The digitalization of supply chains, specifically the use of blockchain technology, has the potential to disrupt large food distributers, like Sysco Corporation.
Sysco is a large US-based distributor of food and other food products. Its customers include restaurants, schools, hotels and other venues that serve food. The company has approximately ~75% share of the US food distribution market as of Q2 2017 as well as a large international market share. While Sysco’s market share is large, the company acknowledges often that its industry has few barriers to entry.
In the food supply and distribution context, digitalization of supply chains entails increased transparency throughout the system, which drives better supply chain planning, better customer service, less inventory and fewer costs. Here, we analyze the use of blockchain in food product supply chain digitalization, which is an emerging industry trend. One of blockchain’s key predicted benefits is its ability to keep track of every action touching a food product. This means faster traceability when food recalls happen because a single ledger can provide management information on where a shipment has been or was contaminated. Because of this benefit, many food producers like Dole and distributers and sellers like Walmart are already collaborating with IBM to develop a blockchain for their food supply systems.
Digitalization with blockchain also produces many consumer transparency benefits, such as less food fraud, better traceability and therefore marketability for ‘true’ organic products, and higher sustainability of the industry as a result of less food waste. Many start-ups are springing up to promote these consumer transparency benefits. Because of these benefits to customers and consumers, the emergence of a food distribution supply chain digitalized with blockchain should be of serious concern to the management of Sysco. Despite being the largest food distributor in the US, Sysco has made few strides towards getting ahead of this emerging industry trend. In an industry with low barriers to entry and potentially high recall-related costs stemming from even small mistakes, Sysco’s management should ensure the company is doing all that it can to improve the underlying technology used to manage its supply chains to ensure maximum traceability and transparency.
As it currently stands, Sysco’s management has adopted a plan for ‘digital transformation’ to be implemented in the next 3-10 years that addresses the general food product supply chain digitalization trend, but fails to address the newer industry trends concerning the use of blockchain. For example, the company is digitalizing some aspects of its supply chain to better serve its customers and growing vertically by providing a point-of-sale systems app for restaurants to help them better manage orders and costs. But these initiatives won’t be enough to stay ahead of the industry.
Therefore, I would recommend that Sysco’s management team collaborate with other industry leaders and IBM in developing the best food supply chain blockchain system in the short term. Without getting in on the ground floor, it will be harder for Sysco to find an adoptable product down the line. Regarding medium term goals, Sysco can become a market leader by becoming more transparent and sustainable. Sysco should task its small ventures group with figuring out a way to label organic products to provide high levels of traceability, such as having a QR code on each product that when scanned, shows the consumer all of the product’s touch points. This system would build trust with both customers and consumers. Sysco should also develop and track a credible sustainability measure concerning how much food is wasted throughout the supply chain. It could then use this measure as a way of communicating to sustainability-conscious customers that the company is thinking about and improving its sustainability.
Some open questions to consider:
- How do others think existing market participants will behave going forward. Have these existing companies not yet jumped in due to fear of sharing data with companies like IBM?
- Separately, what are the implications of creating open ledgers on companies’ supply chains that could show national security-sensitive data on things like shipping or flight routes?
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 Alicke,K.,D. Rexhausen, and A.Seyfert, “Supply Chain 4.0 in consumer goods,” McKinsey & Company
 Robert Hackett, “Walmart and 9 Food Giants Team Up on IBM Blockchain Plans,” Fortune, Aug 22, 2017. [fortune.com/2017/08/22/walmart-blockchain-ibm-food-nestle-unilever-tyson-dole], accessed Nov 2017.
 Kim S. Nash, “IBM Pushes Blockchain into the Supply Chain” Wall Street Journal, July 14, 2016. [wsj.com/articles/ibm-pushes-blockchain-into-the-supply-chain-1468528824], accessed Nov 2017
 Michael J. Casey and Pindar Wong, “Global Supply Chains Are About to Get Better Thanks to Blockchain” Harvard Business Review, March 13, 2017. [hbr.org/2017/03/global-supply-chains-are-about-to-get-better-thanks-to-blockchain], accessed Nov 2017
 Mitch Wagner, “Sysco Looks to Multi-Cloud for Digital Transformation” Enterprise Cloud News, Aug 30, 2017. [enterprisecloudnews.com/author.asp?section_id=570&doc_id=735845], accessed Nov 2017