NAIROBI, KENYA: The retail and consumer packaged goods industries are among the latest to consider the advantages of blockchain.
Proponents say that quality, reliability, authenticity and the safety of products can be assured. Supply chain partners know for certain if an item they ordered is actually being delivered because blockchain provides a real-time perpetual up-to-date history. As every member in a retail network becomes instantaneously accountable, blockchain provides entirely new ways to create value and build brand reputation.
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This year, 18 percent of more than 200 global consumer industry organiSations surveyed in the retail and consumer packaged goods industries expect to work with and invest in commercial blockchain solutions, according to a new study, “Blockchain Reinvents the Consumer Experience”.
The IBM Institute for Business Value conducted the study in 16 countries, which also found that three-quarters of blockchain’s early adopters feel it will help open new markets. At the same time, 69 percent expect it to help solve risks about information and 64 percent think it will help to better navigate regulatory environments.
On a blockchain data associated with every event and transaction is time-stamped, appended to the record and made available to all authorised participants in real time. Individuals can’t tamper with records after the fact; they can be amended only by the agreement of a majority to all participants (number of participants required for agreement depends on consensus mechanism). In this way data becomes part of an unbreakable chain of trust. Applying blockchain to the transport of consumer goods leads to wastage, spoilage and defects diminishing; at the same time as fraud, theft and counterfeiting.
The adoption of blockchain means that at customs and ports around the world, reams of paperwork — including customs clearances, bills of lading, safety certificates and invoices — are being replaced by digitised solutions to more efficiently move goods and automate payments.
To get the most value from blockchain, retail and consumer packaged goods industries may want to consider the following three questions:
1) How fast should we move? Eighteen percent of consumer industry organisations surveyed have already begun and almost 70 percent expect to have a production network in three years. Organisations that are not investing in blockchain now should explore blockchain use cases and potential network partnerships as soon as possible.
Six in 10 organisations that were surveyed view skills as a barrier to blockchain adoption and say the demand for blockchain skills is fast outpacing supply. Organisations that invest in blockchain need more than software developers. To successfully commercialise blockchain, companies need skilled business and technical consultants, cyber security strategists and marketing professionals, among others. Consumer industry executives should cultivate these skills by means of coding camps, community colleges, apprenticeships and other “new-collar” alternatives to bridge the existing talent gap.
2) Can we achieve network-wide standards? Early adopters of blockchain and the rest of the consumer industry are closely aligned on what the barriers to blockchain adoption are, with one exception. Just 8 percent of early adopters cite regulatory constraints as a significant obstacle to blockchain implementation, while 24 percent of all others say they are stymied by regulatory constraints.
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This could be because blockchain is viewed within many industries — especially by the early adopters — as a way to break through regulatory challenges. Today, regulators depend on visibility, but achieve it only through spot inspections. However, blockchains can provide an up-to-the-minute, trusted audit trail.
3) Can we scale with new revenue models? Our survey shows that more than half of the consumer industry executives surveyed have a clear return on investment (ROI) strategy and acceptance by their executive teams. The remaining consumer industry organizations should make an ROI strategy and C-suite acceptance a priority.
Participating in consortia may lay the groundwork for a better understanding of blockchain’s benefits, but many consumer industry organizations already recognize that strategic partnerships are necessary to innovate new business models across their value chains. However, as retail blockchain networks evolve, there is potential for new blockchain-enabled marketplaces and new forms of consumer engagement, which consumer industry executives should consider at the beginning of adopting blockchains.
Due to provenance being one of its main features, once a blockchain is in place, organizations can extend visibility with solutions to regulatory compliance through audits or manage later stages in the lifecycle of a product, such as warranties. The most significant and far-reaching changes in business models, however, are likely to occur as multiple blockchains interoperate as the technology becomes more widely used. These networks of networks could be the basis for an entirely new approach to supply chain transformation.