Food supply chain can reap benefits from use of blockchain

Chain Business Insights report highlights areas where technology improves processes

One of the great vulnerabilities in any nation is the food supply. The movement of food is dependent on many entities ensuring compliance with regulations, proper temperature control, proper handling and cleaning and more, including security.

That is where blockchain technology holds great promise. Blockchain is a trusted, encrypted system of nodes or “blocks” that record data points and place those into a ledger. Typically managed by a peer-to-peer network, a blockchain is a way to ensure protocols are being met and allows authorized users throughout the chain to see all the transactions.

As transportation networks gain more exposure to blockchain, new uses are being dreamed up. A new report from Chain Business Insights explores how blockchain can be used within the food supply chain to drive efficiency, transparency and trust.

“The food supply chain comprises countless players that are functionally and geographically diverse. Many of these entities are largely unaware of each other, and have very different commercial agendas,” Ken Cottrill, co-founder and research principal at Chain Business Insights explains. “This fragmented structure inhibits the free flow of information up and down the supply chain.”

Titled “Blockchain and the Future of Food: Driving Efficiency, Transparency and Trust in Food Supply Chains,” the report explains how blockchain can break down those information silos to improve visibility and traceability of the nation’s food.

The report tracks blockchain’s potential in all aspects of the food supply chain, from farm to manufacturer, from manufacturer to stores and restaurants or the end user, and everyone in between.

Shifting consumer buying patterns, demographic shifts, safety and security and the fight against waste, fraud and regulations are among the areas the report tackles.

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The report also addresses the growing online buying market, led by many “meal-kit” companies such as Blue Apron, but also encompassing large companies such as Walmart and Amazon, who are now shipping food through their networks. The online food market, Chain says, is estimated at $210 billion.

“The efficiency of last-mile – the final delivery to buyers – is all important,” the report notes. “Foodservice companies must ensure that online orders are received and processed quickly, and delivered speedily while meeting required quality and safety standards.”

Getting food delivered in the last-mile is not easy, as companies like SpoonRocket, which burned through $13.5 million in investment capital before going bankrupt in 2016, found out.

“Clearly, the food business is undergoing far-reaching change,” notes Peter Harris, co-founder and research principal at Chain Business Insights. “These changes coupled with long standing structural issues, pose challenges that lend themselves to blockchain-based supply chain solutions.”

Chain Business Insights identified at least 13 companies working on blockchain within the food supply chain.

“Despite the obstacles of implementing blockchain, we believe that the food industry and its supporting supply chains represent one of the most important applications of the technology,” Sherree DeCovny, co-founder and research principal at Chain Business Insights concludes. “Given the potential benefits and promise offered by blockchain-based applications, we believe that it’s not a question of whether they will be implemented – but when.”

One of the primary benefits of the blockchain is the traceability of food in the supply chain to show chain of custody and determine its origins, the report says.

“In addition to traceability, food supply chains are highly fragmented and involve various enterprises in the end-to-end process of creation to delivery,” the report says. “Moreover, participants can be geographically dispersed and perhaps have no prior business relationship. Hence, establishing a framework to promote trust where relatively little inherently exists is important.”

Blockchain can eliminate lengthy manual processes and cut down on errors, all of which can improve the food quality and speed up the process of moving the product to its ultimate destination, the report adds.

“Especially for major distributors and retailers, forming a holistic view of a supply chain, and the gathering and sharing of appropriate data to improve efficiency, reduce fraud and comply with regulations is challenging,” the report says. “That is because in existing models, data resides in silos within individual supply chain participants.

And this is the exact use case for blockchain technology – to connect separate parties through a unified and trusted electronic system.

The use of smart contracts (electronic contracts that include triggers to execute computations) and a shared ledger system ensures everyone within the supply chain has visibility and trust of the goods movement.

Among the benefits of blockchain, the report notes, is traceability, verification (of parties), transparency, payments and analytics data to improve efficiency and lower costs.

Walmart is running a pilot program using IBM’s blockchain system to track mangoes.

In February, Frank Yiannas, vice president of food safety for Walmart, presented at IBM’s Genius of Things Summit at Watson IoT headquarters in Munich, Germany, on the pilot. To show how important blockchain can be in the supply chain, Yiannas relayed a story of an e. coli outbreak in spinach in 2006.

“FDA came out in September 2006 and said, Americans don’t eat spinach, there is an outbreak going on,” he said. “You know what retailers and food service companies across the nation did? All spinach was pulled nationwide. You know how long it took FDA to trace back the source of that spinach to the original farm? Two weeks. For two weeks there was no spinach served and when it was all said and done, they found out it was one supplier, one farm, one lot, one day of production. An entire industry killed, all the farmers’ livelihoods [threatened] because they weren’t able to track and trace efficiently.”

In its mango pilot, the fruit is being tacked from the farm to the store. Each step of its journey is being recorded in a blockchain and will be reviewed. “Traceability in the classic sense is one step up, one step back. This is the mango, where did I get it from, where did it go? It defines attributes that are what, where and when,” Yiannas explained. “Today, the way this is done in the food system is through disparate methods, mainly on paper, so you can never have a long view of the food system. You have to piece it together.”

For the supply chain, blockchain may be the holy grail that secures the nation’s food supply and ensures that what each American eats is both fresh and healthy.

The entire report, Blockchain and the Future of Food: Driving Efficiency, Transparency and Trust in Food Supply Chains, can be purchased at www.chainbusinessinsights.com.