How Blockchain is Improving Traceability & Trust in the Supply Chain

Since the emergence of the cryptocurrency Bitcoin, industry publications have touted its underlying its ledger system, blockchain, as a revolutionary technology poised to change the way commercial transactions and other vital processes are handled.

But if you’ve tried to wrap your heads around exactly what blockchain is, or how it works––let alone how it can impact the grocery world––you’ve likely realized it isn’t a technology that’s easily explained in the short blurb we’d like it to be.

In truth, blockchain is a complex topic that doesn’t lend itself to concepts we’re typically familiar with, so in an effort to make your Blockchain 101 lesson as clear and simple as possible, we’ve summarized the key points from the one of the best explanations on the web as well as a real-life example of how it’s working its way into the grocery world.

A clear definition of blockchain technology

A short and simple definition of blockchain from cbinsights.com:

“Blockchain technology offers a way for untrusted parties to reach agreement (consensus) on a common digital history. A common digital history is important because digital assets and transactions are in theory easily faked and/or duplicated. Blockchain technology solves this problem without using a trusted intermediary.”

Boiling this down even further, blockchain is a method for keeping accurate, un-corruptible ledgers of transactions or assets by removing the risk of having a third party administrator involved. It’s a ledger system controlled by nobody, so it can be trusted by everybody.

While the cryptocurrency Bitcoin is an often-cited use case for blockchain because the whole point of cryptocurrency is to maintain a decentralized public ledger system and remove third party administrators from the process (blockchain’s two primary functions), there are many other areas where the blockchain could be applied to improve transaction reliability, especially in traditional spaces like retail and grocery.

In general, the following question can be used to determine where blockchain can offer improvement:

What is an activity where everyone needs a record of ownership, and where a trusted third party isn’t preferred?

To illustrate how blockchain is multi-purpose problem-solving tool, we’ve summarized a few examples of areas where blockchain could apply.

Examples of other blockchain applications

  • Establishing identify

Although social security numbers were never meant to be used for identification, they’ve becomes one of the most popular ways of doing just that. In the digital age, we’re learning the hard way just how vulnerable this method is, as evident by recent high-profile hacks into companies like EquiFax that have exposed the personal information of over 100 million Americans.

Blockchain could eliminate this inherent vulnerability by establishing an identity record system through an open, global blockchain instead of a state or government-issued system. Blockchain would put you in control of your own identity rather than relying on a system controlled by an entity who may be unable to keep your information safe and secure. Companies like ID2020 and Civic are already taking steps to create just such a system if you’re interested in learning more.

  • Establishing titles and ownership

Blockchain could also be used to give everyone access to records of who owns what, whether it’s a piece of land, a car, a house, or any other significant “owned asset.” Paper records of title or ownership are prone to forgery and physical degradation. Similarly, centralized databases are prone to hacking, human error, and/or tampering.

A blockchain ledger system, on the other hand, isn’t controlled by a single entity and ownership can be tracked without risk of tampering while also remaining neutral and resilient from other threats. In short, the information recorded within it can be trusted.

These are just two examples among many where blockchain could bring greater trust and reliance to currently vulnerable ledger systems.

Now that we have some context, let’s talk about blockchain in the grocery world––specifically what companies are already doing now to integrate the technology into their operations and what opportunities lie ahead.

Blockchain gives grocers a tool for building trust and traceability in an age of greater transparency

In 2016, a joint project between IBM and Walmart brought the first proof-of-concept for blockchain to life in the grocery world. The two companies first applied the technology to accomplish a relatively small goal: improving the traceability of shipments of pork and fresh mango in China and the United States.

Seeing early success, the initial project is now growing. In addition to Walmart, IBM is now collaborating with Kroger and Wegmans as well as supply chain service provider McLane Co., and a number of food suppliers. The goal of this larger project is to accelerate and bring to scale an enterprise-ready blockchain traceability system called IBM Food Trust.

If the group is successful, the blockchain solution could be ready by the end of 2018.

At the same time, industry trade groups are now engaging their members to ensure supermarkets are a part of the broader technology discussions around the direction of blockchain.

So, how exactly is blockchain being used here and what is it actually improving?

  • According to Walmart’s VP of food safety when reporting the details and results of the initial blockchain project, there were a few important takeaways:
  • Before the blockchain test, it took Walmart six days, 18 hours and 26 minutes to trace the selected mangoes back to their original source. Blockchain cut that time down to just 2.2 seconds.
  • The technology also enabled the company to see a wealth of important information that simply wasn’t available before. In particular, the team saw that there were four days of bottleneck as the mango shipment got held up at the U.S. border.
  • Walmart was also able to see audit certificates and other food safety-related documents attached to the product, all of which helped improve its business efficiencies.

In terms of a longer-term vision for blockchain Yiannas noted that Walmart believes “portions of this information could be made available to our customers via a code on the product package.”

This would obviously giving a whole new level of transparency to consumers who want to know more about where their food is grown, while also adding a new level of trust to those concerned about food safety.

Other potential uses for blockchain in grocery retail

  • In-store transactions

In catering the the variety of payment methods now available, retailers and grocers are dealing with fees for transaction processing from intermediaries. To avoid these margin-eating costs, retailers could use a blockchain system to launch their own closed mobile payment system.

Such a system would remove the middlemen between banks and card companies, while also minimizing paperwork and ensuring data integrity throughout the process. In addition to lowering the costs of payment, blockchain would make the entire process transparent, thereby building trust and better relationships among customers.

  • Product storytelling and food safety

With a simple consumer-facing app, the blockchain could be used to show an entire products’s journey throughout the retail supply chain that would open a new realm of security, transparency, and trust-building mechanisms––not to mention a new platform for branding and advertising.

In addition to offering interesting information about the supply chain to consumers, it could also be extremely useful to stores when identifying and removing damaged, expired, or otherwise unusable products while investigating potential cases of fraud, or improper storage conditions.

Interested in learning more about the technologies impacting grocers? Grab our free eGuide for 10 AP/LP tools helping grocers reduce shrink throughout their stores.

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