Blockchain tech provides opportunities for progressive food enterprises to be more competitive and contribute to sustainability measures.
Food supply chain management, or FSCM, has long been put forth as a low-hanging-fruit application in the enterprise blockchain space. Now, after years of pilots, the verdict is finally in: Blockchain-supported FSCM works perfectly.
For innovation managers in food companies that haven’t yet dabbled, this is your chance. The big players have put in millions of dollars to prove the efficacy of the tech. All you have to do now is figure out the right application for your business.
Of course, there are still risks — and in this article I’ll provide ways to minimize them — but the opportunity is huge. Done right, you’ll reduce operational expenses, reach new markets, differentiate your products, and grow market share.
FSCM: The perfect enterprise blockchain use case?
Food supply chains check the “blockchain-can-fix-this” box, consisting of disparate and varied participants who would all benefit greatly from an improved ability to coordinate and an agreed-upon version of the truth.
Food supply chains also check the “change-is-needed” box. World Health Organization data shows that almost one in 10 people get sick due to foodborne diseases each year, and close to half a million die. And, despite common conceptions, this is far from being a “developing-world-only” problem. In Europe, which has the lowest estimated burden of foodborne diseases globally, 23 million people still fall ill from unsafe food every year, and 5,000 of them die, according to the WHO data. Unsurprisingly, consumers are demanding more insight into the source of their food.
Then there’s the wastage. Even for basic single-ingredient commodities like fruits and vegetables, failure to adequately manage the supply chain results in huge wastage. As much as a third of all food produced globally, in fact, ends up abandoned before even reaching the shelves. This level of waste is nothing short of a global shame. We produce then throw out more food than would be required to feed the hungry of the world. The pressure to improve sustainability in the supply chain is immense as will be the impact on hunger.
The benefits of improving FSCM by leveraging blockchain solutions are wide-ranging. From a societal perspective, it goes without saying that preventing sickness, death and food wastage is desirable. For businesses and farmers, which are at the front lines in the battle to improve FSCM, blockchain-supported solutions enhance the ability to coordinate. And this can result in logistical efficiency gains that range from reduced food wastage to just-in-time delivery capability, lowered accounting and auditing costs, automated payments, and improved financing options. Businesses can also differentiate themselves by offering more transparency into their products for consumers.
But isn’t it all just hype?
As with all disruptive new technologies, hype tends to inflate expectations. So, in 2018 and 2019, when — somehow — every global food supply chain hadn’t yet been switched to a blockchain-supported solution, the naysayers naturally claimed the technology to be a dud.
The truth, in fact, is that in the last several years, there has been serious innovation with blockchain technology in the FSCM space. While dozens — perhaps hundreds — of pilot projects proved the viability of the technology, the first large scale implementations have only recently begun to gain traction. IBM’s Food Trust is perhaps the most notable example. It is now used by major players like Walmart, Nestlé, Unilever and Tyson Foods, and it’s already bringing tangible benefits. Nestlé, for example, uses the network to track its coffee brand Zoégas from farm to cup, allowing consumers to trace select coffee editions back to different origins in Brazil, Rwanda and Colombia, with sustainability data verified by the Rainforest Alliance, another IBM Food Trust partner.
Another example is Walmart Canada, which uses DL Freight, a blockchain-based supply chain platform, as its national standard for freight invoices and payment management. By the end of August 2020, the system had processed over 150,000 invoices, with fewer than 2% resulting in disputes. Francis Lalonde, vice president of transportation at Walmart Canada, noted:
“Blockchain is enabling a material advance in our smart transportation network, with expedited payments, extensive cost savings, and other benefits among our supply chain.”
These real-world applications of blockchain in FSCM should serve as a wake-up call to innovation managers in food enterprises of all sizes. With the technology now proven, but with adoption not yet widespread, there is currently huge opportunity.
The path to success
It’s important to remember that actually implementing a blockchain-supported FSCM solution is still a journey riddled with pitfalls. As I noted in a previous article, key technical barriers and oft-made network design flaws result in the sobering statistic that as few as 5% of enterprise blockchain initiatives make it to production — and the cost of failure is high.
In the FSCM space, key challenges include engaging enough stakeholders in a given supply chain and integrating data from disparate systems. With that said, and with the opportunity in mind, here’s what you can do to maximize your chances of success in bringing a blockchain-supported FSCM solution:
Provide unique value-add.
Deploy quickly and efficiently.
Offer a cost-effective and user-friendly platform.
Provide incentives for first-mile producers.
Blockchain-supported FSCM solutions, which have been proven to solve many of the problems of the status quo, are still in the early stages of adoption. This means there is currently a huge opportunity. With the right approach, forward-thinking innovation managers in food enterprises can set up their companies to lead the change and, in the process, strengthen their business.