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Blockchain technology is progressing at a rapid clip, but when it comes to supply-chain applications, full deployment is far from being realized. Blockchain holds special promise in the food products sector, where tight control and visibility of items moving from the farm to retail shelves is essential. In this conversation with SupplyChainBrain editor-in-chief Bob Bowman, Accenture analysts Sarah Banks and Michael Klein discuss the current state of blockchain for tracking and tracing food, the challenges that exist to widespread deployment of the technology, and the timetable for blockchain becoming “ubiquitous” in that sector.
SCB: How prevalent is the use of blockchain for tracing and tracking in the food supply chain today?
Banks: It's not prevalent. That said, there’s tremendous interest in the technology for food. Two primary factors are generating interest. One is around sustainability and ensuring ethical ways for producing and bringing food to market. Cost and efficiency considerations are driving interest in exploring what can be done to improve track and trace capability for the food products that people buy.
SCB: Can you give an example of either a pilot or an actual working blockchain in this sector?
Banks: There are some examples on the safety and sustainability side. A large retailer has been able to put into place a blockchain application to trace the origin of poultry products sold in its stores. That has generated trust from consumers that the poultry came from local markets. It creates a halo effect, knowing where the product originated and that the information on the label is accurate. That’s a brand that you can rely on.
SCB: Is there a cost-saving element there as well?
Banks: An example is in the leafy greens space. A large retailer has been looking at how it can better deal with that type of product. There are obvious safety issues in being able to identify the location of contaminated product, so that it doesn't get purchased and consumed. But there’s also an advantage on the cost side —understanding how to get contaminated items out of the stores so that they can be destroyed, while avoiding the impact of lost sales. In today's world, the entire stock of a leafy green product like romaine lettuce might get thrown out because you're unable to identify where the contaminated product is sitting.
SCB: What obstacles are standing in the way of full implementation of blockchain for the food supply chain?
Banks: One is around generating the right data. There are advances in data generation, for food from seed to table. But how do you track that through the lifecycle of a food product? Internet of things [IoT] technologies can help to generate the necessary data. A second element involves connectivity within the supply chain. The food production ecosystem involves many different players. Dealing with them all can be challenging. So can ensuring connectivity between participants. When you're dealing with small farmers, for example, how do you bring technology to them, so that you can capture data around their process and make it visible?
The third concern is around creating standards for data, so that when information is communicated, it's has a universal definition. Groups such as GS1 have been pushing the industry toward aligning and collaborating on a standard way of setting the data that’s used to communicate the status of food products.
SCB: Mike, can you speak to any technological aspects that might serve as challenges or obstacles to full implementation?
Klein: There are always technology barriers in any IT transformation. It's a common occurrence. What’s unique in the blockchain space, though, is how often the technology isn’t the primary hurdle. The primary challenges we’ve observed are bringing together the various parties and agreeing about the type and amount of data they want to share, as well as the standards by which they’ll be sharing. Blockchain is rather unique, in that the challenge is less around the technology for adoption, and more around the business model and strategy.
SCB: GS1 is indeed working on standards for blockchain. But it doesn’t expect to have general standards available until the end of this year, and it won't get into industry verticals until next year. Must we wait for those standards to be released before the true potential of blockchain can be realized?
Banks: The examples we touched on earlier indicate that there’s progress toward bringing more transparency to the industry. But more work has to be done on standards in order to scale this to the point where it becomes ubiquitous.
SCB: Is there a cost involved in implementing blockchain? And if so, is it enough to serve as a barrier to some companies, especially small and medium-sized ones?
Klein: There are costs associated with any technology or business transformation. When it comes to blockchain, at least from the technology point of view, the investment is typical and in line with normal IT transformations. We're talking about taking core systems of record that exist within various organizations today, and moving them to a new shared source of record. That involves a major transformation of IT systems, but it’s no different in size and scope from a normal IT transition.
SCB: In these early days of development, blockchain is taking several forms — public, private, permissioned, hybrid. Which of those seems best suited to the food supply chain?
Klein: We think about it in terms of two forms. There are permissioned blockchains, where you have known actors operating and running the network. They allow the network to run on behalf of a consortium of organizations, or even a single organization, if that's in the business model. The other side of that is permissionless, where effectively anyone can join and participate in running the network. On the permissionless side, the data is always public. There’s not an excellent way to make the permissionless network private at this point in time. But we do need to have a structure by which we can govern the underlying technology. Generally this aligns itself with a permissioned blockchain. At the same time, we see tremendous innovation occurring in the permissionless space, and a lot of potential future uses there as well.
SCB: Can blockchain be separated from cryptocurrencies? And must it be, in order to function in the years ahead?
Klein: Definitely it can be. Blockchain and the distributed ledger provide the underlying technology for cryptocurrencies. But it can also be applied to a number of shared data situations that do not involve currency. It comes down to what is the goal of the use case, and what we’re trying to do. Are we trying to settle an arrangement between parties with some transfer of value? If that's the case, we can still do it via traditional payment systems. Fiat currencies allow you to share data about the transaction. You can operate in a hybrid mode, between sharing data on a distributed ledger, and settling via traditional currency payments.
Where it gets interesting is when there’s some form of digital currency that allows you to share data about the transaction, come to agreement on the terms of an exchange, and actually settle with the transfer of monetary value via the same transaction. That hold great promise, and we see valuable developments in that space. A lot of central banks are trying to digitize currency along those lines, but it's not a necessity to derive value from shared data structures.
SCB: When do you believe the use of blockchain will become widespread, indeed ubiquitous?
Banks: There’s a lot to orchestrate through, but I believe these use cases are setting us up for a tipping point. We need some infrastructure — not just the technology, but also the basic foundation pieces to achieve widespread adoption by across hundreds and maybe thousands of participants. So we see a path forward.
SCB: Mike, what's your best guess for a timetable?
Klein: The definition of “ubiquitous” is challenging. Is the internet ubiquitous yet? For the most part, yes, but 10% of the population still doesn't have access. The financial services sector has been working with blockchain for quite a long time and is much more advanced. It’s probably ready to adopt the technology within the next year or two. For the supply chain, we’ll see greater adoption across multiple industries over the next five to 10 years.
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