How Blockchain Ensures Security and Visibility in Supply Chain

Summary: Deployment of new technologies holds promise for much-needed improvement across the supply chain. The use of blockchain technology can aid transparency and traceability,  besides reducing paperwork for fashion brands.

Blockchain originated with cryptocurrency and since then has been taken up by financial companies. Recently, technology companies, financial institutions, and start-ups have started inventing new business use cases of this technology to secure information blocks in online financial transactions or just to secure information flow.

What is blockchain?

A blockchain, as the name suggests, is made of a “chain” of information-storing “blocks”. It is possible to access information stored in blocks linked together in the chain. A blockchain database contains the complete history of all the assets and instructions executed since the inception.

Every transaction or block of information is validated by a network of users to ensure data's integrity and transparency.  That’s the reason why the technology is called “trustless trust”,  where that parties do not know or trust each other participating in transactions.

Blockchain and the Fashion Supply Chain

The supply chain in the fashion industry has come under scrutiny for the amount of carbon footprint it generates. Post-pandemic, there has been an acceleration toward adopting interconnected digital supply networks with integrated information flow to drive production and distribution. The seamless flow of information can make the supply chain more agile and resilient.

For sustainability to succeed in the fashion chain, the cloth must tell its story. The fashion industry is waking up to the benefits of deploying new technology that traces and tracks the apparel’s journey from sourcing raw material to its disposal as a used garment.

Blockchain in the supply chain has the potential to provide a wide range of benefits, including:

Increase traceability of material: Blockchain can enable tracking and tracing of goods moving up and down the supply chain. For instance, if a brand is claiming that organic cotton was used in its apparel, consumers can track this piece of information from the sourcing origin itself. Furthermore, it can easily be authenticated through the information stored in Blockchain.

The option of replacing fragmented data with a single, immutable ledger that is visible to all permitted parties, holds great promise in traceability the world is expecting from fashion. Fashion label MCQ is offering an IoT and Blockchain-based platform that enables the trading of handpicked clothing by designers, ensuring their authenticity.

Greater control over outsourced manufacturing: Blockchain for the supply chain provides all stakeholders access to the same information, thereby reducing the chances of communication or data transfer errors. Validating the data becomes less time-consuming, and attention can be on improving quality and reducing cost.

A single labor issue in an outsourced unit can potentially damage the reputation of a brand in seconds. Businesses can have more control over outsourced manufacturing.  A brand can get ahead of the curve in traceability and manage the supply chain better using Blockchain and can build a solid reputation as a leader in manufacturing.

Lower losses from counterfeits: Luxury fashion brands often find that as soon as they ceremoniously introduce new products in the market, counterfeits start doing the rounds almost instantaneously. Consumers would be willing to pay premiums to ensure that the high-end goods are indeed the original ones, saving companies losses due to counterfeiting of goods. Luxury brand LVMH has joined hands with ConsenSys and Microsoft for launching a Blockchain-based platform known as Aura. It offers lifecycle tracking, proof of origin, and protection of intellectual property among other credentials for their products.

Reduced paperwork: Supply chain data can be effectively analyzed using Blockchain. It also makes for easy sharing of compliance data among the stakeholders in a multi-layered supply chain, thereby reducing the cost of paperwork. Replacing paperwork with smart contracts and transactions recorded on the blockchain ensures credibility among parties.

Blockchain can potentially become a decentralized chain-of-custody platform for apparel supply chains. It can give brands, manufacturers, processors, consumers, certifying bodies, and financial service providers a trusted, evidence-based way of tracking materials, claims, transactions, certifications, and more in a digital traceability system.

Limitations of Blockchain Technology

Even though the future is promising, it will take time for the industry to mature and collaborate to create a consortium that can control the blockchain.

Its efficient working is dependent on the validity of data that is fed into the blocks.  Without accurate and timely data the platform cannot deliver its true value. The industry needs to work for the standard that shall govern the blockchain.

Moreover, it shall require all sorts of information to be tagged digitally for blockchain in the supply chain to be an effective medium for traceability. This can take time to bring all stakeholders to a level of digital maturity.

Despite the layers of security, a breach can still happen. Fashion brands need to choose the blockchain partner carefully and go for the launch only when the security and privacy concerns are met in the prototype.  It will require a cultural shift to the decentralized network and employees to be convinced about the significant shift to the unknown way of functioning.

Moving Forward

Blockchain as a technology has created quite a buzz but it will take years of development before it reaches its full potential. Brands can do well to keep a watch on blockchain adoption among their peers. Blockchain works well if enough mass has been generated for the data to make sense for each of the stakeholders at different layers of the supply chain. That’s the time to join the bandwagon.

Key takeaways:

1. Blockchain holds great promise in introducing transparency and traceability in the fashion supply chain.
2. It is still a developing technology that will reach its full potential in near future.

Log on to  Fashinza if you are looking to work with suppliers with a verifiable track record in sustainable manufacturing.  The platform works with a select group of suppliers to provide brands with ethical manufacturing solutions.

Know more about the apparel supply chain at Fashinza.