November 17, 2017 | Digital Supply Chain Transformation Blogs
Blockchain has been the recent buzzword in digital, alongside AI and automation. The application of blockchain technology to food supply chains is significant considering the fast-moving nature of food products and the direct impact on human health.
Blockchain enables processing of large data that is not usually centrally located but rather, stored on a network of computers across a distributed ledger. These computers process each transaction and store a copy of the blockchain which is a comprehensive universal receipt. Every transaction done on individual bitcoin token gets added as a permanent record in the blockchain. This framework is particularly relevant for cases that require transparency, robustness, and transactions that contain proof of validity.
Implementation of blockchain in food supply chain can help address food frauds, illegal production, and help reduce foodborne illness and losses due to product recalls. The horse meat scandal of UK in 2013 with several meat players involved and the milk scandal by the largest milk company in China in 2008 are examples of frauds by large companies. Illegal production is a major issue affecting the seafood industry. Currently, about 10-20 percent of global fisheries are unreported and unregulated. As per a 2015 study, foodborne illness in the U.S. results in a cost of approximately $93 billion/year. Also, food recalls can result in significant costs to companies apart from damaging brand value and impeding future sales. For example, the recent E. coli outbreak in Chipotle resulted in a stock devaluation of 30 percent (in a year) in addition to the decline in sales and expenses amounting to nearly $14-$16 million on crisis management.
Apart from food safety, blockchain can potentially optimize the overall food supply chain. With increasingly global supply chains, blockchain enables provenance and transparency. Food products with varying shelf life can be better managed in different ways. The technology enables data management and visibility across the entire chain (from farm to distributors to retail outlets). Further, the magnitude of data that is generated through blockchain can be utilized through predictive analytics to generate strategies to further optimize supply chains in future and close any existing gaps.
Major food companies such as Nestle, Unilever, Tyson Foods, Dole, Kroger and others have partnered with IBM to explore ways by which blockchain can be used to track food across the complex global supply chain. Walmart has partnered with IBM and Tsinghua University to research ways to improve food tracking systems and food transportation across China. Using IBM’s blockchain platform, Walmart has confirmed the product tracking capability of blockchain technology (through pilots in U.S. and China) from the farm to the end user, tracing every stage of the supply chain.
Thus, as rightly stated by the VP of Walmart, the blockchain technology enables a new era of end-to-end transparency in the global food system. All participants — growers, suppliers, processors, distributors, retailers, regulators, and consumers can access trusted information regarding the source and state of the food for all their transactions. All these participants can also share information effortlessly across a trusted network. Along with enabling food safety, transparency in the food supply chain will aid supply chain optimization which will result in efficiency and cost savings. Secure digital records will provide provenance which aids in building customer trust and brand value. The future application of this technology will depend on aspects such as costs, the possibility of integration with existing IT and procurement systems and scalability across regions.