Securing The Future Of Food With Blockchain
Friday, August 17th, 2018
APFI speaks to Chandan Joshi and Jimmy Ong about blockchain technology.
Countries across the globe are calling for the elimination of hunger and reduction of carbon emissions, governments are increasingly prioritising food security and agricultural income security, and societies are placing greater value on health and wellness.
Food manufacturers have an opportunity – and also the pressure – to respond. However, progress has been a challenge given the global, complex and multi-touchpoint nature of end-to-end production and supply chains.
For example, in the event of a food scandal, the default modus operandi is a mass recall of all products, including non-contaminated products, as companies are not able to pinpoint the exact problem area. Minimising wastage, maximising speed and reducing overall cost in food production and delivery are linked to the effectiveness of the food supply chain.
One technology that has the potential to make a transformative difference is blockchain, which could be the underlying technology to bring improved transparency, traceability and efficiency to the food supply chain.
Industry players, technology companies and regulators are stepping up their investment and collaboration in blockchain projects. In March 2018, China allowed the formation of the Blockchain Food Safety Alliance, which will explore how blockchain technologies can drive accountability from all suppliers. With this, there can be more certainty around how the technology can help and how the risks can be managed, so as to overcome hesitation in adoption.
Transparency And Traceability
Blockchain is more often than not associated with the invention of Bitcoin in 2009. The fact is that many other real world applications and use cases have been developed based on this underlying technology, which is commonly described as a distributed ledger, or in layman’s term, a decentralised database.
Managed by peer-to-peer networks, blockchain allows transactions to be managed without a central authority. Transactions are validated by the network before being grouped into blocks, which are then linked to the previous block chronologically and secured using cryptography. This bundling of blocks produces an immutable shared record of truth that cannot be tampered. The structure only allows transactions to be added; altering or deleting previous records are not permissible.
As this structure can be applied across companies and entire value chains to integrate their data and processes, it has opened up a world of enterprise use cases.
The current practice in many companies is to use Enterprise Resource Planning (ERP) systems as the backbone of data and process integration. The challenge is that every company has their own ERP and operational systems, and rarely do these integrate. With blockchain, these different companies and their respective ERP or operational systems can be then linked together.
When applied to a food supply chain, blockchain technology can integrate the disparate data from food suppliers, manufacturers and distributors to produce a trusted ledger of truth. This provides industry players with the confidence and ability to improve their accuracy and response speed in instances of contamination, fraud or disease outbreaks.
In addition to mitigating downside risks, access to granular information on the history, location and status of a product can help food manufacturers meet consumers’ demand for better nutritional information. Food suppliers are already working with partners to develop blockchain solutions to verify their brand promises of being authentic, organic, fresh, cruelty-free, or sustainable through information labels.
For example, EY has developed a wine blockchain solution that records data at each step of the production and supply chain from field cultivation, to harvesting, to raw material transformation, to packaging, and finally to distribution and sales. Interested consumers could learn about each bottle of wine’s cultivation and transformation process through smart labels that tap on this captured information. With this solution, wine producers can improve their competitiveness and defend against counterfeits.
Experimentation and collaboration
Food manufacturers that are keen to adopt the technology should consider starting off with pilot projects on select product lines (as was the case in the wine blockchain solution), instead of trying to implement the technology across their entire supply chain and operations for all their products. In particular, food companies should consider prioritizing high-risk products such as fresh foods that are susceptible to environmental risk factors.
The experience and results achieved from these pilot projects will help organisations assess the costs and benefits on extending the adoption of blockchain technology across other product lines. It is important to build a clear business case as the move from prototypes to production systems will likely be a costly and time-consuming one, requiring the support of the entire network of suppliers.
Companies could be tempted to adopt a “wait-and-see” approach. However, it may be even more challenging to cross the knowledge gap in the future, particularly because the requirements and approach for each blockchain solution is often unique to each product or service.
In addition to engaging their partners and suppliers in the ecosystem, businesses will also need to come to an agreement on how a blockchain ecosystem will work and be governed. This is typically unchartered territory and regulators would have differing views on how to approach this.
The industrialisation of blockchain is just beginning. This is an opportune moment for food companies to be the disruptors instead of waiting to be disrupted, by collaborating across the value chain and with regulators to develop blockchain solutions.
While this will not be easy, blockchain has the potential to improve the safety of food today, and secure the future of food tomorrow.
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Jimmy Ong is Partner and IT Advisory Leader, Ernst & Young Advisory Pte. Ltd., and Chandan Joshi is EY Asean and Global Emerging Markets Leader, Consumer Products and Retail, Ernst & Young Solutions LLP.
The views in this article are those of the authors and do not necessarily reflect the views of the global EY organization or its member firms.
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