Blockchain may be the buzz concept of 2018 but there’s good reason for that. Technology emerges when there is a driving need. That’s what has happened here: supply chains are under immense and increasing pressure, with squeezed profit margins and performance visibility paramount. Further pressure comes from consumers themselves who now expect a radically different level of service, but also from regulators, stakeholders, and consumers again who expect a higher level of ethical and environmental responsibility.
This is where blockchain enters as a solution because it is fundamentally about creating irrefutable transparency and visibility which supports and promotes ethical practice. The ability to trace origins and provenance with astounding detail means retailers cannot hide behind an invisible mask in terms of their impact on other elements of their supply chain. It enables a consumer to be conscious of what’s going on, because the retailer truly is too.
Blockchain has been largely talked about in terms of cryptocurrencies such as Bitcoin. This may lead us to think that something so ‘virtual’ and ‘in the ether’ doesn’t have a place in something as tangible and ‘on the ground’ as a supply chain. However, to dismiss it is missing an opportunity.
When we combine blockchain technology with that other booming tech, the IoT, we suddenly have the power to not just obtain data, but use it to our advantage in terms of visibility and strategic decision making. We can capture and trace data at every link in the chain.
How Does Blockchain Work for the Supply Chain?
Each individual item making up a supply chain from inception to manufacture to sale can be assigned a unique cryptographic identifier from the off. Think of this akin to a tracker. As the item moves through the chain it is time-stamped at points of contact. This creates visibility of the life cycle and movement of that item. The result is that, armed only with a smartphone, you can check the ethics involved in the sourcing and production of each item.
This can quickly become an immensely powerful tool for supply chain leaders and retailers who want to build their business based on a reputation for high-level corporate social responsibility and ethics. It can become the very differentiator of your business, meeting the needs of stakeholders, regulators and consumers alike.
Power to the Consumer
We’ve known for a long time that the balance of power has shifted in the supply chain and the consumer is very much king. This isn’t a bad thing. By giving the consumer another tool to feel in control of their purchasing decisions, we’re strengthening our business. Allowing consumers to make decisions based on real traceable facts enables us to provide the very service they are seeking out.
At the end of the day, we are only as successful as our consumers. Therefore, appealing to what they are looking for will engage them in our businesses. Consumers are looking for ethical manufacturers and suppliers so we need to use the tools available to make this possible.
We’ve seen an example of this recently with Starbucks and the criticism they have faced over the origins and manufacture of their cups. Starbucks are no strangers to their cups attracting negative news headlines, but this one is interesting across the supply chain industry.
According to the International Coffee Organisation (ICO) 60 billion plastic and paper cups are binned annually. Starbucks is perhaps the most recognisable brand contributing to this and therefore has power to make a change and boost their branding in one swoop. Environmentalists are lobbying for controls and an end of single-use cups because of the environmental impact.
Starbucks has announced that they are investing $10m to create a more environmentally friendly, open-source, single-use cup. Traceability is going to be absolutely central to their success.
Combined with ensuring the social responsibility to coffee bean growers, this initiative has the potential to garner more consumer loyalty for Starbucks by consumers who want to be able to fully trace their coffee bean to the cup, to its disposal.
It’s Not a Choice
In reality, retailers cannot try to wear an invisible mask over their supply chains for much longer and expect to thrive. The demand for ethical sourcing, sustainability and fair trade is growing, particularly amongst the next generation of consumers.
Knowing that we need to rise to this challenge means we need to turn to solutions such as blockchain to make this possible. If we view ethics as our duty and par for the course, we can use blockchain technology to boost our brand reputation. Where trust is fragile, and consumer loyalty fickle, we have to take this seriously.
Another example of using visibility to shine a light on ethics with a view to boosting the brand is Nike. The Nike Materials Sustainability Index scores the individual 77,000 materials they use according to its environmental impact and energy consumption. It’s pretty complex and took a staggering 8 years to develop.
However, with blockchain, it needn’t take so long, or be as complicated.
Business Sense and Ethically Right
Whilst end to end visibility makes business sense it is also ethically the right thing to do. By enabling transparency we are able to protect workers, the environment and communities which have suffered behind a façade of ignorance. These areas of concern should then become less vulnerable to exploitation as transparency shines a light on unethical practice.
Those supply chain leaders and retailers who regularly fall foul of exploitation will no longer be able to deny knowledge or keep their brand intact. Blockchain will help to build and sustain positive relationships throughout the supply chain with transparency at their centre.
To improve the visibility and transparency in your supply chain call Paul Trudgian supply chain and logistics consultancy on +44 (0) 121 517 0008.