The purpose of this article is to explain what I have learned about how blockchain can provide a degree of transparency to supply chains, and how it can help you make informed decisions when choosing a blockchain project.
While it may not seem apparent at first, blockchain can help reduce waste in the food supply chain.
Impact of contamination in food supply chain
Contamination in food supply chain has multiple impacts. Food waste due to contamination is one such impact that has a substantial economic cost in the food supply chain. As far as supply chain scenarios go, besides the consumer-facing side of things, there are also business reasons for companies to adopt blockchain. One is that there’s a tremendous amount of waste that happens in the supply chain. Food waste is a huge issue. Recalls are another issue. In the US context, in particular, there are many recalls, e.g., those related to E. coli outbreaks on produce or meat.
Impact of recalls
Penta did a project with the largest apple packing house out of Michigan that delivers apples to many retailers. They were the first apple packing houses in the United States to have a recall of apples. The purpose of the initiative was to test different sensor devices in the supply chain. In the apple produce ecosystem, all sales are on consignment. Nobody upstream in the supply chain gets any revenue in a recall event for that specific supply chain. If those apples don’t sell at the retail store, then the packinghouse doesn’t get paid, and the farmers don’t get paid. There is an outsized economic impact when these recalls occur.
If we study Walmart’s example, we'll see that it takes a long time to isolate the root cause of the issue in different parts of the supply chain. “I brought a package of sliced mangoes into my staff meeting. I put it on the desk, and I said to my team, ‘The traceback study starts right now. Hit the clock and tell me from where did these mangoes come from, what farm, and what country.’ And you know how long it took them to do that? It took them almost seven days! Seven days to do that because they had to actually contact the supplier, get paper records... They then had to contact the importer,” says Frank Yiannas. This delay has extremely adverse effects on the producers in the supply chain.
How blockchain can help
Large retailers, of course, suffer financial harm and reputational harm, but they also have insurance that protects them. It’s a motivator and a demand driver for companies and supply chains to adopt blockchain technology. Suppose we’re able to pinpoint where the contamination occurs in the supply chain. In that case, you might be able to isolate other stakeholders from suffering as much financial harm. Based on that, it could realign insurance products.
Learning how others have used blockchain in their use cases can help you make informed decisions on how to use it in your situation. When business leaders understand that blockchain can reduce waste in supply chains, they can analyze their own business situation and decide how to achieve similar savings. Using this information, we can define the right use case for a successful blockchain technology implementation.
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