Transparency in the supply chain, forgery-proof and easily retrievable data: these are the advantages expected from blockchain in logistics. The large American company IBM is working on making such tracking possible for textiles. From thread to finished product, the entire production and distribution process will end up on the blockchain. For this, the company is cooperating with the textile company KAYA&KATO and the German BMZ. It’s not just about efficiency, but also about sustainability. A topic that should also interest consumers in USA oder England.
Principle of cryptos is applied
The blockchain stores all data in its blocks. Anyone who sends Bitcoin, for example, leaves traces in the data records of the “distributed ledger.” While not personal data, it does include the time, sender, address, number of coins and additional information, should the sender so desire. And since cryptocurrencies are ultimately just information, this principle can be applied to other types of data.
Ecologically produced – and forgery-proof
This data is then stored tamper-proof and transparently on the blockchain. Origin, processing procedures, transport routes are particularly important in climate-friendly production. After all, strict tracking is the only way to ensure that the product is really green in the end. This is why IBM (International Business Machines Corporation) relies on the blockchain.
Supply chain transparency is increased
“The sensible combination of sustainability and digitalization is forward-looking for us. The project combines both aspects in an excellent way and promotes supply chain transparency. This is the decisive reason for KAYA&KATO to initiate the development of a blockchain. We are looking forward to the implementation and eagerly await the first solution approaches in collaboration with IBM,” says Dr. Stefan Rennicke, co-founder and CEO of KAYA&KATO.
The sensible combination of sustainability and digitalization is forward-looking for us.Dr. Stefan Rennicke, co-founder and managing director of KAYA&KATO
The partners: KAYA&KATO and the BMZ
IBM does not use this technology on its own, but works together with companies and authorities. Firstly, there is a cooperation with the textile company KAYA&KATO. This is a manufacturer of climate-friendly workwear. The fabrics are made of organic cotton and a polyester-cotton blend. The company makes this from recycled plastic waste, fished from oceans around the world. No harmful chemicals are used in the manufacturing process. The production itself takes place in Europe. When it comes to the supply chain, KAYA&KATO want to offer transparency so that customers can also be sure that the products are sustainable.
Awarded green seal of approval
Furthermore, the German Federal Ministry for Economic Cooperation and Development (BMZ for short) supports the project. The German authority awarded the project with the “Green Button“. The Green Button is a seal of quality for socially and ecologically sustainably produced textiles. This also involves dignified and humane working conditions for the workers. In addition, the manufacturing process should not harm nature or animals. The result of the collaboration is the “textile trust” platform. IBM announced the launch of the platform in January 2021. Here, customers, manufacturers and suppliers can record and query the data of textiles in the production process. Initially, only the supply chain will be recorded at KAYA&KATO. Subsequently, the platform is to be extended to other companies.
Benefiting the environment and working conditions
Supply chain transparency is particularly important in the textile industry because various steps are involved in production. This starts with the production of the fibers and continues through to the actual production of the clothing. Then follows the delivery to the warehouses and stores until the product finally reaches the customer. It is in emerging and developing countries where textile manufacturing is a major industry. Employees are often underpaid and work under the most adverse conditions. Even the safety of the workers is not good, as shown, for example, by the building collapse in Sabhar, which killed 1135 people.
Sock, scarf and pants with their own ID
To ensure that clothing is made in a humane and environmentally friendly way, there needs to be a clear record of the data. This builds trust and makes supply chain data readily available. Without much effort, it is thus possible to check how environmentally friendly the textiles are. In theory, the data is simply entered into the next block of the blockchain. Once this is added to the blockchain, the new information spreads across the entire network. Anyone with access to the blockchain data can then verify it. Every single T-shirt, pair of pants, scarf and sock can be assigned an ID that can be used to check the production and supply chain.
Other companies are also turning to blockchain
IBM and KAYA&KATO are not alone in their use of blockchain in supply chains. It is expected to deliver a number of benefits:
- Secure and transparent tracking of the entire supply chain
- Protection against fraud and counterfeit products, including for consumers
- More efficient data collection and verification
- Secure tracking of licenses and fees
So everyone should be able to benefit: Consumers, producers and the workers who make the clothes. The data can basically be checked from any Internet-enabled device. There are also possible connections to the “Internet of Things”, i.e. a comprehensive networking of machines and computers.
Other companies are now also testing the blockchain:
- H&M (Cos): the “UK Fashion and Textile Association” ( ukft for short) is working with IBM for sustainable supply chain tracking. The textile companies as well as stores H&M, Next and New Look are also involved.
- Walmart: Walmart relies on blockchain to manage its supply chains. The distributed ledger serves as a central data registry for managing a wide variety of suppliers.
- FedEx and UPS: Both transportation companies have joined BiTA, the Blockchain in Trucking Alliance, a consortium for the use of blockchain technologies. The goal is to optimize supply chains.
The problems of blockchain in logistics
Perfect is not the new technology. There are also a few problems and concerns when using blockchain:
- Open vs closed blockchains: As a rule, blockchains are open. That is, all information is publicly available. This provides trust and transparency. However, many companies prefer closed blockchains. These are then data sets that are only available to their own employees and official partners. While there are good reasons to keep such systems closed, this also leads to a loss of transparency and security.
- The human factor: In the end, the entire supply chain is still dependent on data entered by a human. Certain aspects can be automated, for example by having machines scan the goods themselves. Thus, no tampering is possible. However, this is not feasible for all operations. And once entered into the blockchain, manipulated or erroneous data cannot be removed.
- Scaling issues: Scaling is an ongoing issue with blockchains. As more data accumulates, the blockchain becomes larger and more unwieldy. Many transactions (including of data) require a network that can process them quickly. Otherwise, bottlenecks will occur.
- Cost: Implementing a blockchain network creates additional costs and technical hurdles. Employees need to be trained, blockchain experts and programmers are needed. Companies face the question of whether to develop their own solutions or work with third-party providers.
- Power and hardware consumption: blockchains run on nodes. Consensus mechanisms are built on either proof-of-work or proof-of-stake. All of this consumes power and more hardware. Sustainable solutions in particular need to justify the use of new technologies if they consume even more power.
Who is IBM?IBM stands for "International Business Machines Corporation." The US-American corporate giant specializes in software and hardware. The publicly traded company deals with AI, cloud computing and blockchain technologies, among others. It was founded in 1911, when it produced machines for reading punched cards. The first computers, in other words.
FAQ – Frequently Asked Questions
IBM relies on “Hyperledger Fabric”. This is not actually an ordinary blockchain. It is not decentralized and does not have a cryptocurrency. Instead, it is merely a distributed protocol for data records.
Companies tend to use blockchains that do not have their own cryptocurrencies. Investing directly in the blockchain is thus not possible. However, the companies do have shares for this purpose.
We do not have any data on this yet. The project together with KAYAu0026KATO is only a test run and serves as a proof of concept. However, IBM seems to be eager to continue the concept and apply it to other companies.