Blockchain technology tackles retail supply chain challenges

Fraud in a business can go undetected for a long time and often can be hard to uncover. As the use of blockchain technology expands into retail supply chains, STORES contributing writer David Schulz discussed the topic with Ross A. Mauri, general manager, IBM Z.

Most people associate blockchain technology with cryptocurrencies. How does the technology work in other uses, such as retail supply chains?

Blockchain technology can be used to solve business problems that have previously been unsolvable — like traceability or verifying provenance — due to the inability of the ecosystem to share information in a transparent, immutable and trusted manner.

For example, a store purchasing computer parts logs a purchase order with its supplier. It records the purchase order and money transferred in the retail store database. The supplier ships the item and records time of shipment and payment information onto the blockchain. In this scenario, the supplier and the retail store keep their data in separate databases. If a problem occurs (say, the shipped good does not arrive), the retail store has to track down its location through the delivery pipeline manually, which can be time consuming and prone to error.

With blockchain, both the retail store and supplier can immediately determine where the item is located because all the arrival points were recorded jointly and cannot be deleted or altered. For all parties, this means disputes about shipment data or fulfillment are greatly reduced as all transacting parties have a singular, shared view of the truth.

Walmart recently required its suppliers to employ IBM’s blockchain technology to track food perishables and maintain food safety. What does this involve?

IBM began working with Walmart in 2016 on a way to apply blockchain to help improve food safety; the first pilots included tracking pork chops in China and mangoes in the United States.

This work evolved into a solution called IBM Food Trust. The blockchain-based cloud network offers participating retailers, suppliers, growers and food industry providers data from across the food ecosystem to enable greater traceability, transparency and efficiency.

There are a number of modules that IBM has built alongside several of the participants based on their specific needs. For example, this includes digital certificates that ensure authenticity of food products and the ability to trace products securely in seconds to identify potential causes of contamination or verify provenance of a food item.

In October, we announced the general availability of IBM Food Trust, demonstrating both momentum and scalability for blockchain within the food ecosystem now that the network is expanding globally and more companies are joining.

Real technology versus bogus merchandise

It’s not on the market yet, but Crypto-Tag by Bonafi is designed to help retailers and manufacturers in their battle against counterfeit merchandise.

The brainchild of founder and chief executive Steven Kuh, Crypto-Tag is an antenna radio tag made of thin plastic that is inserted into or attached to an item by the manufacturer. As the item moves through the supply chain, blockchain technology allows information to be added at each step, down to and including the consumer who purchases it.

“Consumers are able to control their information, which they can correct and update,” Kuh said. This links the vendor, the retailer and the consumer.

Adding to the practicality of the Crypto-Tag is that the information it records can be read with a smartphone. This includes the verification of authenticity as well as allowing the registration of the product when it is purchased, adding the final layer of authentication.

Kuh says Bonafi is working with “several vendors” in testing Crypto-Tag, though no long-term contracts have yet been signed.

There are also some tests involving the use of blockchain technology to combat merchandise counterfeiting. What are the similarities and differences in this use compared with food safety?

The baseline technology we use to track food is the same as the technology we would use to combat merchandise counterfeiting. Blockchain is an immutable, digital ledger that demonstrates a shared version of the truth. The advantage of using a blockchain network is that any manufacturer or producer that has granted rights as a permissioned member of a network can track items as they move through a supply chain or verify an item’s provenance.

Food suppliers, for example, are applying blockchain to trace and share production and harvest data about fruits, vegetables and meats shipped to retail outlets. Using the technology, luxury brands can battle counterfeiters by tracking and recording serial numbers, RFID chips, QR codes and holograms to tell real products from fakes.

Does the technology work all the way down to the store level? Does it follow the consumer home?

The guiding principle of blockchain technology is the network effect. A blockchain application is only as strong as its weakest member. If a store signs on to the blockchain network, the technology works. However, there is still much work to be done to gain this critical mass of adoption. Currently, only 7 percent of retail and consumer packaged goods organizations expect to have a commercial blockchain solution at scale this year.

From a consumer perspective, we’re currently working with clients to build blockchain applications that will enable the consumer themselves to trace the origins and authenticity of the jewelry and food they buy.

An added safety precaution for blockchain technology is the use of permissioned networks. Can you describe these?

“Permissioned” means that network members must determine who else in the network can see their data based on their need to know relevant details.

Data ownership is built into the fabric of permissioned networks — meaning all data on the network is owned by the organization that owns the data prior to it being uploaded. Users can set permissions that govern what data can be seen and by whom — determined solely by the owner of the data. Any insights driven by the data are owned by the solution, as long as the usage does not infringe upon ownership or permissioning of individual data.

Simply put: With permissioned networks, “you upload, you own, you control.”

There are various platforms than can be used for permissioned networks. One of the variables here are authentication speeds, with some taking as long as 15 or 20 minutes. What are the safety considerations involved with faster authentication speeds?

Blockchain can authenticate data in near real-time. Once data is on the blockchain, it cannot be changed or amended without the consensus of the network, so authentication becomes far more straightforward than before. As part of the IBM Food Trust blockchain network, IBM has enabled a module for certificate management, which means that users can upload certificates (such as for sustainable practices or health department certificates) to the blockchain, enabling real-time authentication that a product is what it claims to be.

We spoke with one retailer of high-end merchandise who said he wouldn’t get involved with blockchain until there is more standardization in the industry. What issues would that involve?

Interoperability and standards are a key challenge for leveraging blockchain technology — particularly when working across diverse groups of organizations, including different sized companies, countries and sub-industries. As part of IBM Food Trust, for example, in order to ensure as much reusability and access to all participants, GS1 business standards, which are already frequently used in the industry, and technology standards such as Hyperledger Fabric are core components of the solution.

But there is still a lot of work to be done when it comes to establishing standards that entire networks can use, and IBM is working with various organizations and standards bodies to promote this.

David P. Schulz has been writing for STORES since 1982 and is the author of several nonfiction books.