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How Blockchain Can Address Reverse Logistics Challenges

How Blockchain Can Address Reverse Logistics Challenges

by Sylvie Thompson, Associate Partner, Infosys Consulting

Reverse Logistics Magazine, Edition 94

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The promise of blockchain is large and surrounded by much hype. Working our way through all the hype, we have come to the realization that if successfully deployed, the technology has the potential to fundamentally alter the way we manage reverse logistics. The following is a brief discussion on just a few of the ways reverse logistics can and will benefit from blockchain.

Blockchain is a decentralized ledger that uses distributed peer-to-peer consensus to verify and authenticate all information recorded within the ledger. Some of the universal benefits of blockchain include the following.

Data Visibility and Reconciliation.
Blockchain helps to solve the problem of data access, visibility and data reconciliation. The shared distributed ledger provides visibility to information contained within the blockchain. Further, the information is simultaneously and securely shared as nodes within the blockchain verify transactions. New nodes can only be added when consensus on the validity of that information (transaction) is verified by the majority of the participants eliminated misalignment of information between participants. Disparate systems with incomplete, conflicting or unreliable information is eliminated for all participants.

Transparency and Traceability
Transparency and Traceability is one of the big wins for blockchain. Blockchain enables transparency and traceability from raw material sourcing through production to delivery and post-sale support including warranty management. Blockchain makes it possible for every touch to be recorded and for verifiable records to be attached and stored allowing the item’s pedigree to be securely recorded.

Beyond these key universal benefits, Blockchain offers some specific use cases within the consumer brands and retail industries that can deliver significant savings. These use cases could also greatly impact reverse logistics. It starts with authentication and continues into areas you might not initially think to explore.

Product and Spare Parts Authentication
The design, development and launch of a successful consumer branded product is no small feat. It is an endeavor that requires significant investment, time and numerous global partnerships in addition to strong consumer insights and outstanding product marketing. The ultimate goal of every consumer brand owner is to protect their brand while ensuring growth and profitability. Blockchain has the potential to address some of the key challenges facing brand owners in their quest to protect their brand throughout its entire lifecycle.

According to the 2018 Global Brand Counterfeiting Report, the global counterfeit trade is estimated at roughly US$1.2 trillion annually or 3% of all global trade. International trade organizations also agree that the problem of counterfeit products is growing rapidly with some estimating recent year-over-year growth in counterfeit products is in excess of 80% annually. Counterfeiting now impacts almost all product categories across all product price points. As a brand owner, this poses significant risk including consumer product safety concerns.

Blockchain offers a solution by enabling product authentication at the unit and part level. The benefits of authentication and certification is particularly true for spare parts and after-market operations. Blockchain allows individual items and parts to be tagged with unique identifiers so that they can be tracked and validated. Part certification documentation can be attached to the chain providing full visibility into “first mile” and “last mile” of the product lifecycle.

Consumer Loyalty Programs
Loyalty programs are an effective way to retain customers and drive frequency of purchases. Recently, various loyalty programs have established cross-company and cross-industry redemption partnerships providing consumers with even greater choice on how to leverage and redeem loyalty points earned.

Blockchain is emerging as a trusted and indisputable mechanism to manage and track consumer loyalty programs including earned rewards, coupons and/or discounts. The process starts with linking a blockchain address to each customer’s loyalty account. The customer specific blockchain address can be leveraged by multiple loyalty partners. The blockchain ecosystem validates all of the activity eliminating fraud as well as duplication of rewards between partners. It also facilitates ease of interoperability between redemption partners on a global scale.

Once enabled, the established blockchain ecosystem used to manage consumer loyalty benefits can also be leveraged to validate and facilities consumer returns with the potential to enable various returns across loyalty partners.

Returns and Credits
Retail returns fraud is estimated at roughly $15-$22 billion annually depending on the source. Combining blockchain traceability throughout the retail supply chain including linking to customer purchases through loyalty programs provides proof of sale and ownership. Even if the item was purchased without a loyalty account associated to the purchase the integrity of the chain can be maintained through a recorded sale transaction acting as proof that the item has in fact been purchased (including when and where and for how much) and not randomly removed from inventory.

Blockchain can securely validate the products sales history and associated financial transaction resulting in the ability to quickly facilitate a return along with associated refund to the customer via the chain. This would allow the original purchase, the refund, and any subsequent sales to be recorded against the blockchain.

Further, the customer’s unique blockchain address can also be leveraged to record the refund credits just as it can be used to record promotional credits, earned rewards or other special offers all in one validated electronic wallet. Customers can check their balance via simply querying their private account.

Authentication, ownership and authorization of returns and credits can easily be facilitated real-time while in the store, online or at any partner organization enabling positive customer experience while eliminating return fraud for retailers.

Warranty Management
Consumer Brand owners continue to support their products even after they are sold to the end user. Warranty management for both consumers and brands is not an easy process. If the product is sold to a secondary consumer, warranty and care becomes even more complex.

Blockchain enables consumer brands to establish a virtual warranty embedded into the individual item allowing both the item owner and the brand owner to access real-time. This has the potential to offer significant savings particular on administrative cost while enhancing the consumer experience. Further, recent proposed enhancements could allow a consumer to register the sale or automatically record the sale against the blockchain tied to the item essentially establishing a lifelong distributed digital record of ownership accessible to the brand owner as well as the warranty support organization. The potential benefits of such a digital record are significant for consumer brand owners.

The future of blockchain will be driven by a need to integrate forward and reverse logistics including certification, documentation and post-sale support data to meet the demands of modern consumers. Given the uncertainty in the future technological landscape for blockchain, we recommend exploring and experimenting with various platforms both public and private.

Early blockchain trials are only scratching the surface at what is possible. We have just begun to explore the fascinating opportunities blockchain provides to reverse logistics and their underlying relationships. When you layer on Smart Contracts, IoT, RFID, and other technology solutions the potential becomes even more powerful. Embedding reverse logistics use cases into blockchain trials can be the tipping point in achieving a positive ROI so blockchain can move beyond proof of concept and into full network deployment. We strongly recommend reverse logistics professional become actively involved in their company’s trials early in the concept phase.
Sylvie is a passionate and results-oriented supply chain executive. Her experience with supply chain start-ups has demonstrated to her that supply chain professionals must question the status quo in order to deliver next generation solutions. She is a believer in hands-on experimentation in order to deliver maximum results. Sylvie has developed and implemented numerous supply chain transformation initiatives for her clients and has extensive experience working with leading retailers and consumer brand owners. A supporter of lifelong learning, she continues to seek out fresh and innovative new ideas and insights through a network of supply change thought leaders. She is also giving back to the field as a guest lecturer at the University of Maryland.
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