How Blockchain Is Revolutionizing Food Supply Chains (Part 1 of 2)
By Aly Madhavji on ALTCOIN MAGAZINE
In the blockchain world, we frequently hear that blockchain has great benefits for this industry or that industry, but we always get asked: “What is the real benefit?” “What companies are actually using blockchain?” “What are some real-world examples?”. Based on your feedback, we wanted to start sharing real-world examples of how blockchain is revolutionizing different industries.
In a 2018 Deloitte survey of 1,053 global blockchain savvy senior executives on “Blockchain Technology Use Cases in Organizations”, 53 percent of executives stated supply chain as the top use case.
There’s no better industry to start with than food supply as part of the Supply Chain vertical. This is a sector that has significant consumer impact given that food is essential for our well-being and survival. Let’s look at how blockchain is changing the food supply chain landscape.
Food producers work with many suppliers and food traders along with a complex network of warehouses, container ships, trucks, and planes. Current U.S. rules require that food handlers can see one step backward (who they bought from) and one step forward (who they sold to) in the supply chain. Food safety agencies and regulators around the world don’t get a complete picture of the supply chain, and often companies themselves don’t have a farm-to-fork view of the supply chain since the information is siloed.
Is The Food Supply Chain Broken?
Globally, there have been alarming and harmful issues surrounding transparency of the supply chain.
In Europe in 2013, meat advertised as beef was found to contain horse meat DNA, in some instances, it was 100% horse meat. 85% of samples had traces of undeclared animal DNA, including in certain cases pork, which is not compliant with Jewish and Muslim traditions. While the affected products were pulled from the shelves of retailers Tesco, Dunnes Stores, Aldi, Lidl and Iceland on Jan 2013, Europol was making arrests related to the incident as recently as July 2017.
In China in 2008, dairy producers laced milk and infant formula products with Melamine. It was estimated that 300,000 people were victims, 54,000 babies were hospitalized, and 6 people died from kidney stones and kidney damage.
In the U.S. in 2015, Chipotle Mexican Grill (CMG) had an Escherichia coli (E. coli) outbreak causing 55 customers to fall ill in 11 states in the U.S. due to contaminated food. The ensuing media attention, restaurant closures, and investigations damaged the reputation of the company, sales plummeted, and the share price of CMG stock declined by 42%, wiping away almost $8.9 billion USD of value before the Center for Disease Control and Prevention (CDC) announced that the outbreak was over. In their February 2016 earnings call, the first after the outbreak, CMG revealed same-store sales decreased 36%, and approximately 60% of loyal customers were actively avoiding the chain. While the official source of the outbreak was never officially determined, Chipotle’s share price never recovered all the lost value.
This shows that our food supply chain is broken based on an inability to identify outbreaks in a timely and precise manner. Retailers work with distributors and producers to analyze the supply chain to determine the source of the problem. Producers of the foods you get in the grocery store don’t control the entire vertical chain from farming. Even then, farming has specific inputs such as seeds and fertilizers and pesticides that rely on other suppliers and logistics. A lack of data uniformity along with some records maintained in paper format makes tracing back a product a very slow and intensive process. Each producer or retailer uses their own systems to track food, and with a lack of collaboration among the players, there is no traceability across the individual systems. With a significant loss of trust in organizations and changing consumer preferences, consumers are demanding transparency to know what is in their food.
In the March 2019 edition, we will discuss in more detail real-world examples of companies which are working to solve these food supply issues, how blockchain is playing a role, and how that is starting to benefit everyday consumers.
References:
This is a repost of the Article written by Aly Madhavji and Mansoor Madhavji featured in the Crypto Investment Times Magazine for the February 2019 edition: http://cryptoinvestmenttimes.com/downloads.php?edition=feb19
