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Q&A: IBM Exec Details What Fashion Stands to Gain from Blockchain

IBM was among the first companies to look into blockchain’s potential to fundamentally transform industries and ecosystems and make important investments in the technology. The company started by catalyzing the formation of the Linux Foundation’s Hyperledger project and contributing more than a million lines of code to the Linux Foundation’s HyperLedger Fabric Project since late 2015. IBM has also even applied its blockchain solutions to its own business to help manage partners and suppliers.

Starting from contributing to an open-source code, IBM is now helping its clients to build their own blockchain solution networks as well as offering access to IBM’s own blockchain solution networks like TradeLens and IBM Food Trust. Indeed, IBM announced the global commercial availability of the IBM Food Trust platform this month. Important global retailers like Carrefour and Walmart have already joined the platform.

Today, IBM has engaged in more than 500 client projects across industries from insurance, education and food, to luxury goods and shipping, answering business challenges of all kinds from HR to supply chain.

Laurence Haziot, IBM’s global managing director & general manager for the worldwide consumer industries, will wield her decades of experience with the business services firm when she shares her perspective on blockchain and artificial intelligence at the ReMode conference in Los Angeles next month. Sourcing Journal got a preview of what attendees can expect to hear about IBM’s leadership role with these influential technologies.

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SJ: Blockchain is an often misunderstood technology. How do you explain to clients what it is and where do you see its applications for fashion?

LH: Blockchain is based on a simple idea, but built upon a complex technological framework. It’s a way to share secured information between two or more parties. It’s all about trusted data and trusted business processes in multi-party business interactions.

Blockchain’s trusted and shared system of record creates a permanent digitized chain of transactions, and provides retailers the ability to accurately and quickly trace products throughout the world. With blockchain, data becomes part of a digital record on an unbreakable chain of trust.

Proponents in the retail industry say that blockchain can ensure product quality, reliability, authenticity and the safety. As every member in a retail network becomes instantaneously accountable, blockchain provides entirely new ways to create value and build brand reputation.

In the retail industry, this enables a secure, digitized supply chain to grow. This is particularly useful with eliminating manual paperwork at customs and ports around the world, including customs clearances, bills of lading, safety certificates and invoices.

According to The World Economic Forum, by reducing barriers within the international supply chain, global trade could increase by nearly 15 percent, boosting economies and creating jobs.

That’s why Maersk is using IBM blockchain technology to digitize global trade processes—gaining a new form of command and consent in the flow of information. This empowers multiple trading partners to collaborate and establish a single shared view of a transaction without compromising details, privacy or confidentiality.

Blockchain relates to fashion in different ways.

Intellectual property: The most immediate and obvious use of blockchain in fashion is to verify the originality of a garment.

Supply chain, traceability, transparency: Blockchain technology has the ability to garner greater trust and brand loyalty throughout the product lifecycle. For example, Everledger is using blockchain to authenticate and trace the origin of high-value and luxury goods, such as diamonds and wine that are authenticated by trusted players like certificate houses. This better protects suppliers, buyers and shippers against theft, counterfeiting and other forms of corruption.

Customer experience: It’s the dawn of a new era in fashion, in which customers interact with their clothes in a profound and meaningful way. Blockchain, therefore, is storytelling and brands can do that fairly easily and merge it with social media.

SJ: How far out do you think the industry is from seeing real transformation stemming from blockchain deployments?

LH: The implementation of blockchain technology is growing at a rapid pace. In fact, a recent study by the IBM Institute of Business Value found one-third of almost 3,000 C-Suite executives surveyed are using or considering blockchain in their businesses. So blockchain is here and now, and here’s an example: Back in April 2018 IBM announced a consortium of gold and diamond industry leaders the first cross-industry initiative to use blockchain to trace the provenance of finished pieces of jewelry across the supply chain for increased transparency.

TrustChain is initially tracking six styles of diamond and gold engagement rings on the blockchain network. As the program continues to develop, Trustchain jewelry is expected to be accessible to consumers in participating retail stores by the end of 2018.

The consumer is dictating the pace of adoption with a need for transparency, ethics and sustainability. This will encourage the industry to adopt blockchain platforms and technology.

SJ: Some naysayers claim blockchain is wildly overhyped. How do you respond to these detractors?

LH: People said similar things when the internet and world wide web arrived on the scene.

I am convinced blockchain will do to transactions and supply chains what Internet did to information and commerce. The fact that digital ledgers are designed from the beginning to be more secure than current systems we rely on is key. Whilst this doesn’t make it a silver bullet to solve every issue, it does make it an opportunity and everyday use cases are being put in place across the blockchain.

I’d say to doubters that they should look at actual work we are doing with Maersk to introduce the TradeLens Blockchain Shipping Solution. That’s an industry-wide collaboration announced in January 2018, which is rapidly advancing as more than 90 organizations participate in the global trade solution. Through that, more than 154 million events have been captured on the platform, and it’s growing by one million per day. That’s blockchain in real everyday use.

SJ: There’s a lot of talk about how artificial intelligence (AI) can help apparel companies. What do fashion brands and retailers get wrong about AI and what do they get right?

LH: For one, the maturity level regarding artificial intelligence varies. We observe two main profiles: those taking a wait-and-see approach and others that are embracing it.

One of fashion and retail’s main concerns towards AI is the idea of seeing humans being replaced by AI. They should dig deeper: AI is changing jobs, not replacing them. Forecasts even predict that AI will create 58 million jobs by 2022. At IBM we talk about augmented intelligence rather than artificial intelligence: augmenting human tasks in all verticals, including manufacturing or customer service.

Another barrier is the notion that AI belongs in the realm of science fiction. But AI is real and could help companies to unveil the true potential of all the data at their disposal. From my experience, companies lagging behind in AI adoption are exposing themselves to disruption.

Some players in fashion and retail understand the value of AI and its potential impact: infusing automation in their processes, reinventing creation and design, engaging with their clients and creating new business models.

Those embrace AI and use it to transform their company.

IBM has built AI-specific capabilities for fashion with a portfolio of APIs, assets and use cases to guide retailers and fashion brands in their AI journey. All use cases are targeted towards end consumers, online retailers, buyers, merchandisers and designers and span selling (front-end customer experience), buying (back-end merchandising and procurement) and creative design (fashion designers).

This unique set of AI capabilities has been in production at three Indian clients and successfully piloted with several global industry clients like Macy’s, H&M, Tommy Hilfiger, El Corte Inglés, Inditex and Luxottica.

Some other projects with international impact include a visual search proof of concept for the Swedish multinational retailer H&M and a signature project with the Spanish retailer El Corte Inglés where we have an opportunity to scale to 4 million-plus Spanish consumers and for multiple other fashion stores in Europe and Africa.

Retailers can use volumes of data in predictive analytics and AI to better understand and support their valuable customer, as well as the strategic and operational insights that this information contains. We’ve been working with YOOX Net-a-Porter since 2016 to create a truly premium online shopping experience by creating an integrated network for fulfillment.

Instead of only shipping from Net-a-Porter and YOOX warehouses, orders can be sourced and sent from the brand’s distribution centers or stores that carry the item. And we’re exploring how to use AI in advanced search, as well.

Last January, IBM, Tommy Hilfiger and The Fashion Institute of Technology (FIT) Infor Design and Tech Lab began collaborating on a project aimed at advancing the use of AI in the creative process.

The FIT students were given access to IBM Research’s AI tools where they could creatively explore new AI generated patterns, trending colors and silhouettes pulled from 15,000 of Tommy Hilfiger’s product images, some 600,000 publicly available runway images and nearly 100,000 patterns from fabric sites as a source of informed inspiration.

Customization and personalization are particularly important to new emerging markets, like the FIT students who are part of Gen Z, which has access to $44 billion in buying power.

And more recently, IBM Research developed Crypto Anchor capabilities combining AI and optical imaging to scan a substance or object and capture its optical pattern, thus weeding out counterfeits from authentic materials.

SJ: You’ll be speaking about blockchain and AI at the ReMode conference in Los Angeles next month. What do you want attendees to take away from your talk there?

LH: The overriding message is that blockchain is real and expanding rapidly, and in fashion it can drive efficiencies throughout the entire supply chain, as well as traceability for consumers who are seeking greater knowledge of what they’re buying. Lastly, both blockchain and AI likely will touch most of functions throughout the enterprise, from marketing and manufacturing to supply chain, finance and more, so there’s a lot of possibilities to drive new business models and those in the industry should be looking at how to make the most of the opportunity.