Blockchain has a bad reputation. In financial services, it’s being called “a shiny mirage” as the cost for proof of concepts outweigh the benefits of large scale deployments. Widespread adoption seems a long way off.
We cannot predict if or when blockchain will achieve its promise but we can say blockchain is an emerging technology with much potential that we should prepare for.
The premise of this “Build versus Buy” blog is simple: I argue companies should invest in a technology platform (like Foodware 365 or LS Central) that is pre-built for your industry and is designed to leverage emerging technologies. You can then benefit from blockchain if/when it matures. By way of example, Foodware 365 is invested in a R&D project to Automate Compliance in Agrifood through Blockchain – this is R&D which all their platform customers gain from.
And blockchain is particularly interesting for the food and drink industry where transparency and trust are so important. Blockchain offers the opportunity to resolve many food safety challenges such as traceability and quality control.
This is important because food recalls are rising by 25% a year at an average cost to retailers of $10 million. While biological causes – Listeria, Salmonella and E-coli – are factors, more than half of these recalls (56%) are as a result of operational mistakes including incorrect labelling, the presence of undeclared ingredients or contamination during the production process. This highlights the need for food producers to invest in ensuring the traceability of their products back through the supply chain.
Today’s supply chains are an unwieldy mass of links and players. In these complex data heavy environments, lack of transparency and data integrity are rampant leading to inefficiencies and wastage, and increasingly regular instances of food recalls. Population growth has led to rocketing demand for food and medicines, while rising operational costs have led to retailers and manufacturers expanding their search for suppliers to all corners of the globe. The food supply chain is creaking under the pressure and dealing with fifty times more data today than just five years ago. With so much data, processes and players, inefficiencies and delays have become a standard part of the supply chain.
Blockchain promises to transform this market: to do for transactions what the internet has done for information. In the same way, the internet has opened up siloed information databases, improved communication, collaboration and the transparency of data and its source, blockchain can open up transactions through its distributed ledger. Due to its decentralized nature, blockchain delivers transparency and trust by default.
These unique characteristics – the fact that each transaction is transparent, trustworthy and secure – make it a natural fit for the evolution of the supply chain. As a shared ledger, blockchain stores all records of transactions, making them accessible to all parties in the blockchain, while its distributed state solidifies its security. Unlike the one-way information flows that are typical between buyer, supplier and logistics, the blockchain’s shared ledger becomes a single version of the truth, letting all parties view the information and events in the chain in chronological order thus reinforcing transparency and minimizing the potential for tampering with the data. The digital shared ledger is updated and validated with each transaction, resulting in a secure, permanently recorded exchange. The result is faster, permissioned and auditable business to business interactions between parties such as buyers, sellers and logistics providers. This shared single source of truth is what makes blockchain so unique. If the genesis block is created with trustworthy data, and each additional transaction is validated by network consensus, then the supply chain can be trusted establishing a high level of data integrity, making data trusted, available, secure, and compliant for everyone connected to the blockchain network.
Shipping avocados from Mombasa in Kenya to the port of Rotterdam in the Netherlands can take as long as 34 days, 14 of those days are taken up by port authorities waiting for shipping information and government approval. A recent study reported that one avocado shipment involved 30 port and government officials, and 200 pieces of communications being shared between 100 people. In the Port of Brisbane in Australia approximately 15% of all data in individual import transactions are duplicated almost 30 times. This duplication of effort creates operational inefficiencies and impacts record keeping, leading to increased costs.
Foodware 365 have started building solutions to this avocado problem by using the latest Microsoft technologies – the Power Platform and Artificial Intelligence – but the opportunity to really solve this problem requires a streamlined, efficient system with trust at its heart and this is where Blockchain has the ability to transform the supply chain as we know it.
Traditionally supply chains deploy business automation processes to safeguard corporate governance and quality throughout the supply chain but Blockchain will enable us to offer far-reaching guarantees that satisfy the growing demand for data and information about food and its production. Blockchain’s fully auditable capabilities means information stored in its blocks is permanent and cannot be tampered with, allowing future parties to reference and confirm back any transaction at any point in time in the supply chain. From the birth of livestock (and DNA tracking) to the creation of food to the packaging, shipping, distribution to the consumption of food, the continuous flow of this historical data that the blockchain generates will create a flow of information that is duly reviewable at the consumer unit level instead of per batch.
This will revolutionize supply chains but it will also take time. For Blockchain to be truly transformational, other market processes need to move to blockchain-based systems as well. One isolated blockchain is not sufficient, all market players have to be involved. This is why the cost of large scale deployments is currently prohibitive.
But that is not going to stop this innovation, particularly because the benefits are clear. We believe the the food supply chain will adopt some form of blockchain and this is why our Food ERP and CRM business applications are built on standardized technology which will leverage this blockchain technology as it matures. The Microsoft Dynamics 365 suite of business applications is cloud based and built on a Common Data Service enabling realtime links to Blockchain’s distributed ledger, updating transactions as required while also maintaining visibility of the audit trail.
This is why we encourage our customers to invest in standardised solutions built by ISVs for particular vertical industries. We look forward to sharing customer case studies as we progress along this journey – because it is a journey – and once our first integrated blockchain supply chain solutions are live.
The next blog in this “Build versus Buy” series will discuss an emerging technology that has already arrived – the Internet of Things – and will describe how this innovation is already improving the supply chain with actionable data.
Written by Gerry Power, Sales Consultant