What is blockchain and how could it improve supply chains? – Part 1

Behind the scenes, consumer goods retailers have been working with a new technology, blockchain, and its impact is now starting to bear fruit.

The business value of blockchain in 2017 for retail and e-commerce was $38m. Across all industries, it’s predicted that the value will increase from $2.5bn in 2017 to $2trn in 2030. But what is blockchain and how will it improve supply chains?

On the back of the Web, Cloud Computing, Mobile and the Internet of Things, Blockchain is the fifth wave of innovation since the birth of the internet. A blockchain is essentially a distributed database of records or public ledger of all transactions or digital events that have been executed and shared among participating parties.

Each transaction in the public ledger is verified by consensus of a majority of the participants in the system. And, once entered, information can never be erased. The blockchain contains a certain and verifiable record of every single transaction ever made.

To put things in perspective, the current digital economy is based on the reliance on a certain trusted authority. All of those online transactions rely on trusting someone to tell us the truth. Blockchain provides a distributed consensus ​where each and every transaction, past and present, can be verified at any time in the future. Basically, blockchain allows everyone to keep an eye on what’s going on within a system, without giving any single person control over the information.

This is where the technology comes in handy for supply chains – it can be used to establish a permanent, accessible product database for cross border trading.

The underlying technology of blockchain has worked flawlessly over the years and has been adopted by retailers to establish more accountability in supply chains. Which today is less a chain, but more a complex global web of growers, harvesters, processors, distributors and retailers. This vast ecosystem can theoretically amount to 200 stops end-to-end, and in each we can lose efficiency and accountability.

Heaven forbid, but if there’s an incident where people are getting sick from consuming a product, retailers could identify the source of the contamination without removing all similar items from their shelves. From the supplier’s perspective, this would prevent the devastation of their business.

And what about consumers? As I walk into my local M&S in the evening in search of some lean cuts of beef for a pot-roast, amidst a series of recent supply chain problems – sewing needles and pins found in Australian strawberries, E. coli in Romaine lettuce from Arizona, and Swine Fever in China’s livestock – I am hopeful that the meat is safe.

There are several smaller businesses employing blockchain technology. Provenance, a UK-based fintech firm, announced a pilot project last year at the UN’s One Planet Summit to support more than 10,000 Malawian tea farmers. A shared data system provided by Halotrade – a blockchain based ethical supply chain platform – will see the UK’s Department for International Development, Sainsbury’s, Sappi, Barclays, BNP Paribas and Standard Chartered partner to help improve transparency in agricultural supply chains. The project will ensure producers secure proper trading conditions and are properly compensated for their work.

Last year in China, IBM, Walmart and Nasdaq-listed retailer JD.com formed a Blockchain Food Safety Alliance, supported by the Tsinghua University National Engineering Laboratory for Ecommerce Technologies. Their objective is to create a more efficient and accurate way of collecting data about the origin, safety and authenticity of food. It’s hoped that blockchain will improve processes such as recalls and verifications and enhance consumer confidence through greater transparency.

One of the big players exploring the benefits of blockchain is Walmart. I caught up with Cameron Geiger Senior Vice President of Walmart Technology Business Engagement. He’s been with the business for 17 years and has also held a number of executive roles at Walmart and Sam’s Club in IT, sourcing and merchandising.

During our conversation, Cameron outlined Walmart’s approach; “whatever we pursue in the industry must work for everyone in the industry, regardless of the size of the organisation; and any information that is going to be shared in a blockchain must use GS1 data attributes.” – the standard identification for cross boarder trading.

In next week’s column, I’ll delve deeper into my discussion with Cameron about Walmart’s work with blockchain.

As it stands, Walmart requires all suppliers of leafy green vegetables to make their data blockchain-friendly by 2019 – including suppliers for Sam’s Club, the Walmart-owned membership-only retail company. With a keen eye on the future, Walmart has also filed a patent that will utilise blockchain to track the contents of a package, its location, environmental conditions and other variables.

Across the retail and consumer sectors, blockchain could become a standard tool for solving strategic challenges. But it might also facilitate innovation and offer solutions to problems we didn’t even know existed. Ultimately, blockchain could provide the foundations for a new way of interacting with different components of the supply chain.

Last year, IBM announced a major blockchain collaboration with ten leading suppliers and retailers: Dole, Driscoll’s, Golden State Foods, Kroger, McCormick & Co, McLane Co, Nestlé, Tyson Foods, Unilever and Walmart. Nestlé placed its Gerber baby food products on the IBM Food Trust platform to test whether the technology could trace the fruit and veg that make up its squeezable pouches and purees.

For companies using the platform, data about harvests, processing, packaging and shipping is stored digitally on the blockchain. Recent testing by Walmart showed that applying blockchain reduced the trace time of a package from farm to store down from days or weeks to two seconds.

During the Gerber baby food test, Nestlé worked alongside farmers and processors of apples, sweet potatoes and pumpkins. In another, the partner is a mango provider in Colombia. The tests showed just how simple tracking multiple ingredients across international borders can be. A challenge faced by Nestlé was to build interfaces that connect its software systems related to managing its fruits, vegetables and other ingredients to the new technology.

IBM solved this through a prototype mobile app that supply chain participants can use to enter data onto the Food Trust system. Developers from several Food Trust members are also building interfaces tailored to their own data and infrastructure needs.

Once the hardware is in place, blockchain technology will have the potential to become the new engine of growth in a digital economy where the internet is increasingly used to better conduct trade and improve consumer experience.

The blockchain’s ability to track and trace products and record transactions and contracts will lead to widespread adoption in the retail and consumer goods sectors in the next five years. It’s clear that companies which fail to leverage this new technology risk falling behind.

Find part 2 here.

liana.osborne@thembsgroup.co.uk | @TheMBSGroup