Blockchain technology is most likely one of the biggest trends hitting businesses over the coming year. Blockchain has the potential to make international supply chain transactions seamless, efficient, accessible and most importantly fully secure. We’re already seeing big businesses such as Unilever, Walmart, Dole and Nestle making inroads, in partnership with IBM and major banks, through a food industry consortium set up last year. The aim of this consortium is to establish how to utilise blockchain technology within their food-specific international supply chains.
Blockchain and the Supply Chain
Blockchain is fascinating from a supply chain point of view. In short, it is a distributed ledger which cannot be copied. The records or ‘blocks’ are linked from one to another using cryptography, meaning that transactions can be recorded and followed without the risk of being modified or changed in the process. This makes it incredibly valuable for supply chains where transaction data is critical and has typically both taken up resources and been inefficient. Blockchain makes transactions more seamless, efficient, and verifiable.
Why Has a Food Industry Consortium on Blockchain Been Set-up?
The reason for setting up the food industry consortium is to establish a means of creating secure records on a digital level which increase visibility and traceability of individual food items from start to finish throughout the supply chain. Given that we know that it’s through increasing visibility that we can work with maximising profit margins, this makes sense. Blockchain has the potential to trace the individual item of food at every stage of the chain, without anyone compromising the integrity of the data.
This would signal a notable change in the way that supply chains are run and managed, most specifically with regards to the data management processes. Given how complex the food supply network is, involving individual farmers through to distributors, processors, brokers, regulators, and ultimately, consumers, it’s an enticing prospect.
A clear case study demonstrating how things would be different with blockchain can be seen in the salmonella outbreak in 2017 which was linked back, eventually, to contaminated papayas. Tracing the problem back to its source took valuable time. A blockchain system would vastly reduce the time to trace such issues.
As of yet, we don’t know too many details about the nature or scope of the consortium. However, Unilever is independently going ahead with a pilot project, which will be using blockchain specifically within its tea supply chain originating in Malawi. Ultimately this tea is sold through Sainsbury’s supermarket. It should, in theory, mean you can trace every cup of tea drunk back to the source in a matter of moments.
For Malawi itself, this is welcome news. Tea is a major export for Malawi. The UK is frequently at the end of its supply chain for this product. The blockchain initiative may reach in the region of 10,000 farmers, using the technology to prioritise – through preferential pricing – the farmers who utilise sustainable tea-farming practice. Banks are needed to make this possible as they supply the finance to support these farms. However, typically, this has been incredibly difficult to trace and validate, which has posed problems for the Malawian tea trade over recent years.
This blockchain pilot project should enable the banks to trace and validate the farmers, financing those who are operating within Unilever’s sustainable requirements. The impact of each individual farm and their practices should become highly visible throughout the complete supply chain. This more accurate and visible data could be immensely useful for the banks.
Marguerite Burghardt, head of the Trade Finance Competence Centre for BNP Paribas, has stated: “This will benefit the entire supply chain ecosystem, enabling financial institutions to broaden the scope of their financing offers and to propose financial incentives to their customer clients, based on their environmental and social standards.”
This is only possible through the adoption, and utilisation, of blockchain. It’s therefore easy to see why big businesses are investing time, money and resources to exploiting this technology. Its potential makes it enticing.
Blockchain’s Scope in Supply Chains
Whilst the focus now is on the food industry, which makes sense because of its nature, blockchain’s possibilities for supply chains, in general, are wide-reaching. It could, for example, be used within peer-to-peer trading with regards to electricity. Anywhere and any element that could benefit from increased visibility stands to benefit from discovering how blockchain can be appropriately used.
It’s therefore easy to understand why Unilever’s tea project is backed by the Department for International Development. It gives integrity to the Fairtrade status for starters. Given that Unilever aims to achieve its goals of sourcing all raw agricultural products sustainably, and is currently succeeding 60% of the time, blockchain should further this. Keith Weed, Chief Marketing Officer and Head of Sustainable Business for Unilever, has stated: “This innovative new technology will help us increase sustainable sourcing, enhance the livelihoods of the smallholder farmers we work with around the world, and help to make sustainable agriculture mainstream.”
Who is Behind Unilever’s Blockchain Pilot Project?
Behind Unilever are four start-ups: the FOCAFET Foundation, Halotrade, Landmapp and Provenance. These start-ups are working to utilise blockchain technology in the pilot project through a partnership with banks.
It’s unlikely to end with Malawian tea either. The scope for the pilot project could easily open up to include other crops or other aspects of the supply chain. It’s definitely a case of wanting to keep a close eye on developments to see how things progress. It will then be interesting to see how this filters through to others in the supply chain in their adoption and utilisation of blockchain technology.