By Melanie Nuce/ SVP, corporate development, GS1 US
With the promise of fast and secure end-to-end product traceability, blockchain is easily one of the most energizing—and complex—technological developments of the past few years.
Originally developed in the financial industry, blockchain has demonstrated through early pilots from Walmart and other major food companies that it can improve the complex food supply chain. However, many industry stakeholders still don’t have a clear picture on blockchain. Here is an overview of what you’ll need to know as blockchain matures—how it all works, how it will likely change the retail grocery supply chain and how to prepare.
How it works
Two key features define a blockchain—an immutable distributed ledger and smart contracts.
A distributed ledger is essentially a shared database, that in theory, anyone, anywhere can use to transmit data securely. Shared databases have many benefits, like providing real-time inventory visibility. However, blockchains should be thought of as the ultimate shared database because of their unmatched security features. Instead of linear, batch-oriented transactions, a blockchain has complex transaction validation requirements that usually involve multiple parties. This effectively eliminates the single point of failure (i.e. no single point to hack into) of traditional data exchange systems. Additionally, information is immutable, meaning it cannot be modified or deleted. All parties have visibility into what is replicated, shared and synchronized across multiple geographic locations. This structure makes the data less vulnerable and more trustworthy.
Blockchain also supports “smart” contracts, meaning an automated execution of terms, conditions, and business rules. Through this feature, trading partners can automatically enforce terms and conditions as previously defined, eliminating the errors and inefficiencies associated with the current manual processes based on legacy systems. A trading partner is prevented from writing a business transaction to the blockchain ledger that is outside of the rules specified in the smart contract. For retail grocery, this means far fewer item substitutions, more certainty around what is being shipped and when, and fewer discrepancies downstream.
How it will change the retail grocery supply chain
Retail grocery is well-suited for enterprise blockchain exploration. Driven by rapidly changing consumer behaviors and attitudes toward food, the industry now requires speedier, real-time data sharing capabilities. Blockchain represents an opportunity for farmers, distributors, processors and retailers to look closer at food traceability and information transparency, which will help them remain relevant in the eyes of consumers. Early solutions from IBM, Microsoft and some startup companies are helping to define how grocery leverages blockchain to harness the increasingly complex nature of the global food supply chain.
For instance, Walmart’s well-publicized traceability pilot involving mangoes demonstrated the technology’s usefulness in speeding up food recalls. Blockchain was used in tandem with Walmart’s established system of traceability based on GS1 Standards. Pallets of mangoes originating from a farm in Mexico were tagged with numeric identifiers. Every time the product made stops throughout the supply chain, their status was updated on the blockchain ledger. After the pilot was completed, Walmart was able to access all relevant traceability information in seconds, compared to what historically would take a week to procure.
How to prepare
Blockchain has tremendous potential, but most predictions put its maturity out three to five years. Now is the time to focus on the most important prerequisite for blockchain—interoperability. The data transmitted on a blockchain needs to be universally accepted and understood by all systems for blockchain to be effective and scale.
The good news is the retail grocery industry is no stranger to collaborating to improve interoperability. Since the barcode’s introduction 40-plus years ago, huge strides have been made in enabling food traceability—long before blockchain evolved. Hundreds of trading partners use global GS1 Standards for automated data capture through the use of standardized barcodes, and the ability to share data in real time through event-based standards such as EPCIS (Electronic Product Code Information Service). With all of these standards working together, a company can have supply chain visibility—a crucial first step that can set a company up to maximize blockchain’s power in the future.
Ultimately, now is the time to stay educated and work on a foundation for blockchain. For those attending the annual TPA Supply Chain Conference, check out the panel discussion on blockchain titled “Amplifying the Power of Blockchain” on Tuesday, April 17 at 9:15 am. I will be joined by Kerry Bridges, senior director supplier food safety, Walmart International; Pam Erb, VP, supply chain, Wegmans Food Markets; and Ryan Richard, GS1 US’ senior director, industry development retail grocery for an interactive discussion on blockchain’s potential and what the industry should be doing to prepare.