Blockchain and RFID Could Address a $180 Billion Problem

A new paper published by the Auburn University RFID Lab suggests the two technologies could help retailers, brand owners and logistics providers reduce counterfeiting, shrink and chargebacks.
Published: December 4, 2019

The Auburn University RFID Lab and GS1 US have been studying the problems that retailers, brand owners and logistics providers face when sharing supply chain data and exploring the role radio frequency identification technology might play in alleviating those problems.

In October 2018, the lab and the organization released a white paper describing the Project Zipper study, which involved tracking the movements of RFID-tagged items between eight brand owners and five retailers as they traverse from the point of manufacture to a brand’s distribution center, to another DC operated by the retailer and to stores (see Project Zipper Finds Order Accuracy Jumps to Nearly 100 Percent With RFID). That white paper, which was based on a year-long pilot, revealed that that when brands and retailers both employ RFID and share data about each item’s movements throughout the supply chain, accuracy can rise to nearly 100 percent, thereby reducing the cost of claims.

The lab and GS1 US have now released a follow-up position paper, titled “Why Retail Is Ready for Blockchain.” This paper provides an overview of how blockchain technology works and how retailers, brand owners and logistics providers can use it with RFID, which provides a unique identity for every item, enabling data to be shared about that product in a distributed blockchain ledger.

“By removing the need for outside entities to establish trust or vouch for integrity, those participating in a blockchain network are able to transact directly and more efficiently, as well as maintain ownership of their data,” the paper explains. “In the case of a trade network, all relevant stakeholders could share the responsibility of contributing and independently validating product information as goods flow through the supply chain, resulting in a mutually agreed-upon record of information available to relevant trade partners.”

Project Zipper found that retailers, brand owners and logistics providers share data in different formats and with different attributes, making it difficult to use the data effectively to attack pain points in the supply chain. By adopting blockchain technology, partners would use a common language and agree on the data stored in the distributed ledger about a particular item. This would enable companies to have better inventory visibility and be able to analyze data more effectively.

Blockchain and RFID could help reduce counterfeiting, which costs retailers and brand owners approximately $98 billion annually, by enabling partners to look up information about specific items and determine whether they are genuine or counterfeit. Chain of custody is established so gray-market diversions could be addressed more effectively. Companies could view when an item left the legitimate supply chain and was diverted into the gray market.

Blockchain and RFID could also help companies identify where shrink (a $47 billion problem) is occurring. For example, if RFID-tagged items were read as they entered a warehouse, but were never read leaving the warehouse, that data would be easy to find by examining the blockchain entries. In addition, blockchain and RFID could help address the issue of claims and chargebacks. Retailers, brand owners and logistics providers would all capture data about RFID-tagged items, then store that information in the distributed ledger of a blockchain system and have access to what was shipped and when it arrived.

The paper lays out a compelling case that blockchain and RFID are key technologies that can finally address some of the inefficiencies that have long plagued the global and increasingly complex supply chain. In an introduction to the paper, Terry Brown, the director of North American distribution technology transformation at Nike, says “…we finally have our best chance for resolving these issues and saving billions of dollars of wasted money in the mysteries of supply chain inaccuracy.” The paper can be downloaded from the RFID Lab’s website.