How Blockchain-tech can optimize Supply chains in the CPG and Retail/Fashion Industry?
By using blockchain, digital identities are built for all physical goods involved in the supply/value chain as well as for the various role-players in the chain such as designers, vendors, regulators, suppliers, manufacturers, distributors, and retailers, etc.
CPG/Retail/Fashion and Agritech companies need to orchestrate efficient supply chains, thus blockchain tech becomes very critical for them.
What are the pain points of the Supply Chain?
- Demand Forecasting Model accuracy- Organization's capability to predict the right amount of consumer demand by region and by season and integrate it into procurement and inventory decisions. the reason why an organization does not get accurate data is that there are too many intermediaries who actually control major chunks of data along the full supply chain. For example, to get e-commerce specific dashboard access a lot of paid options need to be exercised by the companies selling on e-commerce platforms. There are levels to the access of the seller’s dashboard.
- Traceability- Getting all the data points related to all raw materials, production components, and labor-related information. Factory Unit, Warehouse, City, State, Country of origin data for the entire supply chain. Current solutions involve too much documentation and paperwork.
- Compliance related to procurement, production- All the facilities, production process, SOP’s and raw/finished materials must be local law compliant. This is particularly true in the case of child labor, and industries like agri-tech, chemicals/pharmaceuticals, and other hazardous yet necessary materials.
- Adaptability and Agility- Real-time data and visibility into the movement of the goods help in taking decisions that help save massive costs and optimize production and distribution systems.
- Trade and finance/currency risks- Trading platforms currently are being orchestrated by large financial institutions or shipping organizations. We are living in the times of trade-war and one announcement from POTUS or China’s Premier impacts the global trade. The trade risks have to be hedged currently through semi-automated treasury solutions. Currency risk also exists in parallel with socio-political risk.
- Credit risks- Currently cross-country trade and global supply chains involve a lot of credit risk both on the vendor and supplier side. An intermediary financial institution charges a cut of the entire transaction to take responsibility for the risk and help in honoring the trade agreement.
How can Blockchain solve these pain points?
- Transparency and real-time data: Blockchain is transparent to all the participants. The data is real-time and auditable and cannot be tampered with. There are flexible and customized options like public and private blockchain as well to enable the right amount of transparency and privacy. The computing speed increase in the 2020s will further enhance the adoption and help integrated the blockchain generated data with AI (#artificiallyintelligent) based predictive models
- Ultra-high Traceability and visibility: Think of a blockchain like ‘irreversible’ data records. Paper-based records can be tampered with, digital copies/records can be changes, but blockchain-based #datablocks cannot be tampered with. Identical copies are maintained on all systems and hence changing the record on one centralized system may not help. Very useful in food/CPG/pharma recalls.
- Compliance friendly: By tracking the origin to the first data block (in a blockchain), and keeping things transparent in a decentralized way, the compliance is very high. Violations related to procurement, production, payments, process, and distribution cannot be corrected by going back in time to avoid legal/fraud-related liabilities. If a fashion product was manufactured at a vendor/facility that later was identified as a violator of labor laws, then all the production and contracts related to that facility/vendor can be recalled/canceled.
- Smart-Contracts- DLT based smart contracts make the supply chain efficient by removing the intermediary. The value created can be transferred to a consumer or a business. Smart contracts that self-execute themselves with help of digital signatures also help in maintaining digital trust and stakeholder management.
- Settlement with crypto will kill currency risk forever- If the cryptocurrency ascent continues then very soon we will witness payments/settlements being made with help of cryptocurrencies.
Credit, trade, and currency risks are all minimized using the smart contracts.
How Walmart leverages Blockchain for Food-Safety?
2018 saw a large outbreak of E. coli in romaine lettuce and Salmonella in a number of products from eggs to breakfast cereal.
A WHO report highlighted that every year
- Around 600 million people in the world get sick from contaminated food, and 420,000 of them die.
- The risk of experiencing an outbreak is not directly related to a country’s income, either; anyone can suffer illnesses caused by bacteria, viruses, parasites, toxins, and chemicals.
Through right traceability, the contaminated food can be separated from the bigger ‘lot’, thus reducing the health-hazards for the people in a responsive way who would have otherwise consumed them. Massive losses related to recall can be prevented.
This use-case is applicable to packaged foods, distribution, component quality tests, source of origin audits across industries like retail, CPG, food, automobile, and fashion.
Case Study Walmart
How Fashion industry can be kept cruelty-free using blockchain?
Sidhartha Sharma (Views are personal)
Digital Strategy and Transformation Expert
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Sidhartha S. - Director, ASEAN- Digital Strategy & Transformation - BIG FOUR | LinkedIn
15 years experience in Management/Strategy Consulting (BIG 4) firms and worked with Startups in ASEAN, India. Strong…