BLOCKCHAIN TECHNOLOGY FOR THE GLOBAL FOOD SUPPLY … · Blockchain echnology or he al ood upply...

BLOCKCHAIN TECHNOLOGY FOR THE GLOBAL FOOD SUPPLY NETWORK: TRANSFORMATION OR HYPE?

2Blockchain technology for the global food supply network: Transformation or hype?

Introduction 3

What’s it all about? 4

How can blockchain help the food industry? 5

Is blockchain becoming the norm? 6

Industry initiatives 7

Does Authenticate do blockchain? 8

The challenges 9

Should my food business be thinking about blockchain? 10

Contents


Over the past 12 months, the global food supply network has awakened to the possibilities of blockchain technology as a transformational force.

Amid a wave of headline-grabbing projects and pronouncements from some of the industry’s biggest players, food business operators who have attended conferences over the past year will have heard the subject of blockchain touched upon, if not pored over, in discussions of its game-changing potential for a sector which arguably has a pressing need for modernisation and reform.

Hearing heavily-hyped claims that “blockchain will do for industry what the internet did for communication” (IBM Think Academy, 2017), it’s easy to see why the subject warrants attention. Understood very simply as a way of creating a secure digital record of transactions, much of the dialogue surrounding blockchain refers to its ability to build trust by making it harder for digital data to be corrupted. Blockchain therefore holds great promise for industries where supply chains rely on multiple parties transporting and transforming goods, with each actor adding additional claims from one tier to the next as a product is prepared for market.

The food industry, with its infamously complex, multi-tiered and often inefficient supply chains, is seen as a prime sector where blockchain could be used to authenticate and validate goods, speed up payments and deliver significant increases in

efficiency to the production and supply of products. In an industry as crucially important as food supply, businesses are investigating ways in which it could be used to reduce costs and improve compliance.

Yet despite extensive coverage and curiosity, there remains a great deal of confusion around blockchain’s practical applications for food operators, as well as concern on the part of businesses who fear being left behind.

This paper sets out to give an overview of the way in which the food industry is approaching the adoption of blockchain, the progress that has been made so far, and the role Authenticate is playing in exploring its practical application for the benefit of our members.

Introduction


Blockchain has been around since 2008. It was first created to serve as a “ledger” that could be used to securely record transactions made using bitcoin, the world’s first digital currency.

Bitcoin has no physical manifestation and exists only as a piece of digital code which acts like a token. The problem with traditional digital code is that it can be copied – and therefore could be “spent” multiple times. Blockchain gets around this problem by creating multiple records of each piece of code and distributing it across multiple “nodes” (read: computers) to verify the transaction.

This idea can be applied to any situation where there is a need for a trustworthy system of recording data. At this point, it’s useful to consider the analogy provided by Financial Times reporter Sally Davis, who explained that “Blockchain is to bitcoin what the internet is to email – A big electronic system, on top of which you can build applications. Currency is just one”.

Blockchain offers an alternative way to store information using technology, which has traditionally been done using databases. While a database exists in isolation, created and administered by one “host”, blockchain is often referred to as a “distributed ledger” as it resolves, among other things, the issue of requiring a central host. This makes it ideal as a technology-based solution that supports transparency when multiple companies are involved and a central authority is not available (or desirable).

Databases have been used for many years, in everything from financial management applications to music catalogues and food companies. Even when data is shared between companies or individuals, there has traditionally always been one “host”, with users required to trust the entity managing the database in order to maintain the integrity of the data, although many a database has been susceptible to security breaches and misuse. With blockchain, this integrity is ensured by maintaining a secure, synchronised record of all “transactions” shared between all actors.

What’s it all about?


A blockchain ledger can record each sequence of transactions in a product’s journey from raw materials at source to a finished product on a shelf in a way that is secure, transparent and trustworthy.

This can be applied to both simple process (i.e. grow, harvest, pack, deliver) as well as cases whereby potentially hundreds of steps/components are brought together to complete a finished good (i.e. a mass-produced lasagne ready meal).

The data contained within a blockchain record comes in two forms: • Transactions – These are simple records of movement or transformation, such as “Supplier A has shipped 1000 units of product X to supplier B”

• Chain code - This is logic that can represent so called “smart contracts” based on sets of rules - for example supplier A is verified to produce 1,000 boxes of eggs a month and therefore cannot ship more than 1,000 units a month, or product X requires ingredients Y & Z and therefore you can’t produce X, unless you have inventory of Y & Z.

As a product is transformed from a primary raw material to a finished good, all elements of its transformation are recorded, and this record remains unalterable. Think of it as a thread of emails – except you can’t go back and edit the time, date or contents of the message you are forwarding. The chain of supply data is immutable, and all participants can depend on the authenticity of the chain without needing to know or trust the other participants.

As each “transaction” occurs, it is put into a “block”, which is connected to the transaction before it and the one after it. Groups of transactions are blocked together, and a “fingerprint” of each block is added to the next, creating an irreversible chain.

In practical terms, it’s safe to assume that a situation such as the horsemeat scandal of 2013 would have been spotted had the supply chain been recorded in this way.

How can blockchain help the food industry?


BreedFarm ProfileFeed Profile

Antibiotic UseNo. in Batch

No. in BatchSlaughter DateSlaughter KPIS

Batch to Curing

Curing KPIsSlicing

Transport

Consumer Data

Example blockchain data


In 2017, the research company Gartner placed blockchain within the “peak of inflated expectations” section of its “hype curve”, which tracks the progress of new technologies.

If the curve is anything to go by, we can expect to wait between 5-10 years before the technology finds broad adoption.

Garter Hype Cycle for Emerging Technologies, 2017 - Adapted from Gartner.com

Anecdotally, it would seem the food industry is following the curve fairly closely. In 2017, a plethora of initiatives were announced with details of numerous micro-concepts published in the UK. A tuna was tracked through a supply chain to demonstrate how it could transform the fishing industry, a few chickens were tracked from farm to fork and Authenticate used blockchain technology to demonstrate the path of high-grade proteins through their production cycle.

Is blockchain becoming the norm?

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4D Printing Artificial General IntelligenceDeep Reinforcement Learning

Human Augmentation5G

Serverless PaaSDigital Twin

Volumetric Displays

Conversational User Interfaces

Neuromorphic Hardware

Quantum Computing

Brain-Computer Interface

Smart Workspace

Augmented Data Discovery

Connected HomeDeep Learning

Machine LearningAutonomous Vehicles

Nanotube ElectronicsCognitive ComputingBlockchain

Commercial UAV’s (Drones)

Cognitive Expert Advisors

Enterprise Taxonomy and Ontology Management

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Virtual Reality

less than 2 years

As of July 2017

Plateau will be reached in:

2 to 5 years

5 to 10 years

more than 10 years

Software-Defined Security

Edge ComputingSmart Robots

IoT PlatformVirtual Assistants

Time

Innovation Trigger Trough of Disillusionment Slope of Enlightenment Plateau of ProductivityPeak of Inflated Expectations


Despite the noise being made, actual practical usage of blockchain within the global food industry has been limited.

The most notable project to date was announced by Walmart and IBM in December 2017 with the creation of the Food Safety Alliance, using blockchain technology to trace up to 50 categorise of food products. In recent weeks they have been joined by US industry peers such as Dole Food Co., Driscoll’s Inc., Golden State Foods, Kroger Co., McCormick and Co., McLane Co., Tyson Foods Inc. and Unilever NV. The project started with a study of mangoes being traced from Mexico to the US, leading to claims that it has reduced the time required to prove provenance from 6 days to just 2 seconds.

Not limited to the US, a handful of European players are also flying the flag, although none have yet adopted it for mainstream commercial activities. Around the same time, J. Sainsbury and Unilever announced a blockchain pilot building a database of tea farmers in Malawi, and Coop partnered with London-based Provenance, although the results of this have never been announced.

French retailer Carrefour has launched a transformation project for 8 animal and vegetable lines following a pilot to track Quality Line Auvergne chickens. Scannable QR codes on the products will provide consumers with data about where the animal was bred, what it ate, whether it had antibiotics and where it was slaughtered. This has now been made a central part of Carrefour’s 2022 Transformation Plan, showing they clearly mean business.

On the more radical end of the scale, the social entrepreneurs behind niche Dutch coffee house

Moyee Coffee have gone all in, implementing a “FairChain” model across the business; every single piece of data, from harvest to payment, is stored within a blockchain, effectively linking the end buyer with the original farmer in order to give growers a fair price.

Most recently, the Food Standards Agency has successfully completed a pilot using blockchain technology in a cattle slaughterhouse. This is the first time blockchain has been used as a regulatory tool to ensure compliance in the food sector.

While there are sure to be other initiatives in the pipeline, it would be fair to surmise that, for now, the practical application is minimal, limited to proof-of-concept initiatives and case studies. However, as Authenticate have previously noted, the genie is out of the bottle – it would be unwise to ignore the groundswell of work being out by some of the most powerful players in the market.

Industry initiatives


Authenticate has been providing transparency to food supply chains for more than 8 years.

Working with most of the main UK supermarkets and their principal suppliers in mapping integrated supply chains, Authenticate has supplied the data required to prove compliance and support integrity. Using traditional database technology and custom-built geomapping software, Authenticate provides everything that is currently promised by blockchain, albeit not on a distributed ledger.

The publicity around blockchain has prompted several forward-thinking Authenticate members to ask questions about whether they should be adopting blockchain for themselves, requesting advice on future strategies for transparency. In 2017, the decision was made for Authenticate to trial the technology using an established blockchain platform with a number of clients in early 2018. Details of the first commercial application of these projects will be published later this year.

The trials undertaken showed that blockchain technology, in its essence, works. The blockchain that was built was used to capture supply chain data, store it securely and provide transparency back to source.

So in summary, yes, Authenticate does provide blockchain technology. And, given the depth of data held on thousands of food companies, including assurance claims, complete supply chains and product attributes, the platform is primed to become a go-to resource for exactly the type of data which companies may want to ‘make immutable’ through blockchain.

Does Authenticate do blockchain?


The trials carried out by Authenticate showed that applying blockchain technology to a food supply chain scenario is relatively straightforward. However, four key challenges were identified:

1 Source data: At the sharp end of the supply chain, whether picking olives, or breeding beef, additional data capture, or in some cases any data capture, is challenging from a practical perspective. Producers view any additional ‘paperwork’ as burdensome, adding little value to them at the current time. One exception to this may be in the case of high-value products where brand protection is important. Until the time comes when all food production from farm to fork is automated, there will be a need for real people to add data manually – herein lies greatest challenge.

2 Data duplication: Most suppliers will already have their own ERP system in some form, so having to enter data manually into a blockchain that is separate from their own internal systems creates additional cost. Individual suppliers track their own activity and inventory, therefore entering additional data into an external system that doesn’t directly benefit them (yet) will receive little support. Creation of data interchange standards and adapters in common ERP systems would greatly simplify this; blockchain does not make internal data systems redundant, so until there are better ways of integrating data, the duplication of data presents a significant stumbling block.

3 Food is generally dissembled, not assembled: While most products are built, food products are often chopped up, so although tracing an individual cow is quite possible, this becomes harder once it is slaughtered and sent to a cutting plant. Once separated and processed, the origins of these distinct parts become far more difficult to preserve. Whilst blockchain could eliminate the flagrant fraud of packs being relabelled, it remains a challenge to accurately track individual animals from farm to fork. For now, the most likely adoption of blockchain will be those high value or single animal commodities which can be individually labelled and where mass disassembly and packing are not the norm.

4 Reasonable Transparency: Blockchain implicitly creates transparency, so a default model would be that everyone within the eco-system or industry could see what inventory everyone else had and what transactions had been carried out between suppliers. For commercial reasons, this may not be desirable, and there is a trade-off between creating traceability and transparency and protecting individual businesses. This is obviously not just the case for the food industry; recording where a shipment of diamonds was on a public blockchain in order to prove that they had come from a legitimate source would create a shiny new target for criminals.

The challenges


At present, Authenticate holds the view that “private” blockchains provide a good way of creating an audit trail for high-value products in relatively simple supply chains, in situations where authenticity adds significant value to the marketing of a product.

As previously outlined, high-value or single animal commodities which can be individually labelled would benefit most from employing blockchain for the purposes of countering fraud and increasing confidence in a product’s origins and authenticity.

However, the industry as a whole must first take a step back to address the primary issue of data collection, as only once attitudes and methods of data collection have been adapted and increasingly standardised will the business case for blockchain become evident. As a starting point, changes to logistical practices across the industry would provide significant savings and create an audit trail that could form a framework for blockchain to operate in. A future in which these global data standards exists may seem distant, although it is not completely out of reach.

For the majority of food businesses whose aims are most likely centred around delivering cost efficiency, achieving high quality standards and meeting environmental and social objectives, meaningful results can be achieved by using technology to gain a clear line of sight of their supply chains and “zoom in” on the actors who are operating within them with the help of easily accessible data.

While it is all well and good knowing that product a was produced by supplier B thanks to the information contained in a data block, unless you also have access to the ‘scores on the doors’

relating to certification, audits and other integrity indicators, then the value within the blockchain transaction is limited, and the fundamental issue remains: how can food businesses capture high-quality, reliable source data for their products?

This question has been the primary focus of Authenticate’s mission since the company’s inception. Now, with a verified database of over 15,000 suppliers, Authenticate offers an affordable technology-led solution that is enabling responsible companies to take a collaborative approach to gaining control over their supply chain data - without waiting for a radical industry overhaul.

Transparency has arrived and it is within reach of all food businesses, large and small. By harnessing existing technology to join the dots between the actors in your network, whilst at the same time logging the stages of your product’s journey, it’s possible to build up a bigger picture that provides genuinely useful business intelligence on technical compliance as well as the environmental, social and ethical issues surrounding the production of food. Think of it as ‘colouring in the blocks’.

Should my food business be thinking about blockchain?

FIND OUT MORE ABOUT SUPPLY CHAIN MAPPING AND BLOCKCHAIN TECHNOLOGY:www.authenticateis.com/solutions/blockchain/

@AuthenticateIS

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