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The Ultimate Guide To

Blockchain In The Food Supply Chain

Everything you need to know.

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Time to Read: 15 min | Audience: Food Producers, Distribution & Transport Companies, Retailers | Last Updated: June 2019

Introduction

Today's Food Supply Chains Are Incredibly Complex — Leading To Increased Food Safety Incidents & Food Fraud

The way food is produced and consumed has drastically changed in the past 50 years.

While people traditionally bought local, in-season, and whole or minimally-processed foods, today's shoppers are always looking for an enormous variety of ingredients and food products that include novelty items or specialty foods (e.g., gluten-free, vegan, or allergy friendly) while demanding always fresh produce all-year-round.

This means that food travels farther and supply chains become more complex. The average American meal has traveled between 1,500-2,500 miles. This journey from growing, harvesting, processing, packaging, distributing, transporting, and sitting on wholesale and retail shelves to consuming includes 15 to 30 hand-off points, depending on the food. Oftentimes, produce spends half of its shelf life traveling to the store, putting it at a higher risk for spoilage. 

Consequently, food safety incidents have skyrocketed. For example, the number of Class I recalls of meat and poultry increased by 83% between 2013 and 2017. And the consequences are costly: Every year, 1 in 6 consumers gets sick with a food-borne illness, 20 million pounds of food are wasted due to food recalls, and businesses lose between $30 million and $99 million on the average food recall.

But food safety concerns are not the only issue. Food fraud through product adulteration, mislabeling, and other misleading tactics has increased significantly, amounting to more than $65 billion in economic losses every year — not to mention the plummeting consumers' trust in the food industry as a whole and certain products or brands in particular.

 

Massive Tidal Shift Towards Sustainability & Traceability

In the past few years, consumers in general but millennials in particular, have become increasingly health-conscious as well as aware of the impact their food choices have environmentally and socially.

They are demanding traceability of the products they consume, including information on where and how ingredients were grown, when they were harvested, and much more. In addition, food supply chain members face increasing regulatory compliance pressure as the FDA and other governing bodies require more transparency and better traceability.

Some leading food companies, such as Tyson Foods, Nestle SA, Unilever PLC, and Bumble Bee, as well as retail giants like Walmart and Carrefour, see this movement as an opportunity for creating a sustainable competitive advantage. Not only do these innovative leaders set sustainability goals for themselves and their partner ecosystem (e.g., Walmart's 2025 Zero Waste goal), but they also drive Digital Transformation initiatives to revolutionize their supply chains — utilizing powerful new technology like blockchain and smart sensors. 

Blockchain 101: Definition & Characteristics

Blockchain is a decentralized ledger of shared, consensually verified blocks of information so all participants can access, inspect, or add, but never alter or delete records — making the data immutable.

While many people immediately think of Bitcoin and cryptocurrency, blockchain is a versatile technology that can be used in many other scenarios outside the financial context. So, let's have a look at what blockchain is at its core:

Blockchain is a decentralized ledger technology that is based on a concept presented in a Bitcoin whitepaper submitted by Satoshi Nakamoto in 2009. This implementation included the first blockchain database. The technology has evolved since then, but the basic concept still stands. To avoid the double-spending problem of digital currencies, blockchain relies on a peer-to-peer network that stores and manages data blocks in multiple decentralized locations. These blocks are sequenced (or chained together), mutually and consensually verified, and immutable (cannot be changed, altered, or tampered with).

BlockchainExplained_CentralizedDistributedDecentralized

While traditionally there was one data master and one file owner (centralized like an Excel Spreadsheet on your computer) or one file owner and many database copies (distributed like cloud computing), blockchain treats every member as an equal owner of the data — without any central master (e.g., dedicated server) or intermediary (e.g., a bank). This means that there is a permanent, never-ending trail of shared information that cannot be altered or deleted, only accessed, inspected, and added to.

 

There are certain characteristics that every blockchain has to meet.

  • It is immutable. One of the key benefits of a blockchain is its immutability which is achieved by duplicating all transactions to a collection of nodes containing a digital ledger of all previous transactions — making it tamper- and corruption-proof.
  • It is permanent. To ensure immutability, blocks of information can only be added, accessed, and inspected, but never deleted or altered — making the blockchain a permanent record of transactions.
  • It is fully transparent. All participants of a blockchain are equal members with the same access to all stored data blocks and transaction history. This provides the greatest level of transparency.

  • It is decentralized. In contrast to distributed environments (e.g., the cloud), the blockchain stores the exact same data on all nodes on the network. There is no master, no intermediary, or central authority.

  • It enforces democratized, consensus-driven voting. To add a new transaction to the blockchain, every node independently has to check the validity of the information and the majority has to agree on it. This process is called trust verification. Consensus models provide rules for validating a block, but they are often very resource intensive.

  • It uses enhanced security. In addition to its decentralized nature, blockchain also cryptography hashes all data using a complex mathematical algorithm where the length of the value remains the same but the value gets changed into something unrecognizable.

Blockchain In The Food Supply Chain

Blockchain: The Equivalent Of FedEx Tracking for Food

In the past few years, blockchain has gotten a lot of attention in the financial sector with regards to cryptocurrency and Bitcoins. However, the versatile technology lends itself to a myriad of use cases, resulting in other industries utilizing its enormous benefits. For example, in healthcare, blockchain can be used to store patient records in a secure, decentralized manner or track the location and condition of expensive equipment.

But maybe more than anywhere else, blockchain has gained enormous traction in supply chain management scenarios in the past 12 months or so — especially in the food and pharma industries! But rather than using the blockchain to store and exchange monetary assets, the decentralized ledger technology is used for tracking, tracing, monitoring, and regulatory compliance. 

You can imagine a blockchain solution in the food industry as a Software-as-a-Service (SaaS) solution that allows you to track your product from the farm to fork — or as Frank Yiannas put it:

"What we're trying to do is create the equivalence of FedEx tracking for food; that at each point in the farm-to-food continuum, when there's a traceability event that occurs — a pass off — the information about that product is recorded in the blockchain network. So that record is not only recorded but trusted because of the features of blockchain being immutable and a consensus mechanism."

As with any new technology, there aren't any standards yet on how to do that, and different vendors have developed different ways to leverage blockchain, ranging from simply scanning a bar code attached to the product (e.g., by putting on a sticker) to more sophisticated solutions using Internet-of-Things (IoT)-enabled smart sensors that are embedded in a pallet, crate, or other transporting unit to monitor the location, shock, temperature, and much more. 

(Please note that the information below refers to a blockchain & smart sensor combination, like Chainvu.)

Use Cases & Real-World Examples

Now that we have defined blockchain and talked about how it is different in the food supply chain from a financial context, let's have a closer look at how blockchain can be used.

While there are too many individual use cases to list, they can be summarized in four functional ways:

 

For Faster Traceability, Better Compliance, and Improved Provenance 

For a lack of a better way, food suppliers and manufacturers needed to be able to track "one up and one back” in their supply chain to be compliant with FSMA regulations. However, times are about to change.

This traditional linear approach transfers the responsibility for traceability and provenance onto the next supply chain participant — making it inefficient, extremely labor-intensive, and too slow in today's complex supply chains that consist of 15-30 hand-off points. It only takes one broken link, e.g., a paper checklist thrown out or not filled out, to bring a food safety recall investigation to a halt. 

 

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Blockchain can reduce the time required to trace an item from farm to table (or the other way around) from weeks to mere seconds. It can also eliminate food fraud by providing trustworthy provenance information to consumers, retailers, and other stakeholders.

 

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This means that with blockchain you can, for example:

  • Instantly determine if any of your currently stocked products need to be removed as part of a food safety incident — significantly reducing the amount of produce or protein that needs to be disposed of,
  • Confidently say that you have traced back all remaining products and none of them are part of a recall — increasing customer trust and protecting the profitability of your products, and
  • Allow your consumers to trace back the food they eat to its source — minimizing the chances of food fraud and often lowering the price sensitivity for your products.

 

For Product Integrity Along The Supply Chain

While most blockchain solutions currently implemented in food supply chains stop at traceability and provenance, we believe it is equally important to monitor the integrity of the product as it makes its long journey from the farm to the fork. Imagine how differently we could approach food safety, spoilage or waste if we could monitor the temperature, shock, location and other important parameters that products are exposed to along their way through the food supply chain!

For example, by using blockchain, any supply chain member can:

  • Monitor the products live — even as they move farther along the supply chain
  • Get instant notifications of any occurring exceptions on the journey (e.g., temperature variations outside an acceptable range or shock that could have caused breakage, how quickly the produce was moved into the cool storage, or if the product was moved outside a predefined zone)
  • Draw conclusions about the integrity of the products
  • Improve the efficiency of the entire supply chain as you now have real-world insights

 

Option 1

 

For Contract Level For Delivery

Another potential bone of contention is the bill of lading. At any given moment, there are billions of dollars tied up in potentially disputed contracts. But time is money, not only for the transportation company's driver who needs to get back on the road, but also for the retailer who needs to get the products on the shelf.

By implementing blockchain with smart sensors, you know even before the truck pulls into your receiving bay if there were any exceptions that could have caused breakage or spoilage. The retailer can make a swift, data-driven decision whether or not to accept the delivery. This means no lengthy inspections, faster contract execution, and speedier delivery.

 

For Smart Contracts & Automatic Payments

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Last, but not least, retailers can expedite the inspection at the receiving bay even further by utilizing smart contracts for automatic contract execution if all predefined parameters are met.

This means that if a shipment has been tracked and monitored throughout the supply chain and the mutually agreed upon threshold of exceptions has not been met, the chances are extremely high that the products' integrity has not been compromised.

Because this process is blockchain-enabled, all parties can trust this conclusion and the shipment can be accepted right away. 

For more inspirational blockchain examples, check out our blog post: "3 Game-Changing Blockchain Applications In The Food Supply Chain That Will Inspire You"

Benefits

Implementing Blockchain in the food supply chain provides a myriad of benefits. Most can be categorized into positive impact on your product integrity and safety, as well as return-on-investment and sustainability. Here are our top 15:

 

Product Integrity & Safety

Full visibility across the entire food supply chain. Today's supply chains are incredibly complex. They include 15-20 hand-off points, and each has its own contamination potential and spoilage-causing conditions. However, current paper-based tracking ("one up, one back") isn't sufficient anymore with the ever-increasing number of food safety incidents, recalls, and fraud. Full visibility across the entire supply chain is paramount — and blockchain can provide it. [Learn more.]

Pinpoint spoilage potential right away. We all know that spoilage is a process, and depending on your products, you will need to maintain specific conditions to minimize rotting, bacteria growth and other processes causing spoilage. If your product has been exposed to potentially hazardous conditions, e.g., temperatures higher than 40F for too long, you can pinpoint potential food safety incidents immediately and act accordingly. [Learn More.]

Ensure food safety, integrity & quality. If you have constantly monitored your products from farm to fork and few, minor, or no exceptions have been detected, you can be confident that your products are safe to consume and have maintained optimal integrity and quality standards. This is especially important as it increases trust among supply chain partners but also with consumers.

Food safety compliance & audit trail. Complying with food safety regulations and providing a complete audit trail is something the food industry has struggled with in the past as there were no adequate systems to provide this level of insight across the entire supply chain. With blockchain, this becomes a complete no-brainer as regulatory bodies are simply made a member of the blockchain, providing them with the same complete and immutable audit trail. 

Identify & trace back contaminated goods in seconds. Because all records are being stored in the blockchain, visible to all members, trace-backs can be done in a matter of seconds, rather than days or weeks. This enables you to quickly and easily identify potentially contaminated goods in case of a recall.

Instant updates about environmental discrepancies. Traditionally, once a product leaves your hands, you lose control over how it is stored and transported. But by combining blockchain with smart sensors, like Chainvu's Intelligent Sensors, you are able to keep tabs on environmental factors that could compromise the safety, quality, and integrity of your product, such as temperature, humidity, light, pressure, and more. Should an exception be detected, you (and all other members of that supply chain blockchain) will receive an alert right away.

Notifications if goods move outside of predefined zones or experience shocks. Just as with environmental factors, blockchain solutions using location, motion, and shock sensors can alert you if your product is being moved outside a predefined zone, loaded onto a truck, or was exposed to potentially damaging shock.


Return on Investment & Sustainability

Reduces labor across the entire food supply chain. Filling out paper check lists isn't only boring, tedious, and unreliable, it also takes labor to create, maintain, store, and search records. With blockchain, all transactions are available with a click of a button — significantly reducing the amount of resources and time required.

Allows you to execute smart contracts automatically. Smart contracts are financial transactions automatically executed if all parameters of the contractual agreement between parties have been fulfilled, e.g., a retailer can automatically expect a shipment of raw chicken without lengthy inspections and costly disputed bills of lading knowing that the chicken arrived safely. This saves not only time, but also resources and money.

Enables you to trace food safety incidents fast and efficiently. Food safety recalls cost businesses billions of dollars every year — with the vast majority of direct costs attributed to the retrieval and disposal of potentially contaminated goods. With 100% traceability in the blockchain, you can trace any product within seconds.

Reduces food waste. By tracking and monitoring all goods in your supply chain, you know which products are safe and which aren't. This drastically reduces the amount of food wasted in case of a recall, as only contaminated products are thrown out. In addition, the constant tracking and monitoring also results in less food waste as the supply chain becomes more efficient.

Enhances your brand's sustainability. Less food waste and spoilage means less food has to be produced and trucked around. That is not only cost effective, but also has a huge impact on the sustainability and carbon footprint of your company. Being able to prove that will lead to less price sensitivity (as millennials are willing to pay more for sustainable products) and other competitive advantages.

Satisfies your customers' demands for traceability. More and more consumers are becoming aware of the impact of their food choices. They demand cleaner, healthier, and better-tasting foods — and while they are willing to pay a higher price for that, they also require proof for the marketing claims. For example, your consumers want to trace back their steak to the cattle farm in Texas that only raises grass-fed Angus Beef. 

Improves your brand integrity and reliability. Improving the visibility, transparency, and traceability across your supply chain has many benefits, but maybe one of the most important is that it directly correlates with your brand's integrity and reliability. This directly influences consumer trust and loyalty.

Rapidly generates a positive Return-on-Investment. Last, but not least, implementing blockchain in the food supply chain can have great implications on your bottom line — not only by avoiding costly recalls, but also by letting you build a brand that better aligns with your consumers' demands for sustainability, traceability, and provenance. 

Challenges

While there are many benefits to implementing blockchain in the food supply chain, there certainly are also challenges.

Garbage In, Garbage Out. Let's start with one of the biggest misconceptions about blockchain: You cannot blindly trust the data on the blockchain. While it is true that the transaction data stored on the blockchain is immutable and therefore fraud- and tamper-proof, it is dangerous to assume that the information itself is true without additional safeguards because the person or organization that adds the data to the blockchain could simply add false information. So the old IT mantra applies here also: if you put garbage in, you will get garbage out. One sure-fire way to eliminate this is to use tamper-proof, secure sensors that input the data while limiting human error.

Lack of standards. Another challenge organizations are currently facing is the lack of standards. Because blockchain is still an emerging concept, standards are still in the infant stage of being defined and agreed upon. This needs to be taken into account when implementing blockchain solutions that need to communicate with different systems and/or many third parties.

Different solution approaches on the market. As with any emerging technology, there are many different blockchain solution vendors that take entirely different approaches to solving smart logistics problems — anything from pure sensor companies, holistic solution providers (like Chainvu) that combine blockchain, sensors, and apps, to large software manufacturers like IBM or SAP that offer blockchain technology. Time will tell which approach will thrive, but organizations looking to implement this need to be aware of this and do their homework to find an approach that best meets their needs.

Competition vs. Cooperation Mindset. One of the biggest roadblocks on your way to adopting blockchain in the food supply chain is that you and all of your supply chain partners must switch their mindset from competition to cooperation. Due to the nature of the beast, you need everyone on board and in support — or you will fail.

Blockchain Fatigue Due To Lack Of Business Case. According to Gartner, 90% of blockchain-based supply chain initiatives will suffer 'blockchain fatigue' due to a lack of strong use cases by 2030. It is imperative that you resist the urge to hop on the blockchain bandwagon too quickly and be sure to define not only a water-proof business case, but also the supporting business processes.

If you keep this in mind, the benefits you will experience clearly outweigh the challenges you might run into along the road. 

How To Get Started

At this point, you are probably wondering what the best way is to get started. We always recommend our customers do two things first: get internal (executive management, business units) and third-party (your supply chain partners) buy-in and run a trial or pilot. A trial is a 30-day test run that lets you experience and evaluate the features and functions of a solution, while a pilot is a longer commitment (usually 3-6 months) that better showcases the benefits of a solution.

 

Get Executive & Partner Buy-in

Let's start with getting buy-in first. Unless you are a retail giant with tightly controlled supplier relationships, you will need to get a variety of different people with various goals and their own agendas on board. To do this, we recommend looking at the risks your specific supply chain faces: Do you have a high risk of food safety incidents? Are you constantly disputing shipments and bills of lading? Find your biggest problems that could have disastrous implications for your business or cause great disruption/cost.

To get all parties to agree on the problem and see why blockchain is a necessary step to take in solving this issue, map out the cost of doing nothing (remaining in status quo) and explain your possible solution approaches before recommending blockchain as the preferred way to go. Be sure to explain why without getting too technical. Then outline the short- and long-term benefits, direct and indirect cost savings, etc. as well as a detailed adoption road map including which steps each participant is expected to take. 

[For a more detailed walk-through, please read our article in the Food Safety Tech Magazine.]

 

Set Up A Trial

Before committing to a solution, it is a good idea to take it on the road for a test drive by setting up a trial. Each vendor will have different conditions on how they would like to run a trial, but keep one thing in mind: Pick one specific problem you would like to solve (e.g., track pasture-raised eggs from A to B) and define specific, measurable, attainable, relevant, and timely goals to measure the effectiveness of the solution you are testing.

To do so, be sure to pick a problem in clear line of sight with tangible business impact — while limiting potential regulatory compliance barriers as well as minimizing any business disruption. This will allow you to create an exciting business case your executives will be happy to sign off on.

 

 

We hope you found this information helpful in determining if blockchain is the way to go for your food supply chain. Please feel free to contact us if you have any questions, and don't forget to download an offline copy of this page for your reference later.

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