Blockchain and Transparency in the Food Supply Chain
Bitcoin has been around for a while now, and so have its proponents. Blockchain the underlying technology of cryptocurrencies like bitcoin is poised to revolutionize the finance industry and has the potential to transform the world economy.
And of the potential new avenues for blockchain, perhaps none is more promising than the food supply chain.
Where traditional paper tracking and manual inspection systems can be open to fraud and inaccuracy, blockchain technology provides a permanent record of transactions. This allows companies to automate information-gathering at all aspects of production, recording things like product age, price, quality, certification, and location, which can help prevent counterfeit products. Blockchain technology can also potentially improve access to funding as the improved coordination and transparency that come with product traceability translates into more efficient regulatory processes, making it easier for lenders to identify worthy recipient firms.
An immutable ledger can potentially store transactions that would otherwise be difficult to cross-reference, allowing firms to connect a retailer sourcing a product, and a bank providing the money for that product order. In traditional enterprise resource planning (ERP) systems conflicts in the supply chain would be costly and time-consuming to find. But Walmart was able to use blockchain solutions to shrink the time to receive tracking info, a task that previously took a week, down to 2 seconds. This can make things like food recalls much faster and cheaper. Walmart China collaborated with VeChainThor Blockchain to create the Walmart China Blockchain Traceability Platform. In the USA the company has implemented IBM’s blockchain for food traceability solution.
Walmart recently put out a press release on this issue, with Frank Yiannas, Vice President of Food Safety saying that its customers “deserve a more transparent supply chain. We felt the one-step-up and one-step-back model of food traceability was outdated for the 21st century. This is a smart, technology-supported move that will greatly benefit our customers and transform the food system, benefitting all stakeholders.”
Oracle, a leader in ERP systems, identifies three key elements to maintaining a healthy food supply chain: transparency, traceability, and trust. Because of the lack of interoperability among ERP systems along the supply chain, information is frequently unverified or withheld.
Transparency is the food system is gaining importance for a lot of customers globally. The traditional systems required that any indication of abnormal temperatures led to the destruction of the whole shipment, while other abnormalities would frequently go unchecked. By using temperature sensors on each pallet or even each case, firms can remove specific items rather than entire shipments, leading to a more focused and effective recall.
Startups Working in This Space
We have already mentioned how big companies like Walmart are taking advantage of this technology to offer greater consistency and transparency to their customers. Albertsons is another example: they used blockchain technology to do a traceback on bulk romaine lettuce back in 2019.
Major tech companies like IBM and Oracle are also offering blockchain solutions: Nestle and Carrefour partnered with IBM for their GUIGOZ Bio 2 and 3 infant milk range, and IBM is also working with Ecuadorian milk processor El Ordeño, Cermaq salmon, and the Organo Corporation to provide transparency and streamline the quality control process for their products.
Nestle is also collaborating with blockchain platform OpenSc, and Carrefour uses IBM’s Food Trust platform to track food products, offering information to consumers.
While it’s clear that large companies can leverage their market position and influence to guide decision making, there are also smaller companies that are utilizing the power of blockchain in new areas:
• Supply chain startup Provenance has had some success in tracking ethical tuna sourcing in Indonesia.
• Tech startup Monegraph uses blockchain technology to enable ownership and usage of video clips and brand-sponsored content, and sharing of revenue among creators, publishers, and distributors.
• B2B trade startup Skuchain targets the global trade and finance market with supply chain finance products.
• UK-based app Breedr launched in 2019 and seeks to increase certainty and productivity in livestock production.
Analysts across the world opine that the current food sourcing and production systems are unsustainable and the need for innovation is bigger than ever.
Consumers are seeking information about how the source of their food, how it is produced, and assurance that it is safe. These changes in customer preference are resulting in increased adoption of digital technologies such as blockchain, artificial intelligence, and near field communication by food companies across the globe – a trend which is going to further explode in the near future.
What kind of limitations might affect the adoption of blockchain technology in the food supply?
For one thing. Typical blockchain technology, like Bitcoin, is based on open records with anonymous users. This is exactly the opposite of what a supply chain needs, as they must monitor their users and protect the privacy of the firms involved.
Blockchain also requires a consensus protocol, which is usually achieved by having participants verify each transaction. This means that the Bitcoin network can handle less than 400,000 transactions a day. In industries that handle potentially billions of transactions, this is simply unfeasible.
It’s also not clear right now who would profit or lose money from these changes, and most firms are unwilling to take the steps necessary if they don’t see everyone around them doing it. However, with companies like Walmart getting involved, who get to dictate what the firms that sell to them can do, it may not be long before these changes are either widely adopted by big-name brands or legally required through legislation.