Blockchain Allows Transparency To Retail Sector
If there is one industry that can do with a significant thrust today, it is the retail business. Plagued by a host of issues, the industry can be largely benefitted by the nascent, yet proven, blockchain technology. However, before we go into that, let us look at the challenges facing the retail sector.
Increasing costs through the supply chain - fuel, high prices of raw materials, labour and logistics costs, etc -- bog down profit margins for retailers. Invoice discrepancies in payments to suppliers and transporters, counterfeit goods, product availability on demand are some of the challenges of the retail sector.
The emergence and establishment of online giants like Amazon has tickled consumer fancies and given rise to myriad expectations that sorely try the retail business. Keeping a pulse on the customer's current demands, engaging consumer loyalty and winning their confidence is the need of the hour. To that extent, ensuring authenticity of products and a secure database becomes imperative. With counterfeit goods and a weak client server network that can be easily compromised, both the above needs are often not met. Given blockchain's reliability, transparency and impenetrability, the technology, which provides an end-to-end supply chain visibility (from tender offer to proof of delivery and payment) and a 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, making it tamper-proof.
This secure information is then shared with a random network of computers across the globe. Any change would require the consent of a majority of these network nodes, none of which can act independently but only in tandem. If any change is made in one of the nodes by altering some of the blocks, the tampering will be revealed as soon as a cross-referencing of copies is done at other nodes and the chain will be cast away. Only if the change is made in a majority of the copies will it be accepted. Compare this with conventional databases that store data in table format, and allow the information to be edited. Thus blockchain allows for decentralised and tamper-proof storage of information.
Blockchain was first implemented in cryptocurrency systems like Bitcoins and Ethereum but since then they have slowly been adopted in various sectors like education, health, real estate and others.
Blockchain technology could help in a major way in inventory management to stay in pace with customer demand and also ensure timely product availability. It can track where the products come from and check the authenticity. Any defective piece can be traced back to the manufacturer and the whole batch can be identified and replaced. This product provenance enabling consumers to see the entire supply chain can also work to win consumer trust. The technology could be adapted for back-office services too. It can help streamline retail tax payment, and by adopting a smart contract, the retailers can provide guaranteed payment to suppliers.
A case in example is how Walmart used blockchain to avoid discrepancies in invoice and payments to freight carriers. The DL Freight system used helped bring down invoice disputes from around 70 per cent to under 1 per cent! It helped put in place a real time invoice to track the movement of goods. This becomes all the more relevant for big players who deal with many distribution centers and stores or various suppliers across the country or globe. When moving perishables it becomes imperative to factor in various points like fuel, stops, temperature control, etc into the invoice. In Walmart's case, this was being done but many players were involved and hence, multiple systems had to be tallied, leading to disputes and delays.
Winning customer trust and retaining the same is a big challenge which can be addressed using the technology known for its transparency. The same goes to improve trust between the supplier, retailer and payment gateways.
The decentralised identity (DID) that the technology enables can be used in the retail sector to store personal data of customers, which is not compromised. The DID remains outside any organisational database but can be used to verify the individual's identity. It ensures that personal information cannot be hacked and minimises security risks to personal data.
A smart contract can also be used to replace customer data or tagged to a product and this 'digital token' generates reward points when the blockchain recognises that certain conditions are met.
As retail outlets adapt more of the IoT (Internet of Things) at each step, with tracking right from sourcing of ingredients to production and shipping, more of such authentic data from scanners and sensors can be uploaded to a cloud server via the internet. The blockchain technology then allows for an incorruptible storage of the data in a sequence. Data analytics can further help with inventory planning and sales promotions, especially when working with perishables.
Globally, over five trillion dollars are lost to businesses annually due to frauds. With transactions monitored and verified by many parties, blockchain as an uncompromising digital ledger is a safe bet.
