various problems that exist in retail today and explored blockchain as a potential tool to solve them. Overall, while the findings showed blockchain was viable, the participants were only successful in sharing data when they used blockchain and RFID in combination with GS1 Standards such as EPCIS. Through further exploration, the team hopes to continue to evaluate the addition of this technology to the transformation of the larger retail ecosystem.
Susan Pichoff is senior director, community engagement, GS1 US, a standards organization supporting and educating businesses and industries in the use and adoption of GS1 Standards to improve business processes.