How Blockchain Is Transforming the Apparel Supply Chain

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September 19, 2019
How Blockchain Is Transforming the Apparel Supply Chain

It is an exciting time of innovation for the apparel industry — and retail at large — with brands and retailers creating new and dynamic ways to attract and engage with customers.

For instance, lululemon’s latest flagship store is more than a place to buy yoga pants. The sprawling 20,000-square-foot space includes a restaurant, meditation room and workout studios. Rather than stick to the traditional department store model, Nordstrom is opening several smaller Nordstrom Local stores without inventory but space for interactive experiences. This summer, Gucci introduced a new feature for its iOS app that lets consumers try on its Ace sneakers collection through augmented reality.

There is another burgeoning technology transforming the industry: blockchain. Whereas recent innovations and digital interventions have focused on reimagining the customer experience, blockchain presents a radical solution to the technical aspects of managing and maintaining a sustainable supply chain.

A decades-old problem

For too long, many brands and retailers have relied on decades-old systems such as Electronic Data Interchange (EDI) to record information on purchase orders and invoices. This data is then used to support critical decisions such as demand forecasting and merchandise allocation. Unfortunately, EDI limits the number of parties that can communicate on a network, which inhibits upstream and downstream communication. The inevitable silos make it difficult to think holistically about supply chain management, resulting in inaccurate production numbers and misallocation of SKUs that hurt profitability on account of missed sales opportunities and additional costs from excess inventory.

Blockchain instead bridges these silos with real-time data flow between every link in the supply chain. Formerly fragmented data is unified through a single, immutable ledger that is visible to all parties. Brands and retailers can then transform their operations and create more customer-centric supply chains with new ways of thinking about logistics, inventory management, authentication and consumer trust.

A seamless, omnichannel experience

Today’s supply chains are varied and complex, involving numerous manufacturing sites, warehouses, logistics providers, and channel partners around the world. Traditionally, each link in the supply chain would manage its respective role using its own systems, databases and metrics. For example, many companies will have internal enterprise resource planning (ERP) and point-of-sale (POS) systems to manage existing stock and capture sales in stores. But then their e-commerce sites will be connected to separate ERPs and warehouse management systems for order fulfillment.

The inherent disconnect between online and offline presents barriers when trying to operate as a holistic, omnichannel supply chain — the very kind that consumers today want. In fact, according to BRP Consulting’s 2019 Real-Time Retail report, 87 percent of consumers state that they would like a consistent experience across all shopping channels. Further, 56 percent of consumers are more likely to shop at a retailer that offers a shared cart across channels, yet only 7 percent of retailers reportedly offer this capability.

Blockchain adds the transparency and connectivity needed to deliver an omnichannel experience. For instance, with total visibility across all channels and its respective inventories, a company can determine the fastest and most cost-effective way to fulfill an online order. If the warehouse is out of stock, you can pinpoint where the nearest available store is and ship the item from there. The customer is happier because they receive their item sooner. If they are unsatisfied for any reason, they can bring their package to any brick-and-mortar location for a return or exchange. Everything is seamless. Plus, that transaction is logged on the blockchain, making it visible upstream in production to support demand planning.

A customer-centric supply chain

When brands and retailers lack visibility into what customers are buying, they end up relying on a reactive approach to supply chain management. Hot items run out of stock, so they send more to fill distribution centers and stores. Unfortunately, this type of model leaves most companies constantly one step behind the curve. According to a study by Bain & Company, 51 percent of surveyed supply chain executives stated that their supply chains are reactive and lack end-to-end visibility and flexibility.

But with blockchain, companies can see what is being sold in store and online in real time. They have immediate demand signals to make proactive decisions about production planning and replenishment. They can thereby ensure they have the precise amount of stock on hand to satisfy customers — with limited excess — and get those items to specific stores or regions where demand is high.

Minimizing excess inventory can be a huge benefit of blockchain for the apparel industry, as any leftover products typically either get heavily discounted or sent to outlet stores, which eats into profits. Or, worse, they can end up as waste, which presents environmental concerns. From fast-fashion brands to the likes of Burberry, the fashion industry has already been faced with heavy scrutiny over sustainability (it was even a major topic of discussion at this year’s G7 Summit).

Ultimately, blockchain helps companies think smarter about supply chain management in a way that better meets consumer demand. They can determine how much product they need to make. They can see which products are popular in which regions. With planogram-level integration, they can even identify the best locations for each item at the store level to maximize sales. This level of insight drives business growth and creates a more profitable, customer-centric supply chain.

Continue reading the full article here.

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