Increasingly, customers are wanting to know where the clothes they buy come from and, given the rise of fake news and increased cynicism, these customers often want proof of provenance. There have been stories of global brands using ‘sweat-shops’. Indeed, Google, lists a number of very well-known high street names such as Adidas, Nike, Abercrombie Fitch, Tommy Hilfiger and H&M, to name but a few. However, by using Blockchain technology it would seem that manufacturers, brand owners, retailers and customers can have more reassurance as to the provenance of the goods they are handling and buying. Therefore, hopefully trust in supply chains and the items being purchased can be rebuilt.
5 Industry Transforming Blockchain Applications | Data Driven Investor
Unless you have been living under a rock, I am sure you have heard about blockchain by this time. While blockchain…
If we study the steps involved from manufacturing to garments being bought in a shop or on-line, we can see there are potentially seven different steps of the supply chain — all potentially vulnerable for unscrupulous participants taking advantage and substituting the correct materials and items for ‘fakes’.
1. Brand owners place an order — relevant information such as type of fabric to be used, colour range, selection of sizes needed, amount of material required, patterns, designs to be used, when the items are needed and for which markets, and details of the actual item including zips, buttons accessories etc. are all information which could be stored on a Blockchain-powered platform and shared with the manufacturer, so they know what has to be produced, for which country and when.
2. Order is sent to manufacturer — sharing the relevant materials needed with the approved suppliers and using Smart Contracts, the brand owner could automatically be informed of what has been ordered by which manufacturer, as well as being told when the supplier will be able to supply the goods. This would initiate a history of each item from the raw material suppliers, ensuring these suppliers were using sustainable sources and also including the labour conditions that their workers are exposed to.
3. The orders are sent to the supplier — again, a Smart Contract could send quotes for materials and copies of any relevant factory inspection checks to the manufacturer and potentially the brand owner. This would create transparency in pricing and other matters, thus allowing the brand owners ‘hands on’ real-time information about their supply chain.
4. Items are manufactured — a transport company delivers the materials scanning a QR code once they have confirmed the authenticity of the packed goods. The manufacturer makes the product attaching the QR code with it (which contains the details like raw materials used, the supplier’s information, the origin of production, manufacturing date and procedure and quality standards).This enables the quality control to create a verifiable audit, all of which is entered on a Blockchain. Creating an immutable record which is tamperproof and can be timestamped, gives the brand owner and, if required, the final buyer, access to the manufacturing quality assurance details in a highly transparently fashion.
5. Brand owner, or its logistic firm, receives the goods — the goods are signed for, having been checked that what has been received was what had been ordered. Smart Contracts then inform the logistics company what products have to be sent to which retailers. At the same time, Smart Contracts can authorise payment for the received goods (potentially all this without human intervention) making the whole process more efficient and faster. As the price of Internet of Thing (IoT) devices falls and using other sensors it will be possible to track raw materials and finished items as they are transported globally, allowing retailers and brand others real-time data so improving the efficiency of supply chains further.
6. Retailer sells the goods — the retailer is able to inform the brand of the items that are selling well, potentially triggering the manufacturing of additional items. There is no reason why, as goods are sold, the brand owners cannot not be paid their % of the sale using a digital currency trigger, off a Smart Contract. All the accounts could be made available online, in real-time, allowing local sales taxes e.g. VAT to be paid to HMRC.
7. The customer has transparency — by using a QR code which customers can scan on their mobile phone, access can be given to a host of data about the items being bought, so building trust and potentially enabling the brand owner and retailer to charge more.
So, the advantages of a Blockchain-powered platform are many. Blockchain clearly offers greater transparency, plus provenance, thus building trust across the whole supply chain. It has the potential to speed up payments and reduce the inefficiency of those same goods being entered into multiple accounting systems that need checking and verifying. This ought to lead to cost savings too.
Blockchain also offers the promise of reducing delays and disputes, preventing orders from getting ‘stuck’ in the supply chain and thus enabling automatic and faster reordering to meet the demand for fast-selling items. The chances of lost or misplaced goods ought to be minimised as they can be tracked in real-time. The good news is Blockchain-powered platforms are being used as opposed to being simply theoretical. Indeed, London-based fashion designer, Martine Jarlgaard, has been using Blockchain technology since 2017 as part of its supply chains. While multinational organisations are using the likes of IBM, we are seeing smaller, nimbler providers (such as Vixidoz,) offering, in effect, ‘off the shelf’ solutions at a low initial price for those looking to start the process of digitising their supply chains.
All of the above has focused on using Blockchain technology essentially for supply chains, but there are many more ways that it can be used. Digitising loyalty schemes and enabling different schemes to interact with each other means rewards in one shop can be used buying another brand’s range of merchandise. LVMH has launched a Blockchain-powered platform to both help cut fraud of luxury goods as well as help reduce fake goods being bought in the second-hand market. Meanwhile, a company called Loomia has a range of ‘smart clothes’ which can be linked to a Blockchain. Data can be collected to see how often a garment of clothing is worn, therefore potentially rewarding the person wearing the item with tokens.
There will, no doubt, be many more applications in the retail and fashion industry to use Blockchain technology as industries simply stop talking about the technology and embrace it as part of the growing trend to become more digitised in our modern society.