The (block)chain in the food supply chain: what you need to know

Fuller Landau team • March 22, 2018

Have you heard of Bitcoin? Great, now forget about it. You need to focus on blockchain or “distributed ledgers”, the technology behind digital currencies like Bitcoin, and one that has the potential to revolutionize industries.

A blockchain is a digital ledger of transactions that are distributed and immutable, meaning data is easy to share with other users of the blockchain, but once validated, impossible to modify. The magic of this design, in commerce and specifically in the supply chain, is that it provides trust between trading partners using fancy mathematics, without relying on external parties to validate transactions.

Blockchain will likely have a significant impact on the food and beverage sector and nearly every other industry. Unlike most new technologies, it is not just another layer to make things faster or easier. It will revolutionize the business model of trust and how commerce is conducted.

A typical food supply chain requires the movement of goods and information between farms, food processors, manufacturers, distributors, and retailers such as grocers or restaurants. Numerous transportation and logistics providers are required, each with their own methods and systems for tracking and relaying data and product, often relying on Excel spreadsheets and proprietary databases.

The transfer of information in a typical supply chain is inefficient, riddled with paper, and prone to human error. If we think of the supply chain as a single end-to-end process with an objective of efficiently and precisely moving goods and information from farm to consumer, then the value of a shared ledger becomes apparent. The blockchain provides reliable, timely, transparent, and unalterable information about the flow of goods, from start to finish.

Transparency and traceability are limited in current supply chain models. The lack of transparency exposes the process to potential fraud in any number of areas such as the origin and growing methods used in food production. For example, foods labelled “Canadian” and “organic” may in fact have been grown using chemicals such as pesticides and imported into Canada. The use of blockchain technology in the supply chain allows virtually any information about those goods to be stored in a transparent and unalterable way, such that data can be quickly verified, presenting reliable information about each point from farm to consumer.

With the advent of low-cost sensors, granular data such as temperature, pH levels, humidity, and other external factors can now also be tracked throughout the supply chain and stored on a blockchain. This enables operators to market and price products more effectively, creating new opportunities for companies willing to adapt and invest in technology. This level of information and transparency should also encourage a greater degree of ethical behaviour across the industry and empower the consumer with knowledge of the products they are buying.

Food safety is clearly a great concern for companies in the food and beverage sector. Successful companies implement quality controls that ensure goods in the supply chain are safe to consume. The consequences of a failure in ensuring food safety can be damaging, and as the adage reminds us, “it takes a lifetime to build a good reputation, and only minutes to destroy it”. Companies that have experienced food safety recalls know this all too well, with negative publicity leading to losses in market share, and even bankruptcy. The key to reducing the impact of food safety recalls is speed and precision in identifying the issue and recalling the products. A blockchain-enabled supply chain would allow operators to accurately identify the source of goods and act quickly to limit exposure. For example, in a recent blockchain test, Walmart reduced the time to trace the origin of goods in their supply chain from two weeks to only a few hours.

Currently, the cost to develop and implement blockchain technology throughout the supply chain is high, and therefore it is the major players such as Walmart and IBM that are leading the way. During this development stage, we encourage our clients to educate themselves of this technology, explore its potential, and consider its implications to their businesses. We anticipate that, over time, the technology and tools will become more readily available, the cost to participate will be reduced, and blockchains will become a standard tool in virtually every supply chain. Those businesses that have actively integrated the blockchain into their long-term strategy will successfully transition into this new business paradigm.


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