You’re going to see a lot more “Oooh! Shiny!” examples of Blockchain in 2018. Most often seen in the financial services sector, this evolving technology will affect the consumer goods sector as China, and Walmart, prepare to use Blockchain. The innovative technology might seem a little daunting at first, but the following paragraphs provide answers to questions you may have about this new technology. Let’s start with a few basics.
What is Blockchain technology? You may have heard that Blockchain technology forms the basis for the Bitcoin and Ethereum cryptocurrencies so popular in the current financial realm – but do you know how it works?
Blockchain records financial transactions in a decentralized form that creates a cyber ledger across many computers instead of the single entity transactions contained in traditional paper ledgers. Each computer gets a copy of the full ledger that the users can view but not copy. The ledger records each financial transaction from each computer node as a block in chronological order. The ledger makes changes in the record not only transparent but also date stamps them. This means that individuals cannot change transactions retroactively. Changes are prospective only and date stamped for tracking purposes. Blockchain makes the entire ledger available for public inspection to those who are authorized to view it. These features make it possible for people to look at the blockchain’s history and track what happened during the series of transactions.
Proponents of using blockchain for food safety and other customer shopping want to use the decentralized cyber ledger to record and integrate each transaction in the food supply chain/shopping experience.
Who (and where) uses Blockchain technology in the consumer goods sector? Walmart runs two projects using blockchain technology to ensure product safety within the grocery market in China and to enable tracking in its US markets.
Like the US, China has had its shares of food safety problems, ranging from selling smuggled meat (frozen for up to 40 years) to improper disposal of food by-products that resulted in polluted drinking water. China imports a lot of pork but also supplies most of the world with this popular meat product. So it is imperative that China’s food supplies are safe, not only for its own citizens, but to maintain its economic credibility to those countries that are its customers.
Small family pig farms in China are being replaced by industrialized pig farms like the ones found in the US. China wants these industrialized farms to incorporate modern safety procedures and food safety protocols.
How does Blockchain help food safety? Advances in food safety protocols require increased tracking capability. Walmart predicts work done in China will also scale to apply in other supply chain segments and in other parts of the world.
Walmart’s tracking project anticipates the following advantages:
- individual transaction authentication,
- secure information retrieval for everyone involved in the supply chain, and
- transactions in a database that supply chain partners can audit,
all resulting in increased trust in the product’s safety among trading partners.
What are the challenges in applying Blockchain to food safety? The biggest challenges that apply to converting blockchain technology from the financial sector to the food safety setting result from blockchain’s consensus nature. All stakeholders in the program (farmers, processors, distributors, retailers) must agree to the protocols and data sets that will drive the food safety dynamic and agree to how much information will result in a transaction verification. For example, cyber ledgers may include information on grower/processor regulatory inspections and food safety certifications that are currently unavailable from paper trails regarding food processors and distributors. The length of the supply chain increases the challenge for agreement among the many parties.
Walmart is a global trading partner. How will Blockchain improve the global supply chain? Walmart intends to increase the efficiency of the global supply. As supply chains increase in size from the local grower to the national shipping company, to the international distributor and finally to the US wholesaler — and when every link in the supply chain becomes visible to every member of the supply chain — opportunities appear to eliminate businesses from the supply chain that do not add value to the final product. Companies whose sole contribution under the paper system was to verify transactions are not needed under the blockchain system. Eliminating them will make the supply chain become more efficient.
Blockchain also means that smaller growers or start-up companies may participate within the supply chain without a huge hardware investment — just using mobile devices. It means even small companies can provide their upstream partners the information they need to enable and maintain food safety (or other integrated protocols) throughout the supply chain.
What steps is the Walmart project taking to inform consumers of the changes? The project principals recognize that education will form a large part of the success of China’s food safety project. Toward that end, Walmart awarded a grant to a non-profit known as the China Children and Teenagers Fund to instill food safety education in school age children. The project leaders want to start educating young people early so that they grow into adults with a solid understanding of the primary goals and tenets of food safety.
For additional information, please open the article “The Blockchain Gang” from February 2017, which was the inspiration for this post. We’re also seeing more digital transformation from consumer goods organizations leveraging artificial intelligence and machine learning to drive growth, and improve in store execution. More to come on the topic in future posts.