Industrial Blockchain in the Food Supply Chain

Overview

With its large, extended, and varied supply chain, the food industry is the leader when it comes to the number of industrial blockchain consortiums.  Among the 37 blockchain consortiums ARC  Advisory Group has examined, ten are in the food industry and gaining traction.  Those companies involved in the food supply chain should join an applicable blockchain consortium and develop a blockchain IT and operating strategy.

Industrial Blockchain Consortiums

ARC Advisory Group has identified and reviewed 37 different industrial blockchain consortiums for proof of concept, pilot or production programs.  The main objectives for these programs include:

• Improving supply chain visibility for recalls or reverse logistics
• Automated document sharing to replace email, fax, etc.
• Trust selling to increase revenue by identifying the product’s origin

Business Process Automation and Coopetition

Industrial blockchain applications provide self-governing automated business processes that extend across a consortium of stakeholders.  Independent entities – some of which are competitors - have common pain points and interests that drive the formation of a consortium of “frenemies.”  Typically, the consortium uses blockchain in applications to replace manual methods for transaction processing with business process automation.  Of the 37 industrial blockchain consortia, ten are in the food industry – making it the clear leading industry for the application of blockchain.

Food Supply Chain Complexity Drives Blockchain Adoption

Complexity involves large numbers, variety, and long chains.  In terms of size, there are over three million establishments in the US among farmers, processors, distribution warehouses, and retailers.  Europe is similar and Asia much larger.  Examples of the variety of interactions include:

• Cocoa beans are processed into a final product like candy bars that go to retail establishments or chocolate ingredients for products made by other processors.
• Cold chains for dairy and frozen foods require their own set of processors and distribution to maintain the lower temperatures.

Long Chain of Custody

The chain of custody includes the series of transfers as a product goes from farm through the supply chain to the retailer.  Each transfer involves multiple transactions as it travels through the logistics providers.  Simple cocoa beans have more than 15 transactions from farmer to plant for conversion into chocolate (i.e., farmer to processor in the graphic).  This includes transportation, warehousing between modes, agents, and government agencies. 

The long supply chain can also contain multiple levels of processors.  Wheat grain is processed into a variety of types of flour that becomes an ingredient in a wide range of downstream products.  In the complete US food supply chain, the path from farmer to retailer has hundreds of transactions among potentially millions of entities. 

Benefits of Industrial Blockchain

Industrial blockchains offer significant potential benefits.

Business process automation: The leading application for blockchain involves business process automation to replace manual methods like FAX, email, and paper documents to make transactions with less labor, delays and errors. 

Recall size reduction: The second most common blockchain application provides visibility to respond to a recall.  The size of a recall can be significantly reduced to the products known to have the problem.

Higher price: “Trust selling” uses track and trace of the food to allow the consumer to know its source.  Particularly among younger consumers, people will pay more for products with an ethical or wholesome origin.

Food Industry Blockchain Consortiums

All the applications of blockchain in the food industry examined by ARC involve a consortium.  The key reasons for establishing a consortium are:

• Independent entities need an agreement or legal contract that establishes the scope, activities, and business rules.  A governing body in the form of the consortium manages the agreements.
• To achieve the needed scale in terms of transactions per second for full production, all the applications use private and permissioned configurations of blockchain.  This requires an approval process to join and a consortium for a governing body.
• To grow the acceptance and achieve critical mass requires a marketing function to recruit and on-board appropriate independent entities in a targeted and organized manner.  Typically, consortium members agree on the strategy and allocate people from existing staff to execute.

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Keywords: Industrial Blockchain, Food Industry, Supply Chain, ARC Advisory Group.