In the food industry, blockchains are on their way to becoming the technology to set your sights on. Why? Because they facilitate the exchange of data among professionals and could significantly impact the supply chain.
The global food chain is complex, bringing together farmers, warehousing, shipping companies, distributors, and grocers. Involving so many different parties also means involving many different types of record keeping methods, from Excel sheets to emails to paper printouts.
Not only is this system inefficient, it’s also imprecise. When you buy a vegetable at your local grocery store, the brand listed on the sticker may have no idea which farm the vegetable came from. Therefore, brands may not be sure how to react when something goes wrong.
The World Health Organisation estimates that almost 1 in 10 people become ill every year from eating contaminated food, with 420,000 dying as a result. Food crime is a rising trend, and Arc-net points to national reports claiming 30 – 40 percent of the food we eat is either adulterated or mislabelled.
Many are aware of high profile incidents of food fraud, from the 2013 UK Horsemeat scandal to the 2009 Salmonella peanut butter outbreak and the recent scandal surrounding two of Brazil’s largest meat production firms.
While according to the TÜV SÜD Safety Gauge Food Segment Report, only 64 percent of companies say they can trace every component of their products through the supply chain. In a time dubbed the “era of transparency,” this is disconcerting to say the least, and a report released by PwC in 2016 sets the cost of food fraud and adulteration in excess of $40 billion per annum. Regular consumers are affected, but so are national retailers, who unwittingly sell or purchase tarnished products
For consumers, blockchain technology could make a difference. By reading a simple QR code with a smartphone, data such as an animal’s date of birth, use of antibiotics, vaccinations, and where the livestock was harvested can easily be conveyed to the consumer.
Blockchain technology will enable consumers to make more informed decisions when purchasing groceries, reduce food waste, and has the potential to halt the spread of illness by contamination and save millions of lives.
So What is Blockchain?
At its essence, blockchain is a decentralized software mechanism that enables a public distributed ledger system. It allows the tracking and recording of assets and transactions without the presence of a central trust authority such as a bank. Importantly, it relies on public key encryption, or cryptography which makes it difficult for hackers and other cyber criminals to change or steal data. It enables peer-to-peer exchange of data, assets and currencies through rules-based smart contracts in a more efficient, transparent and cost-effective manner. Think of blockchain as a series of data blocks, each containing information about events that have recently occurred. This data can cover any online activity, such as a product purchase, an ownership transfer, a property sale, or a royalty payment. Blockchain data verification and validation is carried out by “miners,” individuals who use cryptographic software and the processing power of their computers to confirm the activity.Each block is securely hashed — meaning it is rendered into a digital representation and the hash is stored in the next block which makes it nearly tamper proof.
Each data block typically contains four pieces of information: a reference to the previous block, the list of transactions including the transaction summary which is created by hashing all the transactions in the block, a time stamp, and optionally a cryptographic proof that ensures that the nodes stay true. The cryptographic proof algorithm varies by blockchain framework, the choice of which is determined by the positioning of the framework’s network security model (public, private, etc.). The blocks are strung together into a chain and broadcast across the network to various nodes. Each node independently validates the blocks and comes to a consensus about the block’s validity before the block is added to the decentralized ledger. This makes it difficult for hackers and fraudsters to introduce fraudulent transactions (as long as a majority of nodes are true), thus ensuring trust and integrity without the need for a central authority (e.g., a bank).
The Value of Blockchain in Supply Chains
With the possibility to improve supply chain transparency and traceability and condense complex supply chain transactions into verifiable, trusted data blocks, there’s promising potential for blockchain.
C. John Langley Jr., Ph.D., clinical professor of supply chain management at Penn State University and coauthor of the 2018 Third-Party Logistics Study, says the increased desire for visibility within the supply chain is driving increased interest in blockchain technology, which breaks each movement down into a block and documents transactions every time a shipment changes hands. Linking the blocks together creates a record for parties involved in the process and provides specific details associated with each movement, which all parties can access.
Blockchain technology can be used to improve the traceability and quality of products by providing reliable information about their origin and status. Aim: provide food products with increased freshness in order to put consumers’ minds at ease. In order to do so, a blockchain relies on three fundamental principles:
- Transparency: since data transferred is accessible to everyone, blockchains help fight against the opacity of supply chains. Supply chain actors can record each step in the manufacturing process of a food product, from its production to its point of sale. This traceability makes it possible to identify any potential problem— contamination of products, breaks in the cold chain— and to take action almost instantly.
- Speedy and secure transactions: with blockchains, information is transferred in a matter of minutes. Once data has been validated as reliable, it is duplicated on various networks to ensure security.
- User collaboration: the way a blockchain works encourages collaboration among the different links in the food supply chain. Information exchanged is verified by blockchain users and then can be consulted by producers and distributors in the food industry, or even consumers.
Blockchain in the food sector
With the implementation of a blockchain, in the food supply chain (producers, suppliers, food processing companies, distributors, retailers, regulation agencies and consumers) participants can have authorized access to reliable information on the origin and status of food products. And each and every one of these actors has a lot to gain:
- Producers: with a blockchain, any attempt to alter a product can be immediately detected and a notification sent to the producer. This detection then prevents the same incident from happening to the distributor. Transparency can also push some sectors towards more ethical and responsible practices (in industrial fishing, for example).
- Distributors: if the wrong product ends up on grocery store shelves, it can be easily identified and removed. Today it takes a number of days, even weeks, to trace back the supply chain (as we saw in the summer of 2017 with the case of contaminated eggs in Europe). With blockchains, we can immediately pull up data and thus avoid the high costs of removing entire batches when only a few products are contaminated.
- Consumers: the transparency provided by a blockchain heightens consumers’ trust. They have the guarantee that labels are reliable and can adapt their consumption habits based on their individual needs— preference for origin, farming or growing techniques, etc.
Using blockchain, food companies can much more quickly trace outbreaks back to specific sources. This could help increase consumer safety while limiting financial losses, as only the products directly impacted would need to be recalled.
Food companies can attach connected IoT tags to shipments, with each shipment assigned a unique identification number. These IDs will be tied to products’ origins, processing data, storage temperatures, expiration dates, and other information. At each stage in the supply chain, employees can simply “check in” the product using its ID number, and the blockchain will securely track the product over time across checkpoints.
Employees can also enter an ID number to see real-time data on a product and its history — a significant improvement over calling up different parties, sending over documents between multiple people, etc.
Limits of blockchain
Our current traceability systems need work, and blockchain technologies could be the evolution they need. Given its architecture, blockchain technology offers an affordable solution to both small-to-medium enterprises (SMEs) and large organizations. However, there are noteworthy limitations.
The amount of information which can be processed is limited. Since all of the information would be out there and accessible, several contracts between organizations would need to be secured for some level of confidentiality to be retained. How to balance confidentiality with transparency would need to be worked out.
The agrifood arena is filled with secrets. Blockchain technology as it is currently being deployed would be problematic for many food companies. For many, blockchain is just a solution looking for a problem. Simply put, some companies, like Walmart, have more power and influence over other companies within the same supply chain.
Blockchain tech has amassed a long list of industries it is poised to revolutionize. Food and health, two of our most fundamental quality-of-life sectors, may be the next to change. We could be looking at a future with higher standards for health and a stronger understanding of our food, with the added bonus of a discounted price tag.
Industry leaders should embrace blockchain as an opportunity and become part of the digitalization strategy currently affecting the entire food industry. As such, transparency, productivity, competitiveness and sustainability of the agri-food sector could be enhanced.
Blockchain startups target food producers
- Provenance, which serves over 200 food businesses with product traceability software. Provenance works with grocers bring shoppers produce data and with seafood companies to highlight fair treatment of their workers, and more. On December 12, 2017, it announced a new partnership with Unilever, Sainsbury’s and others to track social sustainability and financial efficiency across supply chains.
- Walmart, Kroger and others are looking to blockchain to help prevent the 48M annual food-borne illnesses in the US. In August 2017, ten of the world’s biggest CPG and food companies partnered with IBM to integrate blockchain into their supply chains. This cohort — Walmart, Nestle, Unilever, McCormick, Tyson, Kroger, McLane, Driscoll’s, Dole, and Golden State Foods — represents more than half a trillion dollars in aggregate annual global sales.
- Arc-Net teamed up with PwC Netherlands in August 2017 to target food fraud (the intentional substitution, addition, tampering, or misrepresentation of food, ingredients, or packaging), an issue PwC says costs the global economy over $40B per year.
- Brazil-based Bart.Digital, which provides secure financial documentation for small farmers.
- Colorado-based Bext360, which specifically targets fair-trade coffee.
- Ripe.io: San Francisco-based Ripe Technology is developing a system that combines sensors, the internet of things and blockchain to collect data about food quality, safety and origin. It’s testing its system with local farmers in places such as Peterborough, New Hampshire, where the technology is capturing information about tomatoes. The company’s partners in this effort at The Cornucopia Project and Analog Devices.
- TE-FOOD is an example of a new type of company offering a tracking system intended to provide all food industry participants—from farmers and wholesalers to retailers and consumers—with robust information about the products they buy and sell.
Image Source: Resolve Cover Photo; Fredmeyer – Wiki’s common