Logistics

Blockchain tech to rescue tainted food in China

02:51 SGT September 8, 2017
Blockchain
The food industry and its supporting supply chain can reap the benefits of this emerging technology to make food safer

The world is not a small place anymore. While technology has eased connections, at least virtually it has also opened doors to remote, inaccessible areas, altering boundaries. The crucial role of food supply too is not waived off from this benefit, and consumables now go from one part of the world to the other seamlessly.

The movement of food in any country or region depends on various factors. It requires due compliance of various handlers and all parties involved to make sure the food is not contaminated at any stage. Every country has regulations for temperature controls, proper handling, equipment used, types of carriers, days of courier, cleaning and security. But the food supply chain is poised with great vulnerabilities.

While this magnificent supply chain is a boon, the food safety scare that tags along with it is not desirable. Food fraud costs the global food industry about US$40 billion every year, according to a 2016 report by PwC. Stories of contaminated and adulterated food products are common in many countries in Asia.

The tainted milk powder problem in China that reportedly killed six infants deterred the confidence of Chinese consumers in domestic goods. Today, there are not only fake food but also fake exposés of fake food dominating Chinese social media platforms such as WeChat and Weibo, further aggravating the distrust.

 

WHAT IS BLOCKCHAIN
A report by Chain Business Insights said that the food supply chain comprises countless players who are functionally and geographically diverse. Most of them are unaware of each other, and have very different commercial agendas. This fragmented structure restricts the free flow of information up and down the supply chain, thus adding considerable risk to the food carried.

But there is hope. And that is called blockchain technology.

Food fraud costs the global food industry about US$40 billion every year, according to a 2016 report by PwC.

The brainchild of a person or group of people known by the pseudonym, Satoshi Nakamoto, it was first devised for the bitcoin industry in 2008. The technology was used to tackle problems of the cryptocurrency and prevent people from “double spending” their digital money. It also helped to maintain a public record of every bitcoin transaction.

Tech developers explored its potential, only to unravel multiple applications across industries. A blockchain is simply a trusted,
encrypted system of nodes or “blocks” that records data points, that is, information in a ledger of sorts. It is like a shared document that allows all its authorised users to see all the data points or information constantly updated by the peer-to-peer network.

The report titled Blockchain and the Future of Food: Driving Efficiency, Transparency and Trust in Food Supply explains how blockchain can break down information silos in the food supply chain arising due to the many hands involved — from farm to manufacturer, from manufacturer to stores or restaurants or the end-user, and everyone in between.

It connects separate parties through a unified and trusted electronic system made up of smart contracts (electronic contracts that include triggers to execute computations) and a shared ledger system that ensures everyone within the supply chain has visibility and trust of the goods movement.

In the traditional supply chain, information was recorded too, mostly manually and on paper. But they were reviewed and shared only in case of a crisis. Moreover, instead of being centralized, it was often made available to manufacturers, warehouses and delivery companies separately.

Shifting consumer trends have led to a rise in the number of online deliveries of food from restaurants, groceries and packaged meals which calls for a stronger food supply chain. Consumers are demanding faster deliveries, and this is straining foodservice companies who sometimes compromise on the food standards itself. Take the case of SpoonRocket that focused on faster and cheaper deliveries and eventually succumbed to the pressure, finally declaring bankruptcy in 2016.

To meet changing consumer demands and still tackle structural food quality standards and comply with food safety issues, blockchainbased supply chain solutions are the need of the hour.

Blockchain can break down information silos in the food supply chain arising due to the many hands involved — from farm to manufacturer, from manufacturer to stores or restaurants or the end-user, and everyone in between.

 

EMBRACING CHANGE
Big players in the market realised its worth early on and are already in the process of implementing blockchain in their supply chain modules. Walmart started with a pilot programme using IBM’s blockchain system to track mangoes from the farm to the store. Each step was recorded in a blockchain and reviewed. For the supply chain, blockchain is the only saving grace in sight to combat food safety fears.

To tackle increasing need for food safety amid sceptical consumers in China, JD.com, the country’s second largest e-commerce company, has introduced a way for customers to look at a detailed history of their steaks — from when the cow was born to what it was eating — before it is served on their dinner tables with the help of blockchain.

JD.com, along with Inner Mongoliabased beef manufacturer Kerchin, will be using blockchain in Beijing, Shanghai and Guangzhou to track the production and delivery of frozen beef. In their partnership, JD will reportedly be responsible for the logistics, while Kerchin will ensure the authenticity of all product information. They are using architecture from Hyperledger, an open-source project that lets enterprise developers use blockchain technology in various industries to facilitate their online sales.

The process begins with a barcode that contains all the data about the product. Kerchin scans it and stores data in its own supply chain before
passing it to JD, who in turn writes the information to blockchain. Once this is initiated, any new change requires a digital signature, and both parties are immediately notified if and when modifications are made, thus making sure that the whole supply chain process is transparent.

JD is not the only one to invest in blockchain in China. Alibaba, China’s largest e-commerce player, announced in March this year its plans to use blockchain to track beef from Australia. Walmart too in collaboration with Food Safety Collaboration Centre in Beijing worked with IBM to recently complete blocksupply chains in transporting pork from Chinese farms to its stores.

Dairy food manufacturer Fonterra recently unveiled a QR code on its Anmum range of products which enables consumers to trace the product’s origins. This is a step towards achieving full electronic traceability by 2020. By scanning the unique code on each can of product, consumers can access information including the product batch number, the production and expiry dates, the region that the milk was sourced from and a certificate of inspection.

Kerchin had about $300 million in revenue in 2016, 10% of which came from online sales of beef products

 

DISTANT DREAM
So far, blockchain does seem like the industry’s answer to food fraud in supply chain management but it may not be fully fool-proof. In his blog, John Spink, who studies food fraud at Michigan State University, USA, said “traceability is not a single magic-bullet to stop fraud, but it is a critical part”, and that fraudsters can be creative enough and sometimes operate within the legitimate supply chain so they could defeat even a very technologically advanced countermeasure.

JD also said that periodic spot checks are essential even with blockchain as there might be lapses in data that is tracked. According to a 2015 paper in the peer-review journal BioScience Trends, the implementation of food traceability requires “a substantial amount of valid information”. And given the size of some countries in Asia and their manual processes, complete accountability may still be a distant dream. Supply chains often involve small factories, and the lack of dedicated electronic systems for recording information can render the blockchain technology useless.

Blockchains work effectively well in shorter supply chains but the same is not verified for longer ones. Food cargoes exchange multiple hands, and not all parties maintain and share data. The trust levels and collaborative spirit must be high among various parties in the supply chain for it to be successful. Not all companies are eager to share their data and business practices.

Sherree DeCovny, co-founder of Chain Business Insights, reportedly said: “Despite the obstacles of implementing blockchain, we believe that the food industry and its supporting supply chains represent one of the most important applications of the technology.”

She concludes: “Given the potential benefits and promise offered by blockchain-based applications, we believe that it’s not a question of whether they will be implemented, but when.”