As consumer and activist pressure for increased traceability and sustainability mounts, and as the world moves into an increasingly technological operating framework, many companies are looking for new solutions to assist in traceability and recordkeeping. Recently, discussion has focused on the potential for blockchain technology to change the information transfer of food supply chains.
Blockchain technology originated in 2009 as a distributed ledger for recording monetary transactions in the Bitcoin network. Transactions between participants on the system are bundled together into blocks, which are then linked to the previous block, forming a chain.
Since each subsequent block is based on the previous block, retroactively changing entries in previous blocks is functionally impossible. As a result, blockchains are said to be immutable, or permanent. Currently, a number of companies are investigating the use of blockchains in a wide range of industries, including financial services, healthcare, land grants and food.
Blockchain presents a new platform for recording traceability information and, in the current efforts of companies such as Walmart and IBM, serves as a direct competitor to track and trace software. Although smaller entities may not have comprehensive tracking systems, many large entities have a proprietary software which allows full traceability through their supply chain.
However, blockchain offers a few advantages over existing systems. First is auditability. Once recorded in a blockchain, information is immutable and can be referenced at any point in the future, allowing future parties to verify that the information has not been tampered with.
Second, well-constructed blockchains can intake a wide variety of information rather than be restricted to a particular format, such as data from an inventory management system, batch or lot records for unique identification, GPS data for location information or cold chain data. As a result, blockchain systems can serve as middleware, allowing interoperability between different software platforms that may need to exchange information.
Blockchain offers a clear value proposition in food safety, as events could be traced back to identify risk factors and uniquely identified products could be pulled in a targeted recall instead of a blanket recall. Furthermore, the auditability of a blockchain offers the promise of being able to meet consumer, shareholder and buyer demand for increased supply chain transparency, should data be posted publicly.
Combining auditability and transparency allows for increased trust between business parties, as they can now confirm the validity and authenticity of information posted on the blockchain while transferring information more efficiently.
Current efforts led by the IBM consortium or vertically controlled supply chains are permission-based blockchains, which restrict access to participation in a blockchain. While excellent testing grounds, the development of multiple independent restricted-access blockchains does not present a substantially better world than what is experienced today.
For example, if IBM’s blockchain wants to interact with another vendor’s blockchain, then the two protocols must be interoperable. This is not substantially different from today’s world, where if Walmart wants to send data to the Coca-Cola Co. from its proprietary system, then they must pass it through enterprise software like SAP in order to communicate.
Furthermore, these private blockchains limit access to information and as a result limit transparency. Nevertheless, the buzz around blockchains has pressured many parts of the industry to engage in traceability platforms, promoting rapid digitization.
As the investigation and use of blockchain expand in the food system, companies should develop an intellectual property strategy around what information should be publicly available and what information should be kept confidential.
Blockchain offers the promise of using supply chains as a new competitive edge in marketing, but only if the information is accessible by other parties, including consumers. As such, companies should strategize around what information may be helpful in boosting a brand.
Even if supply chain transparency is not a goal, it may still be useful to post encrypted information in a blockchain in order to be able to prove oneself at a later date in the case of a recall or regulatory event.
Blockchain offers an immutable, auditable platform to record data among a range of disconnected parties, with the promise of reduced traceability time, better supply chain collaboration and possible brand strengthening. However, many challenges in implementation are still to be overcome, such as how to translate posted information in the system and whether companies are willing to take the leap into transparent operations.