Blockchain in Focus: Blockchain in Supply Chain
At Crypto Curry Club, we are proud of the fascinating people that join us for our monthly curry events and wanted to share with you the exciting work that they do.
In our first edition of Blockchain In Focus, we spoke to Alan Wilson, founder of Aventus Consulting, about his exciting vision for blockchain in the textiles supply chain.
The textiles supply chain is a complex, multi-national system that has problems with transparency, efficiency, compliance and control. At its worst, these issues have led to multiple crises for manufacturers like GAP, H&M and Zara, who have all experienced scandals over child labour in their supply chains.
Alan is currently working on a blockchain-based solution that will reduce costs but also drive stronger compliance and governing structures across the whole supply chain.
Challenges Faced in Textiles
When todays multi-national retailers design a new product, they will place an order for millions of items with a few key factories in multiple countries. These large factories will then sub-contract smaller factories to make the many different parts that may go into a product, from different threads to buttons and zips, these are then brought back together to make the final product.
“As a result you potentially have large numbers of sub-contractors involved in making one large order of T-shirts. That’s where the big companies don’t have the visibility or understanding of the whole supply chain. A lot of it is a black box to them,” Wilson said.
In practice, companies often rely upon their main contractors to manage their supply chains.
“That can affect not just the price but also the quality of the garments, because materials that should be used are sometimes substituted for a cheaper alternative without the companies (brand) knowledge. The company (the brand) won’t realise this has happened until they get the products in store, or even worse, after the customer has bought the product and finds a fault. This can have a serious impact on the brands image and underlying profitability.”
Being caught using factories that employ child labour is a huge concern for brands, with the financial and reputational implications far outweighing the costs of monitoring the situation in the first place.
One problem however, is that it’s currently very difficult to know what exactly is happening in the supply-chain and who is being employed to make the product.
“It’s not always the case that the big companies ignore the child labour issues, it’s that they just don’t know. They can’t control it, they can’t see it,” Wilson adds.
“Employers largely get away with it because the fashion supply chain is hugely complex and it is hard for companies to control every stage of production. That makes it possible to employ children without big brands and consumers ever finding out,” a report in The Guardian said.
In recent years, Marks and Spencer, ASOS, GAP, Primark and H&M among others have been accused of using child labour.
“At the moment once you’ve identified the use of child labour, the challenge is then to prevent it from happening next time.”
“Companies apologise, but a lot of times will rely on their main contractors to manage these issues as they don’t have a way of governing that whole supply-chain to make sure it doesn’t happen again.”
“Today’s systems and processes are not able to manage these sorts of issues over a large scale effectively or efficiently but blockchain with its emphasis on transparency and record keeping is the perfect technology to prevent these types of events happening again.”
Alan says “The other major obstacle to managing complex supply chains is the cost of rolling out large scale, enterprise technology to all the companies involved in that chain. This is a very expensive and complex operation and as a result a lot of the supply chains today do not have the right technology in place. A lot of companies are still using email to keep track of orders and supply chain, which leads to a lot of errors and a lack of transparency. Again, this is where blockchain can help because it’s a low-cost solution that can deliver the latest technological solutions to industry.
Currently, major retailers have a limited choice. They can either bring all elements of production in-house, which creates the control and visibility that can ensure specifications are upheld and labour laws are respected.
“However, this creates massive inflexibility, a lack of agility and much higher costs of production.”
The alternative and most common approach by retailers has been to contract out production. Alan said: “This gives the efficiency and flexibility that a modern business needs, but at the expense of visibility and control.”
Clearly, this isn’t much of a choice at all.
Why blockchain can solve the problem
With a blockchain solution, a major retailer can retain the flexibility and efficiency of contracting out, but add the visibility and control required to ensure compliance.
“No other system is capable of doing this so effectively at relatively low cost” said Alan.
“Moreover, the blockchain solution is a ubiquitous easy-to-connect system that doesn’t encounter the many implementation issues that exist with a traditional global enterprise computer system. And it’s a world away from organising solely via email.”
With blockchain, hundreds of suppliers could simultaneously update the blockchain to create an unparalleled level of visibility.
“A retailer can see in real-time, what materials or services are being used, where it has come from, whether it meets the quality required. At all times,” Alan added.
Blockchain systems can create multiple winners, but the main driver for Alan is the consumer.
“The fundamental winner is the customer. You will get a higher quality garment as you can oversee the whole process and the materials used, you get it cheaper because there will be less errors made, and you’ll speed up the process.”
Ultimately, Wilson’s conversations with businesses around the world prove to him that “everybody’s interested in blockchain, everybody sees that it can bring benefit”.
The next step is working out how best to harness its potential.
Interviewed and Edited by Tom Lemmon