Optimizing Retail Supply Chains with Blockchain Technology 

Retail businesses rely heavily on the supply chain, which includes procuring raw materials, manufacturing the product, and delivering the same to the customers.

 Optimizing the supply chain ensures that all its processes are managed efficiently. Just two decades ago, supply chain optimization was labor-intensive, but automation and high-speed communication have transformed the world of commerce. It has helped in inventory management, order fulfillment, supply chain visibility, and quality control. 

However, given the intricacies of business processes, it does not support traceability and transparency, building trust and security, and mitigating risks. 

Blockchain was introduced in the retail supply chain to look after the limitations of automation and work beside it to complement it. 

Transparency in the retail supply chain has become a necessity. It helps ensure consumer protection rights, manages risks by handling supply chain disruptions, and protects the brand image. 

Transparency is needed to examine compliance with industry regulations and assess environmental impact while tracking the origin of materials. 

Introducing blockchain in retail supply management improves transparency and efficiency, and builds trust. It is a decentralized ledger that can not change while offering real-time insights about the product. It ensures high transparency and authenticity, reduces misinformation, and fosters collaboration between the supply chain partners. 

Blockchain impacts the retail supply chain in different ways. These ways affect the management of products throughout the supply chain. The points explain the ways blockchain has transformed supply chain management.   

• Transparency and Traceability

Fragmented systems, manual record-keeping, and less visibility featured traditional SCM. Such management was time-consuming, and the companies often had varying standards for retail traceability. The consumers could not trust the brands because they could not get information on the origin of products. 

Blockchain SCM

There is greater product traceability as the ledger system records every transaction since procuring product development resources. The decentralized ledger helps the different supply chain partners access the product information whenever they want with improved authenticity. It plays a vital role in recalling sources when dealing with food products.

• Reduction in Information Asymmetry  

In traditional SCM, the partners have varying access to information in the supply chain. These variations caused coordination between the suppliers and the consumers.

Blockchain SCM

With blockchain comes an immutable ledger that allows the participants in the supply chain access to every transaction and movement of the products. 

• Smart Contracts 

Traditional SCM was often accompanied by manual processes, which made it time-consuming and prone to human errors. Such a management system lacked proper transparency because of information silos within the organization. 

Blockchain SCM

Smart contracts featured with blockchain technology helped address traditional SCM's limitations. The feature automated operations, allowing real-time execution of transactions. They eliminated the need for human intervention in the SCM processes, thereby reducing human errors. 

• Better Security 

Traditional SCM relies on a centralized database prone to a single point of failure, which can eventually lead to data leakage and hacking. Also, the records can be altered, making them less authentic for the parties involved in the supply chain. 

Blockchain SCM 

The single point of failure is mitigated because of the decentralized network of nodes. The improved retail traceability ensures that retailers can quickly identify and resolve quality issues. The advanced cryptographic techniques provide additional security for the data. Smart contracts ensure compliance with industry standards and reduce the risks of fraud. 

If we see the world as an extensive supply chain, we’ll find that consumers and sellers interact constantly. The product moves through several stages before it reaches the end user, and the supply chain management deals with many challenges while making the businesses meet the end goal. A few such challenges and blockchain solutions are highlighted in the section below. 

1. Growth of Multinational Corporations

Multinational companies are growing in number and size, affecting supply chain management. The following points briefly explain these challenges and how blockchain technology addresses them. 

• Global Sourcing 

MNCs often source their components from other countries because of the cost differences and availability. Such sourcing resulted in delayed procurements and increased issues related to customs and transportation.

 Blockchain addressing the challenge:

Blockchain technology increases transparency and traceability in the sourcing process, reducing risks related to logistics and transportation.   

• Complexities of Supply Chain

The companies often operate in different locations, complicating compliance with supply chain management strategies because the strategies differ.

Blockchain addressing the challenge:

Blockchain in retail SCM simplifies the complexities of the supply chain by offering a unified platform for managing transactions across different regions. 

• Customer Expectations

MNCs must care for their audience globally; user expectations usually vary from region to region. Traditional SCM needed help to create supply chain strategies that addressed local preferences and demands.

Blockchain addressing the challenge:

Blockchain facilitates transparent communication among the supply chain partners, bridging cultural gaps while allowing more responsive operations.  

2. Partnerships 

Often, retail organizations go for partnerships to expand their market and reduce the costs associated with developing products (costs get shared). However, such alliances bring several challenges. The points below discuss a few such challenges and how blockchain technology resolves them in retail supply chain management. 

• Alignment of Goals and Resources 

Retail supply chain meets inefficiencies because the organizations in partnership have different goals, priorities, and business strategies. Optimizing the supply chain requires aligned goals and shared objectives.

 Blockchain addressing the challenge:

Blockchain features shared performance metrics tracking, consensus mechanism, shared visibility, smart contracts, and collaborative planning (with shared forecasting). All these features and functionalities help businesses reduce conflicts and work together for aligned goals. 

• Dependency Risks 

Relying on the partners for critical components or services can increase the dependency risk. The supply chain can be affected when one partner fails to address these dependencies because of financial constraints or other reasons.

Blockchain addressing the challenge:

Blockchain in SCM facilitates better transparency, collaboration, real-time monitoring, and decentralized data sharing. All of these things prepare partners for potential disruptions.  

• Integration of Systems and Processes

Often, companies in different geographical locations employ various tools and technologies. When sharing common goals, it becomes essential to integrate systems and processes.

Blockchain addressing the challenge:

The decentralized platform with blockchain technology helps address the integration challenges. It allows the partners involved in the supply chain to collaborate and share information while maintaining better compatibility. 

3. Outsourcing 

Outsourcing benefits the retail supply chain, including optimized costs and access to specialized expertise. However, it can impact efficiency and controls because of its challenges. Some of these challenges are discussed below. 

• Loss of Control

Retailers can outsource certain functions like manufacturing, logistics, and customer service. When a third party gets involved in these functionalities, the retail business loses direct control, leading to quality issues, delivery time, and more. 

Blockchain addressing the challenge:

The decentralized ledger records transactions in real-time, allowing the partners to monitor compliance quality standards. The ledger also helps businesses meet timelines because the issues are identified and resolved quickly.  

• Communication Barriers 

If the third parties are in different geographical locations, this may increase communication gaps between the parties involved. Other cultures and languages can impact the workflow of the retail supply chain. 

Blockchain addressing the challenge:

With blockchain technology in the retail supply chain, the communication between the partners improves significantly because they rely on a single source of truth. The chances of misunderstanding are reduced because they all see the same information in real-time.

Over the past few years, the global supply chain has seen its pitfalls, and with customers demanding more personalized products and services, SCM has become complex. The latest developments in the retail supply chain address issues related to increasing lead time, operational costs, and more.  

AI and Supply Chain Analytics 

Putting AI in the center of supply chain operations offers retailers new capabilities and metrics. It transforms the supply chain by increasing the forecasting capabilities and creating new segments to improve delivery efficiency.

Resilience, relevance, and responsibility are the significant outcomes; only a segment of organizations have been able to implement supply chain analytics and AI in their business. The top use cases of this tech are mentioned in the following points. 

• For Sourcing and Procurement

Organizations leverage AI for contract management. They use anomaly detection and text AI for entity extraction and analysis. Such processes help them proactively manage risks and streamline the contract review process. 

• Integrated Planning

AI algorithms, advanced analytics tools, and AI-driven scenarios help organizations with integrated planning by making accurate demand forecasts, optimizing the supply chain, and simulating different scenario plans.  

• Smart Warehousing

AI and supply chain analytics feature automated inventory planning, robotic process automation (RPA), and predictive maintenance. The organizations also benefit from intelligent routing and picking facilities to optimize the supply chain operations.   

Steps to Include AI and Supply Chain Analytics in Retail Business 

Today, only a handful of retail organizations outperform others regarding financial performance. The given steps help 

• Advanced Scenario Modeling 

The modern supply chain is affected by logistics challenges and demand fluctuations. You may use techniques like Monte Carlo to generate possible outcomes based on probable inputs while considering modeling techniques like predictive analytics and deep reinforcement learning (DRL). 

• Unified Demand Planning  

It is a comprehensive approach to forecasting and managing data throughout the supply chain. It uses data integration and management techniques, scenario modeling, and simulation (like Monte Carlo and what-if) to achieve better supply chain management. It is all about examining the internal and external data to establish a unified demand for the product.

• Supplier Risk Monitoring

It is vital to establish visibility at the supplier’s end and monitor closely where the products are in the pipeline. Analytics, AI, and cloud computing are critical in this monitoring.  

Machine Learning for Demand Forecasting

Retail organizations often have to deal with the Bullwhip effect, where a small fluctuation in demand at the retailer’s end can largely affect the demand for products at the wholesalers, manufacturers, and end.

Self-learning algorithms with ML in the retail supply chain help forecast demand efficiently, mitigating the chances of the Bullwhip effect. The technology can sense demand, which enables cognitive computing to incorporate real-time signals in demand prediction. Its uses are given in the points below. 

• Retail Demand Forecasting 

Retailers use ML models to forecast demand while considering several factors like seasonality, demand fluctuations, promotions, and external factors like holidays.   

• Inventory Optimization

Retail businesses use demand forecasting to ensure optimization in the inventory levels. The models analyze the purchasing patterns of users to optimize product demand across its stores. 

• Dynamic Pricing 

Organizations today deal with dynamic markets where the demand for a particular product can change instantaneously. To deal with such changes, they opt to change the prices of products and services in real-time. 

Implementation of ML for Demand Forecasting

Two commonly used models in the supply chain are described below. 

• Long Short-term Memory (LSTM)

LSTM is a recurrent neural network (RNN) type of ML model that requires large data sets. It can examine complex patterns in non-stationary time series data for univariate and multivariate forecastings.

Its features, like Gatling mechanisms and memory cells, allow models to focus on specific parts of input data and help manage information over time. All this improves demand forecasting significantly and eventually optimizes the supply chain. 

• Auto-Regressive Moving Average (ARIMA)

It is a traditional statistical ML model popularly used for linear relationships in time series datasets. It offers engineers a clear understanding of underlying data and assists them better in short-term forecasting with stationery data.

Its features like parameterization, MA component, and stationarity ensure smoothing out short-term fluctuations and effectively handling trends.

Retail and manufacturing businesses deal with the challenge of certifying the information on raw materials. The increased transparency of such information helps the parties involved in the retail supply chain better trust the brand. Blockchain technology brought up smart contracts to address these challenges in the retail and manufacturing industry.

The decentralized ledger, enhanced traceability, and smart contracts (feature digital tokens) allow users to trace back effectively to the product's origins. The following points describe the usage of blockchain in ethical sourcing. 

• Organizations like Walmart use specific applications to trace the origins of produce to instill trust in their customers. 

• Big brands like IBM are working on this technology to improve the process efficiency. 

• A UK startup is working on establishing an application that can trace food roots and has successfully piloted tracing Tuna in Southeast Asia. 

Include Blockchain in Retail Supply Chain for Ethical Sourcing 

The following steps can help your business implement blockchain technology for ethical sourcing. 

1. Define the objectives you wish to achieve with the technology and identify the parts of the supply chain where this implementation will occur. 

2. Collaborate with the involved parties and educate them about the benefits of this technology. 

3. Choose the right platform that will address the project’s requirements (Hyperledger or Corda), 

4. Establish a traceability framework using the data model that captures the relevant information about the product throughout the supply chain.

Blockchain offers several solutions to critical metrics of the retail supply chain. A few of these are highlighted below. 

• Inventory Management 

Blockchain helps maintain inventory stocks in real-time, mitigating stockout situations and over-stocking. It optimizes inventory levels and improves turnover by offering clear visibility into the product chain. 

• Order Fulfillment

XP features smart contracts that automate order processing, speeding up order fulfillment. Blockchain offers transparency in this process, improving order accuracy. 

• Supply Chain Visibility 

Blockchain helps examine the product cycle starting from the product’s origins. Extensive tracking helps identify potential issues in the supply chain and build resilience. 

• Cost Optimization 

Smart contracts offer automation of different processes in the retail supply chain, optimizing them and reducing operational costs. Optimized inventory reduces transportation and warehousing expenses.

• Sustainability 

Constantly tracking the product journey helps reduce the impact of product development on the environment. Blockchain allows organizations to follow ethical practices and ensure that their partners and suppliers follow them. 

Different companies across different industries are using blockchain in their supply chain processes. The following section covers a few of such companies. 

• Food Industry 

Brands like Nestle and Walmart use blockchain to track the journey of their food products to improve food traceability and safety. This process has helped them gain the trust of their customers and build a better relationship. 

• Luxury Goods 

Some popular brands like Gucci and Louis Vuitton are investigating blockchain technology. They are examining the effects of this tech for improving supply chain transparency and ensuring product authenticity.   

• Pharmaceutical

Pfizer is using this technology to monitor the origins of different drugs. Transparency and tracking help the brand avoid counterfeits while ensuring the product’s integrity. 

Optimizing the supply chain management ensures reduced operational costs and an improved financial standing. Blockchain can completely transform retail supply chain operations by streamlining logistics and improving visibility in sourcing raw materials. There are challenges like its integration, implementation costs, scalability issues, and energy consumption. However, the challenges surpass the technology's benefits for supply chain management. 

As blockchain technology evolves, the chances of its adaptation will increase, letting businesses gain an advantage over their competitors.