How Blockchain Is Transforming the Apparel Supply Chain
Pratik Soni, Omnichain Solutions
It is an exciting time of innovation for the apparel industry — and retail at large — with brands and retailers creating new and dynamic ways to attract and engage with customers.
For instance, lululemon’s latest flagship store is more than a place to buy yoga pants. The sprawling 20,000-square-foot space includes a restaurant, meditation room and workout studios. Rather than stick to the traditional department store model, Nordstrom is opening several smaller Nordstrom Local stores without inventory but space for interactive experiences. This summer, Gucci introduced a new feature for its iOS app that lets consumers try on its Ace sneakers collection through augmented reality.
There is another burgeoning technology transforming the industry: blockchain. Whereas recent innovations and digital interventions have focused on reimagining the customer experience, blockchain presents a radical solution to the technical aspects of managing and maintaining a sustainable supply chain.
A decades-old problem
For too long, many brands and retailers have relied on decades-old systems such as Electronic Data Interchange (EDI) to record information on purchase orders and invoices. This data is then used to support critical decisions such as demand forecasting and merchandise allocation. Unfortunately, EDI limits the number of parties that can communicate on a network, which inhibits upstream and downstream communication. The inevitable silos make it difficult to think holistically about supply chain management, resulting in inaccurate production numbers and misallocation of SKUs that hurt profitability on account of missed sales opportunities and additional costs from excess inventory.
Blockchain instead bridges these silos with real-time data flow between every link in the supply chain. Formerly fragmented data is unified through a single, immutable ledger that is visible to all parties. Brands and retailers can then transform their operations and create more customer-centric supply chains with new ways of thinking about logistics, inventory management, authentication and consumer trust.
A seamless, omnichannel experience
Today’s supply chains are varied and complex, involving numerous manufacturing sites, warehouses, logistics providers, and channel partners around the world. Traditionally, each link in the supply chain would manage its respective role using its own systems, databases and metrics. For example, many companies will have internal enterprise resource planning (ERP) and point-of-sale (POS) systems to manage existing stock and capture sales in stores. But then their e-commerce sites will be connected to separate ERPs and warehouse management systems for order fulfillment.
The inherent disconnect between online and offline presents barriers when trying to operate as a holistic, omnichannel supply chain — the very kind that consumers today want. In fact, according to BRP Consulting’s 2019 Real-Time Retail report, 87 percent of consumers state that they would like a consistent experience across all shopping channels. Further, 56 percent of consumers are more likely to shop at a retailer that offers a shared cart across channels, yet only 7 percent of retailers reportedly offer this capability.
Blockchain adds the transparency and connectivity needed to deliver an omnichannel experience. For instance, with total visibility across all channels and its respective inventories, a company can determine the fastest and most cost-effective way to fulfill an online order. If the warehouse is out of stock, you can pinpoint where the nearest available store is and ship the item from there. The customer is happier because they receive their item sooner. If they are unsatisfied for any reason, they can bring their package to any brick-and-mortar location for a return or exchange. Everything is seamless. Plus, that transaction is logged on the blockchain, making it visible upstream in production to support demand planning.
A customer-centric supply chain
When brands and retailers lack visibility into what customers are buying, they end up relying on a reactive approach to supply chain management. Hot items run out of stock, so they send more to fill distribution centers and stores. Unfortunately, this type of model leaves most companies constantly one step behind the curve. According to a study by Bain & Company, 51 percent of surveyed supply chain executives stated that their supply chains are reactive and lack end-to-end visibility and flexibility.
But with blockchain, companies can see what is being sold in store and online in real time. They have immediate demand signals to make proactive decisions about production planning and replenishment. They can thereby ensure they have the precise amount of stock on hand to satisfy customers — with limited excess — and get those items to specific stores or regions where demand is high.
Minimizing excess inventory can be a huge benefit of blockchain for the apparel industry, as any leftover products typically either get heavily discounted or sent to outlet stores, which eats into profits. Or, worse, they can end up as waste, which presents environmental concerns. From fast-fashion brands to the likes of Burberry, the fashion industry has already been faced with heavy scrutiny over sustainability (it was even a major topic of discussion at this year’s G7 Summit).
Ultimately, blockchain helps companies think smarter about supply chain management in a way that better meets consumer demand. They can determine how much product they need to make. They can see which products are popular in which regions. With planogram-level integration, they can even identify the best locations for each item at the store level to maximize sales. This level of insight drives business growth and creates a more profitable, customer-centric supply chain.
Transparency for authenticity and trust
Counterfeit and gray market goods are an unfortunate reality for popular brands — and can really hurt business and reputation. According to a recent Global Brand Counterfeiting Report, the counterfeit market is projected to reach $1.82 trillion globally by 2020. But a distributed ledger technology like blockchain makes counterfeiting very difficult.
Blockchain records and timestamps every touchpoint, transaction and product movement in the supply chain. Any change would require the consent of everyone else in the network, preventing any sort of tampering. So, whether a company is in the business of designer handbags or jackets, there is full transparency and traceability across a product’s entire lifecycle to verify authenticity. With insight into product provenance, companies can also reassure consumers that their items are ethically sourced and made without the exploitation of workers — other key factors in the mind of the modern-day shopper.
Making the future a reality with BaaS
Blockchain may sound like a complex, expensive and far-off investment, especially as use cases in the news often point to examples from conglomerates such as Walmart and Target. But blockchain is now a practical reality for any company today — not years into the future — thanks the Blockchain-as-a-Service (BaaS) model. Using only an internet browser, BaaS helps businesses connect the disparate systems and parts of their business into a decentralized digital ledger. BaaS, much like Software-as-a-Service (SaaS), makes the technology widely available as a subscription-based service.
Since all you need is an internet browser, blockchain deployment through BaaS is fast, affordable and scalable. Companies can get up and running with a BaaS-based platform and connect their supply chains in less than 90 days. Critical supply chain data is then available from anywhere, at any time, from any mobile or desktop device, so users can make important decisions when needed. BaaS democratizes blockchain so that brands and retailers of all sizes can build more omnichannel, customer-centric supply chains and transform their entire business.