If there’s one industry that needs a big boost today, it’s retail. Plagued by a host of problems, the industry can benefit greatly from nascent but proven blockchain technology. However, before we dive into that, let’s take a look at the challenges facing the retail industry.
Rising costs throughout the supply chain – fuel, high raw material prices, labor and logistics costs, etc. – bogs down retailer profit margins. Billing discrepancies in payments to suppliers and carriers, counterfeits, product availability on demand are some of the challenges in the distribution industry.
The emergence and establishment of online giants like Amazon has tickled consumer cravings and raised myriad expectations that are straining retail. Keeping track of current customer demands, building consumer loyalty and gaining consumer trust is the need of the hour. To this extent, guaranteeing product authenticity and a secure database becomes imperative. With counterfeit products and a weak client-server network that can be easily compromised, the above two needs often go unmet. Given the reliability, transparency and inscrutability of blockchain, the technology, which provides end-to-end supply chain visibility (from tender offer to proof of delivery and payment) and real-time tracking, is the answer.
What is blockchain technology?
In blockchain technology, information is collected in blocks and linked in a chain. Each block once filled is linked to the previous block, and the next block is then filled. This is both irreversible and chronological, as well as dated, which makes it tamper-proof.
This secure information is then shared with a random network of computers around the world. Any change would require the consent of a majority of these network nodes, none of which can act independently but only in tandem. If a change is made to any of the nodes by modifying some of the blocks, the tampering will be revealed as soon as a cross-referencing of the copies is made at other nodes and the chain will be rejected. It is only if the modification is made to the majority of the copies that it will be accepted. Contrast this with conventional databases that store data in tabular form and allow information to be edited. Thus, the blockchain allows a decentralized and inviolable storage of information.
Blockchain was first implemented in cryptocurrency systems like Bitcoins and Ethereum, but since then it has been slowly adopted in various sectors like education, healthcare, real estate, and others.
Blockchain technology could make an important contribution to inventory management to keep pace with customer demand and also ensure timely product availability. He can track the origin of the products and verify their authenticity. Any defective part can be traced back to the manufacturer and the entire batch can be identified and replaced. This provenance of products allowing consumers to see the entire supply chain can also help build consumer trust. The technology could also be adapted for back-office services. This can help streamline the payment of retail sales tax, and by adopting a smart contract, retailers can provide guaranteed payment to suppliers.
One example is how Walmart used blockchain to avoid discrepancies in invoices and payments to freight carriers. The DL Freight system used has reduced billing disputes from approximately 70% to less than 1%! It made it possible to set up a real-time invoice to track the movement of goods. This becomes all the more relevant for large players who deal with numerous distribution centers and stores or various suppliers across the country or the world. When moving perishables, it becomes imperative to consider various points such as fuel, stops, temperature control, etc. in the invoice. In the case of Walmart, this was done but many players were involved and therefore multiple systems had to be accounted for, leading to disputes and delays.
Gaining customer trust and keeping it is a big challenge that can be overcome by using technology known for its transparency. The same goes for improving trust between provider, retailer and payment gateways.
The decentralized identity (DID) that technology enables can be used in the retail industry to store personal customer data, which is not compromised. The DID remains outside any organizational database but can be used to verify the identity of the individual. It ensures that personal information cannot be hacked and minimizes security risks to personal data.
A smart contract can also be used to replace customer data or be associated with a product and this “digital token” generates reward points when the blockchain recognizes that certain conditions are met.
As outlets adapt more IoT (Internet of Things) at every stage, with tracking from ingredient sourcing to production and shipping, more of this authentic data from scanners and sensors can be uploaded to a cloud server via the Internet. Blockchain technology then allows incorruptible storage of data in sequence. Data analytics can also help with inventory planning and sales promotions, especially when working with perishables.
Globally, more than five trillion dollars are lost to businesses every year due to fraud. With transactions monitored and verified by many parties, blockchain as an uncompromising digital ledger is a safe bet.
The author is co-founder and president, Brugu Software Solutions
Disclaimer: The views expressed in the article above are those of the authors and do not necessarily represent or reflect the views of this publishing house. Unless otherwise indicated, the author writes in a personal capacity. They are not intended and should not be taken to represent the official ideas, attitudes or policies of any agency or institution.
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