Supply chains
Why food and drink firms should learn to love blockchains
The blockchain model has been trialled in other industries and supply chains, but food and drink has been left largely untouched. Until this summer, that is, when IBM made a high-profile announcement of collaboration with some of the largest players in the sector, in the US and beyond.
But, what exactly is it?
“It’s a trusted system of record. Across an ecosystem or network, people can use this as a way of storing data without losing control of it,” says blockchain vice president at IBM Brigid McDermott.
Electronic data interchange has long allowed the digitisation of data, but blockchain enables participants to share that data in a non-hierarchical, secure way, she adds.
Trust and reliability come in the form of a record, which can be added to with new transactions, but in such a way that this fresh data forms a new, fixed block incorporating all the transactions that preceded it.
As such, nothing in the chain of data can be altered, added to or – importantly – taken away. IBM is putting forward its own platform (see box below) as a basis for collaboration with Walmart, Unilever and Nestlé, among others, to identify where blockchain can provide the greatest benefit.
But it is not the only provider with a current focus on food and drink. Like IBM, Swiss-based Ambrosus uses the smart contract as a starting point. While it is based on Ethereum open platform, Ambrosus is a private system offering permissioned access.
Chief executive Angel Versetti says: “Blockchains in general, and Ambrosus in particular, not only create transparency in the supply chain, but permit real-time auditing and automation of quality control and supply chain management. This offers tremendous value to companies.”
Traceability and food safety (back to top)
When it comes to food supply chains, the benefits IBM is emphasising publicly are more to do with traceability and food safety than anything else.
Within blockchain, the ability to track back quickly and reliably is based on the need to validate every step and stage written into the supply contract. In the case of product recalls, it can allow the source of contaminated product to be detected swiftly and efficiently.
McDermott cites the example of a salmonella outbreak during the summer, which affected more than 100 people across the US. Without the benefit of blockchain, she says, it took over two months to trace the pathogen back to papaya from a single farm in Mexico. “In the meantime, product from Guatemala and other parts of Mexico was being pulled off the shelf.”
Damage can be longer-term, too. “A few years ago, an outbreak of E.coli in spinach led to the vegetable being taken off the shelves everywhere,” McDermott recalls. “It was down to one shipment from a single farm, but it took the industry years to recover.”
For its part, Ambrosus is making a “powerful monitoring system” for food quality and safety an integral part of its offering. In the past, says Versetti, the challenges of cost and calibration stood in the way of any such system.
“There’s no point storing information on the blockchain if the data from sensors and analytical tools can be tampered with, manipulated or modified,” he says.
“As such, we’re assuring the transparency and integrity of data collected by developing high-tech sensors and innovating in the fields of biosensors and nanosensors.”
Food safety is a primary concern with this monitoring, says Ambrosus, whether at the level of foodborne diseases or allergens. But more quality-related criteria such as fat type could also be analysed.
If the core issues for Ambrosus are safety and quality and, for IBM, traceability and trust, key themes for UK blockchain operator Happerley are provenance and consumer needs.
Heading up a team with a background in developing online systems in other areas, founder Matt Rymer turned his attention to supporting ingredients from the family farm – and from further afield.
“The blockchain preserves evidence of provenance,” he says. “But is that evidence only being revealed internally, within the supply chain, or is the consumer benefitting?”
Happerley uses its version of a blockchain to operate a validation and certification system for food ingredients. As Rymer puts it: “The premium is in the provenance.”
The interest of consumers in the origins and background of their food has never been keener, he says. “There’s a widespread awareness that consumers, and especially millennials, want to know more.”
Nor does he believe that the drive to reveal provenance will stop at top-tier products. “In due course, the idea that provenance is the preserve of the middle classes will be smashed to pieces,” he says.
Rymer sees Happerley’s version of the blockchain as a legacy project, which will evolve into a consumer-owned co-operative over the next two years or so. As a project, this could be just as exciting to watch as anything from the biggest names in technology, retail and consumer goods.
The IBM and Happerley visions overlap in the conviction that, in order for it to work effectively, any solution must involve even the smallest suppliers.
“Everyone from small farms to government regulators have to see the benefits,” says McDermott. “We’ve been focusing on ensuring that the value proposition is clear, even for the single- acre farmer. They may not have an IT department but, using an application programming interface, they can access it via a smartphone, for example.”
IBM apparently hopes to build up sufficient momentum across specific food and drink supply chains to make blockchain a de facto standard. “Those who choose to be part of the system will be saying they are prepared to share information, though in a way that’s not open to everyone,” she says.
In partnership with Walmart, the company has moved on from trials of its model in a linear supply chain to something more complex.
“We’re saying, let’s involve multiple suppliers,” McDermott explains. “Does the solution deliver an ability to provide trusted information across an ecosystem?
“We’re trying to bring retailers and suppliers together; we don’t want it to be seen as something that’s handed down from on high by retailers.”
Value of the model (back to top)
Meanwhile, even those with no blockchain system of their own recognise the value of the model.
“The ability to design blockchains that provide secure farm-to-fork tracking solutions is going to revolutionise the way supply chain systems operate in future,” says Olivier Deniaus food industry consultant at management consultancy firm Vendigital.
“It’s important for businesses at one end of the chain to know what’s happening at all levels of the supply chain. Problems can arise if working practices are illegal or unethical, for example, or if quality standards in place further up the chain are not being adhered to lower down.”
Providers of supply chain systems have been reassured that blockchain platforms will interface with their own software, as much as is necessary.
The challenges could come elsewhere, says Mike Gallagher, sales director for food and drink enterprise resource planning technology at Sanderson.
“Blockchain data is resistant to adulteration once provided, but if the source data is deliberately falsified at origin – and potentially with supply-side complicity – then it is not in itself the ‘magic bullet’,” he says.
Buy-in across food and drink supply chains will no doubt hinge on the scale of the additional costs for firms and how they are distributed.
From Ethereum to ‘solution as a service’
Blockchain technology might have common origins with Bitcoin and the Ethereum open platform but, according to IBM, it has since moved well beyond that in developments around the Hyperledger project – an open-source collaboration hosted by the Linux Foundation.
Importantly, from a business point of view, Hyperledger has fine-tuned blockchain as a platform where access is permission-based rather than public.
IBM has introduced its own blockchain ‘solution as a service’ available via the IBM Cloud. This model has as its backbone a smart contract, which defines rules of access, security protocols, interactions with the partners’ own systems, and so on.
Policies on who can join a network are agreed by consensus as are the channels within which two or more parties can ‘talk’ privately to each other.
Interaction can be cryptographically encoded so it is unavailable to parties without the requisite access rights. In some cases, parties may be entitled to know that a transaction took place, but not to see all the data behind it.
