Blockchain: The Holy Grail?
“I brought a package of sliced mangoes into my staff meeting. I put it on the desk, and I said to my team, the traceback study starts right now.” Frank Yiannas, Walmart’s Vice President of Food Safety, waited 7 days for his team to track mangoes from farm to store. With blockchain, he has reduced that timeline to 2.2 seconds .
Blockchain—the technology at the heart of bitcoin and other cryptocurrencies—could be the solution to traceability issues in food supply chain management . Blockchain refers to a bookkeeping method that “chains” together entries so that they are very difficult to alter . In the case of the food supply chain, all participants—growers, suppliers, processors, distributors, retailers, regulators, and consumers—can gain permissioned access to secure and reliable information about the state of the food for their transactions . From a single receipt, Walmart will be able to uncover farm origin, batch numbers, factory and processing data, expiration dates, and shipping details . As the food supply chain becomes increasingly complex and global, such information is “the holy grail” for Yiannas .
Failures of the Current System
The current tracking process uses disparate, manual methods that are inefficient and vulnerable to inaccuracy or fraud . Costs include:
- Human loss of health and life. According to the World Health Organization, every year, an estimated 600 million—almost 1 in 10 people in the world— fall ill and 420,000 die after eating contaminated food . For example, the recent salmonella outbreak linked to Maradol papayas ran rampant for over two months, during which time 220 people fell ill . Use of the blockchain network to trace a contaminated product to its source quickly will help curb the spread of foodborne illnesses.
- Food waste. During outbreak scares, retailers must destroy all products that are, in some way, connected to the contaminated batch. According to Yiannas, “It’s the difference between pulling a few tainted packages and yanking all the spinach from hundreds of stores” . In addition, without accurate shelf life data, retailers tend to discard food that is still fresh. Brigid McDermott, Vice President of Blockchain Business Development for IBM claims, “The more that [retailers] have granular information about particular items, the more that [they’re] able to make smart decisions on how [they] merchandise them” .
- Low levels of consumer trust in the food industry. Increasing incidence of food fraud—like the 2013 UK horsemeat scandal—and information asymmetry limit consumers’ ability to identify high quality food  . Amid growing demand for food characterized by certain properties (GM, non-GM, ethical, organic, low carbon footprint, subject to religious constraints, etc.), blockchain will satisfy consumers’ desire for more transparency in the food system .
Walmart: Next Steps and Recommendations
Walmart has already run blockchain pilots with IBM tracking Chinese pork and Mexican mangoes . In the near term, Yiannas hopes to scale in China, stating last week that all 400 of the company’s stores across China are “in active conversation to accelerate the process” of blockchain. “China is probably the place to scale its adoption as the Chinese government is already interested in tracing [the supply chain of food] and Chinese consumers are so tech-savvy,” he said .
In the future, Yiannas hopes to build an ecosystem of multiple players along the food supply chain. He realizes the limits of being able to identify dangerous food within Walmart’s supply chain if other players are still using the traditional system to trace food origins . However, in order to build this ecosystem, Walmart must promote monetization opportunities for all supply chain participants, especially those upstream. Growers and distributors, for example, will be loath to adopt blockchain technology if they do not see a clear value proposition. And, as McDermott warns, “If only one segment of the ecosystem participates…a food safety solution does not work” .
McDermott’s “if” is a big one and poses a legitimate concern for the future of blockchain. A recent survey on blockchain in logistics and supply chain management reveals that, of 152 respondents, only two logistics services companies experiment with blockchain today. Most cite regulatory uncertainty and the concern that different parties will have to join forces as barriers to adoption .
Despite this skepticism, does Walmart have the power to build an ecosystem for the successful adoption of blockchain for food? Is the food industry ready for more openness, or will existing players resist such extreme transparency? If the industry is ready, when will blockchain achieve scale such that the death toll from foodborne diseases drops, food waste declines, and consumer confidence increases?
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