By Melanie Nuce, Vice President, Corporate Development, GS1 US
The word blockchain has been seen on almost every conference agenda this year as various industries begin to share perspectives on how it can help their businesses. Still many questions remain:
While companies piloting blockchain programs are careful not to overhype the benefits, there is resounding consensus about how the use of this technology can lead to vast improvements in efficiency and security in the retail supply chain. Let’s break down what blockchain is, how it benefits the industry, and how quickly we can expect this technology to become adopted.
Blockchain = Shared Database
The simplest way to think about blockchain is to regard it as a shared database. Many industry veterans already know shared databases have benefits, but what makes blockchain special is it is a distributed ledger. There is no single point of failure in a distributed ledger — it is a consensus of replicated, shared, and synchronized digital data geographically spread across multiple sites.
This means, in a blockchain, every entrant is on equal footing. This decentralized structure makes the data resilient to a technology or organizational failure. In theory, this could upend the way companies — large and small — access and store important documents and transactional histories. For instance, in developing countries, where paper documents can be destroyed in a natural disaster or electronic copies can be lost in unstable economic conditions, blockchain represents a huge opportunity for consistency.
Blockchain was first used in bitcoin — digital currency operating independently of a central bank. The blockchain technology that underpins bitcoin is proving to offer valuable benefits to use cases outside of the financial world. Blockchain’s attractiveness to the retail supply chain is it can be leveraged in an enterprise context, hence the intense focus on blockchain from technology providers like IBM and Microsoft to launch solutions that solve supply chain problems.
From a security standpoint, enterprise blockchain would not operate in an open structure like bitcoin making it less susceptible to any influence from unknown outside parties. Plus, the very nature of blockchain means there is not one central data point to hack into — multiple entry points means the security responsibility falls to every user equally.
Solving Retail’s Reconciliation Problem
In addition to a distributed ledger, one of blockchain’s primary features is the ability to support “smart” contracts, meaning the automated execution of terms, conditions, and business rules. Currently, retail agreements are largely manual and based on proprietary systems. A smart contract can automatically enforce whatever terms and conditions are defined between trading partners. A trading partner literally cannot write a business transaction to the blockchain ledger if they are not complying with the rules specified in the smart contract.
It is through this feature real-time visibility may be achieved. Even with the best product identification and tracking systems, there currently exists a sort of cloud of uncertainty between the time a retailer orders a product and a shipment arrives from a trading partner. Smart contracts can cut down on last minute product substitutions that are not realized until a truck arrives at a retail location. For example, Retailer X ordered 1,000 small pink t-shirts from Manufacturer Y, but the shipment only contains 500. Today’s systems allow for mismatched orders and shipments that lead to reconciliation problems; blockchain will not permit such shipments as non-compliant transactions cannot be written to the ledger. There are no changes or substitutions allowed when automation exists.
Imagine the possibilities with this accuracy and efficiency. On-shelf availability is improved through better forecasting and planning, there can be fewer product markdowns, and retailers can excel at omni-channel operations with greater visibility.
Helping Blockchain Operate Consistently
With the potential to cause a tidal wave of change in retail, the blockchain movement is not unlike the business climate 44 years ago when leading retailers joined together to adopt the UPC barcode. Similarly, today’s most forward-thinking companies see the need for collaboration as blockchain evolves.
It’s a given retail companies are not going to all select the same technology provider when they decide to implement blockchain. GS1 Standards ensure systems interoperability from supplier to manufacturer to distributor to retailer. The good news is the standardized framework that has helped companies identify products and transmit data about them for four decades is completely applicable to blockchain, and can even amplify its abilities.
Traditionally, retail has relied on electronic data interchange (EDI), which helps standardize the transmission of data but does so on a peer-to-peer basis, and on a batch level, not down to the individual transactions or events that can take place multiple times in one day. A standard called EPCIS (Electronic Product Code Information Services) can work in tandem with blockchain, identifying individual transactions so all parties involved know what has occurred.
Already used in healthcare as part of the intricate track and trace of pharmaceutical products, EPCIS can provide the granularity of information about products needed to respond to today’s demanding consumers. Coupled with the use of globally unique product identifiers, EPCIS can enable true product information transparency by exposing the detailed provenance of the product.
Increasingly, conscientious consumers are scrutinizing products based on their origin, sustainability, socioeconomic impact, how it was made, and other concerns. With EPICS and blockchain, retailers and consumers will know more about the product’s journey with a high degree of certainty and validity. Also, in more aspirational use cases, EPCIS and blockchain can support the Internet of Things (IoT) by more efficiently transmitting data used in personalized marketing, in-home replenishment, or upselling or cross selling beyond the sale of a product.
Deciding To Collaborate
The industry players who understand blockchain recognize the opportunity to collaborate now to enable interoperability across all trading partners in the supply chain. With investments in this technology growing exponentially, coupled with academic institutions already training the next generation of data scientists, blockchain implementation is expected to ramp up fast. Now is the time to decide to be at the forefront of a potentially transformational technology in order to realize its full benefits when ubiquity is achieved.
About The Author
Melanie Nuce is the vice president, corporate development, GS1 US, with more than 20 years of experience in retail technology. She oversees a team that investigates new technologies, partnerships and investment opportunities to increase the relevance and reach of GS1 Standards in e-commerce, mobile, social media and supply chain business processes.