intermediate
Supply chains are essential for any business that sells any sort of product. Even if you are simply selling soap produced by your next-door neighbor, you will still have to engage in some basic supply chain management. The bigger your business and the longer the distances goods have to travel, the more complicated the supply chain.
Although it has been known for ages that supply chain management has a ton of issues it has been struggling to solve, they have not been that apparent — and pressing — before the pandemic hit.
In the past two years, it has become more important than ever to be able to tell where the food on your plate has come from, as well as what journey it had to go through to make it to your kitchen. Additionally, shipping congestion has become an issue: as delivery times had to be extended, perishable goods like food have suffered the most.
Walmart, a multinational retail corporation that sells everything from patio furniture to the latest iPhones but is particularly famous for being a grocery hypermarket, has decided to solve those pressing issues in the supply chain and food industry using blockchain technology.
What Is Blockchain?
Blockchain is a type of digital distributed database that is shared across multiple participants of a computer network. It groups data into blocks that have a certain predetermined storage capacity. Once a block is filled, it gets added to the blockchain — and from that point on, the information recorded in that block can never be changed again. Blockchain is used in many different ways but is most famous for being the backbone of cryptocurrencies like Bitcoin or Ethereum, NFTs, DeFi, and dApps.
Blockchains are mostly characterized by seven main properties:
🦾 Programmable
Blockchains are fully programmable and can be used to create decentralized applications, smart contracts, tokens, and so on.
🔐 Secure
All data records on each blockchain are encrypted individually.
🤫 Anonymous
All participants of a blockchain network can remain completely anonymous.
✔️ Unanimous
A block, or a data point, is only considered valid if all network participants verify its integrity.
🕰 Time-stamped
There’s a clear time stamp attached to every new block on the blockchain.
💎 Immutable
All data that has already been validated and recorded on a blockchain cannot be changed.
🔗 Distributed
All network participants have their own copy of the whole blockchain.
Blockchains are an incredibly secure, transparent, and reliable way to record information. Additionally, they make all information widely accessible and easily retrievable. Unlike traditional ledgers, blockchains can provide all the required data within minutes, if not seconds.
Blockchain and the Food Supply Chain
Blockchains have many use cases in the modern world and are a perfect fit for the supply chain sector. The transparency and immutability of data they can provide are of particular importance to the food industry.
Let’s take a look at some of the common issues present in the supply chain industry and how blockchain can be used if not to eliminate, then at least to lessen the negative effects these issues have on the entire food supply ecosystem.
You can also check out our article on the impact blockchain can have on the banking industry.
Food Safety
Foodborne illnesses and disease control are slowly becoming an increasingly bigger concern as many companies and stores move their production and packaging centers to countries with loose food safety regulations.
Whenever there are outbreaks of foodborne diseases, it can sometimes take weeks to find their source. Once the source is found, it can take even longer to track all the places where the ingredients may have ended up — and in the case of perishable goods, that means infected items may end up on consumers’ shelves long before the disease is identified. In such situations, all that can be done is to tell customers to avoid certain groups of products, and it’s hardly an efficient or effective solution.
Blockchains can help to track contaminated food in a much clearer, transparent, and effective way. They will make identifying the exact distribution center where each food item has passed through a quick and easy affair. Right now, it can take weeks to trace some goods, which is extremely time-consuming and can be detrimental to public health. Blockchain reduces the time it takes to find the data on specific food items from 7 days to 2.2 seconds.
Food System Efficiency
The enhanced traceability provided by blockchain can protect not only the consumers but also the farmers and other food producers. It will lessen the chance of customers abandoning one group of products altogether on the off chance that it can be infected and allow suppliers to easily identify where the outbreak has begun in order to take care of it and resume normal operations as quickly as possible. This can greatly benefit all of the participants of food supply chains, from farmers to trucking companies to grocery stores.
Waste is one of the biggest challenges that the food industry faces. Every day, thousands of products get thrown out or rot away on the shelves. Additionally, overproduction is one of the reasons why this sector has such a high carbon footprint and wastes thousands of tons of water every year.
While some of the issues in the food system can be attributed to the greed and bad practices of individual businesses, there’s no denying that the whole food supply chain is terribly inefficient.
A food traceability system based on blockchain technology can help significantly reduce waste and increase the efficiency of supply chains. All the data, including the production date, how long it took for the product to reach the shelves, when (and if) it was finally sold, how it was stored — all of it will be recorded on a blockchain.
Blockchains can make recording, retrieving, and analyzing data a much quicker and easier process, thus increasing the efficiency of all parts of the food supply chain.
Food Fraud
Blockchains can not only make it easier to investigate disease outbreaks and find and identify all infected goods but also expose supply chain participants who manipulate data and aim to increase their profits at the expense of customers’ health. For example, blockchains can make it much harder to forge expiration dates, manipulate the freshness of a product, and even lie about the origins of different foods.
A few years ago, there was a huge food sector-related scandal that exposed some glaring problems in the supply chain industry. It turned out that the Australian meat that was sold in China was actually horse meat, not beef. Such falsification would have been impossible if blockchain technology had been involved — both consumers and Chinese grocery stores would have been able to easily check where any particular chunk of meat came from in a matter of seconds.
Market Transparency
This point is somewhat related to the previous one — blockchain will easily be able to expose any fraudulent activities along the supply chain. Customers will be able to know what exactly they are paying for, while suppliers will get a fuller picture of how their money gets allocated and spent.
The increased transparency that blockchain technology can provide has the potential to make consumer goods pricing much fairer. Additionally, blockchain technology can make it easier to access and process all the data that concerns food supply chains, thus increasing the effectiveness of various demand forecasts and analyses.
Walmart and Blockchain Technology
Walmart has effectively used blockchain not only to increase the efficiency of its food supply chain but also to improve the customer experience all around the globe. Let’s take a closer look at the history of their blockchain-based supply chain initiative.
When Did Walmart Start Using Blockchain?
There have been many cases when inefficiencies in traditional supply chain solutions have caused Walmart and other grocery supermarkets a lot of problems. Perhaps the most infamous foodborne disease outbreak occurred in early 2018: five people died, and over 200 were hospitalized after eating romaine lettuce.
Due to how hard it is to track goods using the traditional paper-based method of data keeping, the investigation of where the disease came from and what was causing it took almost a year. This greatly disrupted the farming industry and caused a lot of harm to both consumers and suppliers.
Walmart launched two proof-of-concept projects for its blockchain food traceability system back in 2016. One of them was focused on tracing mangoes in US stores, and the other was set on monitoring pork across Walmart shops in China. After both tests turned out to be a success, Walmart officially partnered with IBM in 2017.
The next year, Walmart began tracing over 25 different types of products using the technology provided by the IBM Food Trust. In September 2018, Walmart officially announced that all their suppliers of leafy green vegetables must upload their data to the blockchain within a year.
Walmart & Blockchain Use Cases
In 2019, Walmart went one step further by launching a traceability platform in their Chinese stores. While food safety issues are a concern all across the world, they are (or, at least, used to be) an especially big issue in China. After the Australian beef incident, many consumers lost their trust in grocery stores and the food they sell.
As part of this program, many food items, including but not limited to pork, chicken, packaged salads, and more, were each assigned their own QR codes. Customers could scan those codes to see where each product came from and how it got to the Walmart store they were shopping in. Additionally, this technology makes it possible to trace all of the ingredients of each product.
Something like this wouldn’t have been possible without using a blockchain-based tracking system. No other technology is capable of guaranteeing the full immutability of all data while still maintaining full transparency and ease of traceability.
The company’s goals for blockchain implementation include not only the increase in overall efficiency and ease of carrying out food safety protocols but also an improvement in customer experience.
One of the biggest challenges associated with blockchain-based solutions is how new and novel the technology is. Many companies still lack the technical expertise and understanding necessary to embrace and utilize blockchain. Walmart was aware of this and worked together with IBM to ensure that all providers, regardless of their expertise level, would be able to utilize the new technology. They have created a special onboarding program that eases new users into the system.
One of the hurdles that blockchain technology can’t overcome yet is the process of making sure the data that gets recorded on the blockchain is genuine. Since it is nearly impossible to verify data that can only be accessed by one party — be it a trucking company, a farmer, or a particular Walmart store — there is a possibility that the information that gets recorded on the blockchain will be incorrect. While automatization can resolve the issue of human error, it is hard to say how big companies like Walmart can identify and prevent any malicious actions from taking place.
What Blockchain Does Walmart Use?
Walmart uses the IBM Food Trust platform, which was built using Hyperledger Fabric and runs on the IBM cloud.
The Walmart China food traceability system was powered by VeChain’s Thor blockchain technology in cooperation with PwC.
IBM Food Trust
IBM Food Trust is a major global initiative that aims to improve the efficiency, safety, transparency, and sustainability of the entire food supply chain using blockchain technology. While Walmart is seen by many as a pioneer when it comes to collaborating with this platform, there are other food companies that have also worked with IBM in the past: Carrefour, Unilever, Nestlé, and many others.
IBM’s blockchain solutions log transactions at every step of the supply chain process, using the transparency and security provided by the technology to take care of food safety risks, reduce waste, and increase efficiency in all operational processes in the food industry.
This program allows both suppliers and customers to track such things as where food comes from, what ingredients were used to make it, how it was stored and produced, and more. In addition to decreasing food safety-associated risks, this system helps to solve labeling errors, prevent food fraud, and evaluate shelf life even more accurately.
The more companies join the program, the more accurate its data and predictions will be. Blockchain is a perfect fit for the supply chain industry, so it’s very likely that this particular initiative and other similar ones may become mainstream in the future.
Disclaimer: Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.
