The textile industry is one of the oldest and most expansive sectors in the world, and yet, despite its age, it is currently enjoying rapid growth. In 2023, the global textile market was valued at $1,840 billion USD and is anticipated to reach around $3,768 billion USD by 2033. However, the industry faces numerous quality control, traceability, and transparency challenges.
Blockchain technology, with its ability to offer secure, immutable, and decentralised data management, presents an opportunity to address these issues. In this article, we explore whether blockchain can improve textile supply chain management, drive efficiency, and build sustainability within the textile industry.
Textile supply chain management issues
Textile supply chains are intricate, often spanning multiple continents and involving numerous stakeholders, from raw material producers to retailers. Textile supply chain management must contend with the absence of a unified method for tracing materials through the supply chain. This creates traceability gaps that lead to inefficiencies and often result in waste and financial losses.
At the same time, the industry faces growing pressure to address sustainability challenges. Mounting regulatory demands are impacting how textile supply chains are managed, pushing companies to adopt more responsible and sustainable practices. For instance, in Europe, the EU Corporate Sustainability Due Diligence Directive (CSDDD) and the 2023 EU strategy for sustainable and circular textiles have introduced sweeping changes.
Together they mandate businesses to identify, prevent, and mitigate environmental and human rights risks within their operations and supply chains and introduce Extended Producer Responsibility (EPR), which holds manufacturers accountable for the entire lifecycle of their products. Additionally, Digital Product Passports (DPPs) are set to become mandatory for all clothing entering the EU market by 2030. This requirement will make ensuring traceability and transparency a key area of focus for textile companies seeking to maintain and develop access to the European market.
Consumers are also demanding more sustainable and ethical products. Although this has prompted textile producers to reduce waste, promote ethical sourcing practices, and adopt more energy-efficient technologies, meeting this demand requires coordinated action throughout the supply chain. This is complicated by a lack of cross-chain visibility, which often prevents stakeholders from accessing accurate and reliable information and is compounded by traditional quality monitoring systems, which are often static and ineffective in dynamic production environments.
Blockchain’s transformative impact on textile supply chain management
One promising solution for textile supply chain management challenges is the integration of blockchain technology. Blockchain supporters advocate that the technology’s core features – decentralisation, immutability, and transparency – can tackle the textile industry’s accountability and sustainability issues head-on. By creating a distributed ledger accessible to all supply chain participants, blockchain can ensure a single source of truth, enabling real-time data sharing and robust traceability.
The primary benefit of adopting blockchain is its enhanced traceability. Blockchain allows every material and process to be recorded with unique, unalterable identifiers. Starting at the farm or factory, raw materials can be logged onto the blockchain, with subsequent updates at every stage of processing and distribution. This end-to-end traceability ensures that defects can be traced back to their source, preventing waste and ensuring accountability.
Naturally, by making data accessible to all authorised stakeholders, blockchain fosters trust and collaboration at every stage of the supply chain. This improved transparency allows retailers to verify claims of sustainability (such as organic certifications) while consumers can access their product’s journey from raw product to finished garment.
Since anything on a blockchain can be traced in real time, quality control can also be substantially enhanced. Blockchain-enabled machines and sensors can automatically record quality data at various production stages. A consensus mechanism can flag defective batches in real time, allowing for immediate corrective actions to be taken. This reduces waste, enhances product quality, reduces consumer returns, and lowers manufacturing costs.
Control measures may also extend beyond the product itself, as blockchain can also document and verify compliance with ethical sourcing and environmental standards. For example, information about water usage, carbon emissions, and fair labour practices can be recorded and shared with stakeholders. This is especially important for textile supply chain management, as the textile industry has faced significant criticism relating to its labour conditions.
Blockchain implementation challenges
While blockchain offers numerous benefits for textile supply chain management, integrating it effectively into textile supply chains presents several key challenges.
Data accuracy
Data accuracy is a persistent underlying issue. Blockchain itself does not inherently verify the accuracy of inputted data but requires complementary systems and processes to ensure its accuracy. If incorrect or fraudulent data is entered at the source, the blockchain will perpetuate these inaccuracies, and determining liability in such instances can be difficult in a decentralised system.
Additionally, implementing systems capable of automatically halting production processes when defective materials are detected would require detailed protocols for monitoring batch consistency, process adherence, and product specifications at every stage of production. To achieve this, supply chain stakeholders would need to collectively agree on standardised quality metrics, acceptable tolerance ranges, and automated flagging mechanisms. Establishing this consensus criteria could be extremely challenging given the diverse nature of textile manufacturing processes, varying quality standards across different regions and markets, and the complex interplay between different materials and production methods.
Technical infrastructure and integration
Integrating blockchain technology into existing supply chain operations can also present significant technical and financial challenges. For instance, current supply chain machinery such as barcode scanners, RFID readers, and inventory management systems may not be compatible with blockchain technology. Companies would need to upgrade or replace their existing hardware, software, and systems to interface with blockchain platforms. This transformation would likely encounter considerable resistance. This resistance may also be present further up the supply chain, where many of the stakeholders are accustomed to traditional systems and are likely to resist adopting blockchain due to its perceived complexity and implementation costs. For instance, raw materials would need to be assigned unique identifiers at their source in order to have their properties logged onto the blockchain. The time and effort required to do this may prove overly onerous for some producers, especially for smallholders and SMEs.
Blockchain technology also suffers from technical limitations and scaling issues. Certain data types, like images or detailed reports, are ill-suited to blockchain and would require off-chain solutions, which would likely limit the system’s transparency. Additionally, blockchain networks, particularly public ones, can face scalability issues. As the number of transactions increases, networks struggle to process transactions efficiently, leading to bottlenecks, higher fees, and more energy usage. Blockchain itself may also pose energy consumption concerns. Some blockchain networks, particularly those using proof-of-work (PoW) consensus mechanisms, consume significant amounts of energy, putting them at odds with sustainability goals.
Data privacy and regional compliance
Enabling manufacturers to record processing data may also raise significant privacy and intellectual property concerns. Many supply chain participants would need to share sensitive information such as pricing strategies, sourcing relationships, and manufacturing processes. Even with permissioned blockchain networks, many companies will likely be hesitant to divulge this type of data. It is also worth noting that many regions have strict regulations regarding data privacy (e.g., GDPR in Europe), which can also complicate how information is used and shared across the network.
The path to better textile supply chain management
While blockchain technology offers promising solutions to many of the textile industry’s long standing challenges around traceability, transparency, and quality control, its implementation presents significant hurdles, and successful adoption will require overcoming substantial technical, financial, and operational challenges.
At Farrelly Mitchell, our agribusiness consultants are highly experienced in the textiles and fibres industries. We offer tailored solutions to textile producers, processors, manufacturers, and retailers, helping to optimise their supply chains, improve their operations, and integrate more sustainable practices into their businesses. To find out more about our services, reach out to our team today.
