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Lessons learned so far from implementing a food blockchain project - by Leontien Hasselman-Plugge, CEO at SIM – Supply Chain Information Management

"Blockchain is a revolutionary technology; it will change everything."

by Leontien Hasselman-Plugge, CEO
photo by SIM

It seems nowadays that implementing a blockchain is the next best thing since sliced bread and will solve all issues in the food industry. The economist named blockchain the "trust machine" and blockchain pilots in the food industry pop up everywhere claiming success. Often these are proof of concepts to test using the technology for traceability and provenance and not implementation on an industrial scale.

First of all a short explanation: A blockchain is a decentralized ledger which records transactions and stores this information on a global network in such a way that the data entry can never be changed at any future point. The blockchain provides a neutral platform where there is no third party needed to authorize transactions, but rather a set of rules that all chain participants, both users and the operators of the system, must follow. It was originally developed for financial settlements, but the technology underpinning crypto currencies like Bitcoin, can be used in a very different elegant way for the food industry. Will the use of blockchains in the food industry be a game changer? At SIM we are building a blockchain application and I'd like to share some first lessons learned during this journey.

  • The first food blockchains are almost all private, permissioned blockchains and not yet public
For retailer, traders, food producers, growers and farmers there is a lot at stake when opening the doors and becoming transparent about where they source their products or their ingredients. This is competitive sensitive data and there needs to be a serious push (vendor requirements, legislation, etc.) or a clear win-win in order to share this type of data. Blockchain is an elegant technology to use to create traceability in food supply chains but it is a large step from minimal data sharing till full transparency. Therefore you see most projects use permissioned private blockchains so that chain partners can firstly become confident and start trusting the system before opening it up to any participant. The question is how will all these private blockchains that for instance retailers use be linked at a later stage? We have to make sure we take the learnings from our legacy systems and ensure interoperability. 

  • The "smart" of smart contracts is that it brings supply chain partners together
Often the supply chains are still paper based systems where forms have to pass through numerous channels for approval and often data is hidden in each of the supply chain partners own IT systems, which increases exposure to loss and fraud.
Smart contracts are self-executing digital contracts. Contracts in the supply chain between actors digitize agreements on for instance quality, provenance data, food safety certification and social compliance certification of a product. For me the most interesting part of a blockchain project is to have all of the supply chain partners around the table (often for the first time) and discuss the minimal data points and KPIs they need to know on both the product, the origin and the journey of the product as well as basic data on all the supply chain actors and the activities they have towards the product.
Once these have been defined, these contracts are converted into computer code, stored and replicated on the system and supervised by the network of computers that run the blockchain (no more paper). If products move through a supply chain and are according to the specification and the agreements, the transactions can result in ledger feedback such as receiving the product, proactive issue management or transferring money automatically. The latter, I believe, can transform the industry.

  • The blockchain can bridge the gap between the consumer and the ones making our food
Now often the largest margins are for the retailers and large traders. Often the producers and farmers at the first mile are not benefitting from the premium a consumer is willing to pay for good, safe and sustainable produced products. The blockchain can help provide a name and ace to the makers and growers of our food. If the traceability is established and the product is carrying the QR code, the consumers can easily access the products information, the journey of the product and the farmer or producer with a smartphone. This opens up the possibility to connect and we are experimenting with offering the consumer the possibility to give a "like" to a farmer or even offer a small tip to show appreciation for the work done. (www.tip2farmer.com)
This is one of the ways to create a win-win. You often see the burden of the additional data entry and traceability costs are bourn by the primary production actors who benefit the least of the margins on the end product. If we want to use blockchain as a traceability and provenance tool used on an industrial scale, we must make sure there is a clean win-win and ultimately a financial gain as well for the first mile. The business case for all value chain partners needs to be crystal clear. 

  • It is a trust machine, but ultimately it needs people to keep it going
According to the Edelman trust barometer, trust in institutions, governments and large corporations is at an all-time low. We are moving from an institutional trust system to a distributed trust system. Defining the rules for products to move along the supply chain and embedding these in smart contracts is mechanism to set up distributed trust. A blockchain facilitates exchange of information and all supply chain partners can validate the quality, taste and provenance of food and share assertions and evidence as it moves through the supply chain. It can also include the end consumer actively.Product related claims like "free range" can be evaluated by the network partners and they can even ask a certification agency to review their assessment and post the certification on the blockchain. Standard organizations can collaborate and help validation and make authentications easier by for instance adding a QR code on the certification like IFS already does. This way participants can scan the QR code and validate the certificate before sharing it in the blockchain network resulting trusted data entry. This food safety information can then be processed as data instead of just a PDF as well.

One essential feature of the blockchain is that participants can share some data with all, some data with one partner and other data with none. The fascinating promise of the blockchain is that it can be the technology that enables supply chain partners to come together for the first time and decide what information is necessary, and enable financial transactions between partners that just starting to trust each other. But this can only happen if they continue to open up and share data and everybody starts participating in the chains. 


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