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Five steps to shift a supply chain to the blockchain

End-to-end product transparency has fast become a key factor for millennials when deciding whether or not to purchase from a brand. A recent McKinsey study revealed 52% of millennials do research for background information on a product before making a purchase. Because of this, product traceability has become ever more important for retailers wanting to gain and maintain trust with their customers, but this comes with its own challenges.

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For example, under the Modern Slavery Act 2018, large businesses and other entities in the Australian market with annual consolidated revenue of at least AUD$100 million must be able to identify and address their modern slavery risks, and maintain a responsible supply chain.

The problem with traceability today, however, is that each segment of the supply chain performs it in its own way, typically on systems that don’t speak to each other —  some are even still using paper. Because of this, retailers rarely have a holistic view of the product journey and cannot deliver on transparency to their customers or meet reporting requirements.

Fortunately, there is a solution. Blockchain can provide a single source of truth for retail organisations, facilitating greater transparency throughout the supply chain. However, businesses often do not know where to start with blockchain.

In light of this, here are five steps retail businesses can take to shift their supply chain to a blockchain-based model.

1. Set the precedent

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Before implementing blockchain in the supply chain, it is essential to articulate the business rationale, as well as the downsides to maintaining the status quo. Stakeholders should address some key questions at the outset, such as ― How does your organisation define visibility and traceability? What is the impact of not being sustainable on profitability, revenue and customer sentiment?

­­Gaining a perspective of the environmental and social footprint of products will be essential to establishing tangible environmental and social objectives, measures and benefits.

2. Assess and evaluate

Assess the current state of the supply chain with an eye for improvement. More often than not, best practices, operating procedures and technology components can be enhanced and scaled at this stage to meet present and future needs.

This stage presents an ideal starting point for retailers to develop concepts and model the information flow and technology landscape of the supply chain. Start by identifying merchandise and material categories as pilots that can be initiated with a few suppliers across a mix of geographies.

3. Prepare and model

Traceability initiatives rarely succeed unless all stakeholders are woven into a string of processes where expectations, objectives and value are clearly articulated. There is no better way to achieve this than creating models that give form and structure to define processes, input information and integrate systems.

Retailers should model their sourcing supply chain with a focus on supplier selection, material process and consolidation, procurement operations, and cost optimisation. They should also look to develop an information model that allows them to record, measure, and report transparency and traceability, as well as a technology model that portrays the flow of information, from raw material provider to customer.

4. Build and operate

Cross-industry product traceability is exceedingly complex with its constantly shifting supply chain environment. Blockchain/DLT (Distributed Ledger Technology) can be used to capture and manage digital identities, as well as input to output states, in production — a logical extension to the operations and process model. It also provides certification and auditability to verify the end-to-end supply chain process.

The desired build should allow a hierarchical representation of product-level provenance data that can be easily captured. Moreover, prioritising the features that are most critical for the use case will yield the most return on investment for businesses.

5. Measure and communicate

Traceability across the supply chain presents unique challenges. Data must be collected not only from a retailer’s direct suppliers, but also across sub-suppliers until the raw material providers have been found.

Because of this, retailers need to not only measure the value of the supply chain, but also visualise it for the benefit of all stakeholders, internal and external. Delivering provenance information to all stakeholders, including customers shopping online, will be key to displaying full transparency of a supply chain.

Looking forward: The future is transparent

Digital thinking and technology have made exceptional customer experience a must-have, but it comes with significant investment. Compared with the customer journey, the product journey has received far less attention and investment. To balance the ledger, blockchain/DLT can deliver enhanced product authenticity at a reasonable cost.

The future of customer expectations rests on ethics and transparency, and businesses need to take note. The supply chain is immensely complex, but getting it right has extraordinary benefits to brands and reassures trust in customers, retailers, manufacturers, and providers across the entire ecosystem.

Gaurav Sharma is Head of Industries Business for ANZ at Cognizant