“Blockchain is the most overhyped and least understood technology”, remarked Marco Iansiti and Karim R. Lakhani in a Harvard Review piece back in 2017.
Five years later, in 2022, blockchain is still riding the hype wave. But while some fashion insiders still find the technology mind-boggling, the good news is that the tone is shifting towards greater understanding. Compared to 2017, there are more use cases popping up, and more organisations are leveraging blockchain-based solutions to both tackle age-old issues and embrace future strategic visions.
Synchronised data over supply chain networks enables shared ecosystem, which makes the supply chain process more fluid and flexible and agreements throughout the supply-chain process, information and transactions become quicker and more accessible. An example would be if the consumer and market want to verify their product was manufactured by a company with sustainable and ethical practices, this information would be accessible and verifiable since it would be traceable and recorded on the blockchain.
Understanding Blockchain’s Relevance to the Fashion Industry
Despite that continuous flurry of activity around blockchain, there are still some decision makers who are still unsure what it actually is. My colleague Emma published a deeper examination of its inner workings recently, but essentially it is a technology that allows companies to store information regarding their supply chains (or anything else they wish to encode that way, but supply chains are a primary focus) into one decentralised and distributed network. Mario De Luca, CEO of Maison Merikerho, defines blockchain as a “technology that allows you to speed up the search for the information contained in the blocks and thus maximise the information’s usability.”
Marjorie Hernandez, founder of LUKSO champions blockchain technology as the best solution to enhance flexibility, transparency and agility in supply chain operations. “An example of the benefit of blockchain solution integrated into supply chains would be if a manufacturer created a product which was then was sent out for distribution, this product may go through various stages of transportation, then arrive to the market and then the consumer. If the desired product was damaged or malfunctioning at one of these steps before getting to the consumer it would be easier to track and trace in an open shared network or issue a recall”, explained Hernandez to The Interline.
Although the technology began its life in Decentralised Finance (DeFi), a financial technology based on secure distributed ledgers similar to those used by cryptocurrencies, Laura Elvin, a Social Impact and Sustainability Executive Consultant, predicts that there will be a natural evolution of blockchain’s role. “Given the fashion industry’s continued and expedited advance into the Metaverse, for example, where blockchain is intrinsically linked, brands will be more exposed and have to familiarise themselves with these perceived, “new “technologies”, shared Elvin.
As it evolves rapidly, the technology promises to deliver several benefits to the fashion industry, like connecting the apparel supply chain with a real-time flow of data creating an immutable ledger of whatever information is entered into it at the source. “The blockchain is not synonymous with truthfulness. Instead, it improves the interaction with information. It’s a new kind of power,” schools De Luca.
With many experts in this space believing that the conventional model is out of date and no longer offers the competitive advantages in which ecosystems and industries utilising blockchain technology, Tumelo Setlaba, a Fashion Supply Chain Blockchain expert comments: “How I see it: blockchain is the key to the fashion industry’s evolutionary glow up. And as glow ups go, it’s about levelling up, taking responsibility, and upgrading.”
Blockchain, Driving Change in Fashion’s Supply Chain
“Supply chain data is not always visible, available or trusted”, stated a Forrester study: Blockchain for the supply chain. This is the big hole in every sustainability strategy: the industry cannot disclose what it does not know. Therefore it makes sense that fashion businesses prioritise tracing materials back to specific suppliers, or manufacturing operations back to particular facilities, because doing so will provide data that was not accessible before..
So what is blockchain in the supply chain? According to Iteratorshq.com, a blockchain supply chain is versatile for many problems. For example, its implementation in financial transactions can make the involved processes in supply chain management run smoother – building brand-to-supplier relationships on mutual access to information, and on automated smart contracts. Moreover, blockchain for the supply chain enables transformative benefits in areas such as data integrity and accountability – both areas that brands have dedicated considerable attention to in their enterprise technology investments.
As an example, to achieve authentic environmental sustainability, blockchain could allow a permanent, indelible,and accessible record of carbon footprints at every stage of the supply chain to be available to all parties in the value chain – and potentially also available for consumers. As one of the most promising applications, blockchain solutions address fashion’s supply chain deficiencies by giving fashion brands the ability to track their products from the raw materials to the end product: assuming trustworthy information is inputted at the source, that same information will reach the in-house or retail end user without any possibility of interpretation.
Therefore, But as a brand, your blockchain journey must begin quickly, because it can take any technology years to transform a business – let alone one where the balance between hype and understanding hasn’t yet been found.
Framing blockchain in the supply chain this way also makes it easier to understand why the traditional supply chain system, which is centralised, is being superseded. In place of trust-based relationships, voluntary disclosures, and opaque sustainability statements, brands could build a customer-centric supply chain that prioritises authentication and trust while maintaining transparency.
Blockchain could also become the tool used to hold companies accountable for every part of the process, assuming it’s made public. A great example of a company that could have benefited from existing on the blockchain is Boohoo, which made headlines for instances of labour exploitation in their home country of the UK – something that could have been avoided with greater insight and transparency into who was actually conducting its contract manufacturing, in place of relationships that ran on trust and outside inspection.
Elvin explained: “Boohoo were given a triple-A rating and then got into major trouble with their institutional investors when that rating came into serious question, based on a subcontract that was uncovered in its supply chain”.
She continues: “In this instance, the investigation of the rating agency didn’t go far enough to uncover the use of a third party subcontracted manufacturer. Blockchain technology would make this impossible, as the entire supply chain would exist on a ledger with full accountability for every part of the process”.
This was a hard lesson for Boohoo, because in the end, “trust can be elusive, hard to maintain, and can take patience and time to develop”, added Setlaba. “So any assistance on the trust factor within the supply chain is gold, and blockchain offers that”.
So, is blockchain already capable of driving change in the industry’s supply chain? An IBM study found that 63% of respondents would say so, although that change is only at the fledgling stage:. “For many, those deployments are still fairly small and often still in the proof-of-concept or pilot phase; nearly three-quarters of those using blockchain today are expanding their implementation, which indicates fairly nascent usage of the technology”.
The lesson here is that when it comes to creating transparency in your supply chain, you need first to understand that although clothing production can often involve complex global supply chains, the fashion industry is entering a new era of localised, digital production and more conscious, cautious consumption. Therefore, it would be a mistake to discount blockchain for fearing falling down the rabbit hole of fashion production, and uncovering things you don’t like. Blockchain poses incredible opportunities to facilitate the next stages of your brand’s evolution so take time to seek out the use cases that harness the technology so you can discover first-hand the opportunities blockchain solutions can bring to the table.
Who’s Experimenting – And Who’s Winning
When it comes to those experimenting with blockchain technology, one of the first early adopters was a collaboration between Danish fashion designer Martine Jarlgaard and blockchain technology provider, Provenance.
Working together, they showed each step in the production process by tracking the product from farm to finish. Then, they created a digital history of the garment-making process. Finally, they ensured each garment had a unique digital token with information, like where it was manufactured and what raw material was used for its manufacturing.
The result was that anyone interacting with the garment, at any stage of the value chain, had access to the complex nature of the product.
As we continue to witness mainstream adoption of blockchain technology, another great example is AURA, a consortium blockchain pioneered by the LVMH Group. Challenging the status quo, AURA’s objective was to help track and trace luxury goods— from raw materials to the point of sale.
With some of the biggest luxury brands already on Aura, Toni Belloni, Managing Director of LVMH, said in a press release: “Technologies like blockchain ensure that the products sold are authentic and contribute to preserving the prosperity of luxury brands over time.”
Incidentally, you’ll also find reference to both Martine Jarlgaard and AURA in my colleague Emma’s Recent article, here, as a prime example of the blockchain in action in fashion.
Then there is Alexander McQueen. The fashion label bet on blockchain technology by partnering with Everledger, the blockchain platform that brings provenance to luxury goods. As a result, MCQ was the first fashion brand to have an entire label traceable on blockchain.
“Fashion innovation in the blockchain space is very exciting, we see big fashion brands adopting blockchain, new creatives, designers and even digitally native brands emerging in this ecosystem. I believe as more brands adopt it they will have a competitive advantage and will benefit from this ecosystem”, said Hernandez who recommends that you check outKARL LAGERFELD, Rebecca Minkoff, Vogue Talents and RTFKT x NIKE.
Lastly, we have Alyx. Founded by Matthew Williams, Alyx took supply chain transparency to another level with a blockchain-powered pilot programme in partnership with Avery Dennison and Evrythng.
Williams added nine items to blockchain ledgers with the hope of cultivating a more positive connection between customer and product and combating suspicions of greenwashing. “Adding this blockchain layer means it is much harder for brands to cheat. It’s about bringing trust back,” Williams told Vogue Business.
Ready to Start Using Blockchain?
Adoption, adoption, adoption -now there is a buzzword that won’t quit. Yes, some might say that we live in an era of hype, but with 79% of businesses reporting significant improvements in data quality, according to a Forrester study: Blockchain for Supply Chain, how can you not want to adopt and experiment?
The good thing about hype is that it encourages brands to embrace and test new technologies designed to disrupt the industry. So, are you ready to adopt and experiment with blockchain technology?
Here are some tips about how you can get started.
The first thing you need to do is gather relevant information from the right partners. Blockchain experts advise that gathering information is a great starting point because you will better understand what blockchain can do for you. For example, let’s assume that transparency and traceability are your goals. In that case, you will be able to use the blockchain application to show your customers information on the type of textile used, where the raw materials are coming from, and what chemicals were used in processing – once you’ve been able to obtain the right inputs from your partners.
Once you have identified your needs and goals and decided on the levels of trust you will operate with, the next thing you pick is an appropriate blockchain platform. “There are many, such as Ethereum, Ripple, IOTA and Stellar, to name a few, each with unique characteristics”, advises CGSINC.com. “Then, write your blockchain application and give it a suitable user interface that will make it easy for farmers, processors, manufacturers, shippers and retailers to use”.
It is also worth noting that integration with existing systems should be considered. For example, Enterprise Resource Planning (ERP) systems are often the digital backbone of companies’ supply chains. “A flexible ERP system will make it easier for you to send the blockchain information automatically. This could include information such as supplier identities and batch numbers of material used, corresponding finished product identification, and shipping dates and destinations”, instructs CGSINC.com.
If you want to build a resilient supply chain, IBM offers Blockchain supply chain solutions. They use smart contracts that automatically trigger when pre-defined business conditions are met, giving near real-time visibility into operations allowing brands to take action earlier should there be an exception.
Also, there is VeChain, a blockchain solution provider that benefits from the combination of decentralised ledger technology and a SaaS business model. In 2021 VeChain launched a Digital Carbon Footprint SaaS Service based on the VeChainThor public blockchain. You can find some additional information on VeChain in Emma Feldner’s recent article, here.
Lastly, before going ahead, Deloitte Consulting LLP principal Linda Pawczuk, Deloitte consulting leader for blockchain and cryptocurrency, advises fashion businesses to ask the right questions like; how do blockchain-enabled processes change how my sector does business? How can blockchain reshape my industry? What are my long-term objectives and strategies? Does blockchain create the potential for new market ecosystems, and what role should I play? How do I leverage the inherently open nature of blockchain? What opportunities does blockchain generate when it comes to co-creating new markets? And lastly, Pawczuk advises that you ask where your most prominent blockchain blind spots are.
Do Not Underestimate Blockchain’s Challenges
Even though blockchain addresses critical supply chain needs, one should not underestimate the business challenges blockchain can pose. These include agreeing on process flows, developing appropriate governance models, and establishing the required legal agreements. Also, to realise the full potential of blockchain involves a degree of collaboration that traditional fashion companies aren’t used to.
So as COVID-19 continues to shine the spotlight on various supply chain issues within the fashion industry, blockchain solutions are no longer “nice to have”. With the existing structural problems in the supply chain infrastructure illuminated, the way forward is not to ask, “Will blockchain work?” but, “How can we make blockchain work for us?”