The grocery supply chain is broad and complex, characterised by many food retailers and suppliers frequently holding potentially inefficient, manual records. As a result, it is often extremely difficult to map the paths of goods, and supermarkets have a hard task on their hands to unearth the foods and products that are tainted or fraudulent. For example, we saw the rush to recall products following the Dutch egg scandal last year, as well as the salmonella outbreak earlier this year.
However, blockchain could provide the solution for future scenarios. It is already being used by food suppliers and retailers to prove authenticity and increase consumers’ trust in their brand. But it can also be used to provide complete transparency across a product’s end-to-end supply chain journey. Not only will this help prevent the spread of contaminated goods, but it can also cut down food fraud.
Proving authenticity and driving quality
The secure (encrypted) digital ledger provides a level of transparency that most record systems cannot support. The blocks of information are secured by complex algorithms that are hard to hack and cannot be erased or manipulated. Tie this authenticity ‘stamp’ to a smart tag and retailers have a quick reference of where the product started and where it has ended up. Minimising risk for the consumer and potential damage to a brand’s reputation.
Proving goods’ authenticity is just the tip of the iceberg for how blockchain could be used in the grocery sector. Combining the technology with IoT can help brands track the provenance of goods. For example, a consignment of mange-tout originating from a Kenyan farm bound for the UK may get ‘bumped’ from a direct flight from Nairobi to Heathrow and go via Dubai where it spends time on the tarmac during transition between flights. It may hit Heathrow at 10°C and then spend four hours in a blast chiller getting it back to 4°C, which will still allow it to pass supermarket quality control. Blockchain, combined with IoT, has the capability to track temperature throughout the chill chain, with each set of readings linked to each other in chronological order and with non-editable timestamps. This helps improve the quality of goods hitting the shop shelves.
Cutting costs in the supply chain
Another of the major benefits of blockchain for food suppliers is not having a need for a third party payment authentication across the supply chain without losing users’ trust. It creates a frictionless and faster process upstream and downstream, lowers costs and significantly and reduces fraudulent interactions. For suppliers in the grocery sector, such as farmers, this means they can directly trade with brands, which will help cut down supplier difficulty. It also removes unnecessary costs paid to banks, making the end cost to brands and consumers more palatable in a very typically low-margin industry.
Building a blockchain strategy
As blockchain is a relatively new technology, there will naturally be some initial teething problems. While a global standardisation for the technology is under way, it would still need to be cleared by the International Organization for Standardization (ISO). Once in effect, it would likely impact long-term trade agreements. At a company level, implementation costs, filling the talent gap internally and externally, and conflict management among business partners (as blockchain demands full transparency and smart contracts), are challenges that will likely have to be overcome.
For food suppliers, the long-term benefits of proving the authenticity of products, improving the quality of food and cutting down costs along the supply chain, should outweigh the obstacles. Businesses should be exploring blockchain options now, calling on expert help to see how it can fit into supply chain operations. To accelerate adoption, they will also need to establish internal blockchain champions and identify immediate opportunities that boost confidence in the technology and show quick results. With consumer expectations for quality and authenticity only set to rise, building a blockchain strategy will be key for maintaining brand reputation, minimising contamination and fighting fraud, as well as boosting margins.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.