How Blockchain Technology Is Improving Food Supply Chains
Supply chains are an integral part of most business, and even government, processes. A supply chain is an ecosystem of multiple entities working together to bring a product or service from the producer to the consumer and are aimed to ensure speed, cost, and system efficiency.
Despite best industry practices, the supply chain process can break down at certain points over issues such as tampering, counterfeiting, substitution, misrepresentation, violation of laws and other such problems. This can result in cases of product recall, disputes, legalities, and in extreme cases, even death. These result in huge economic losses and tarnish the company’s image and brand value while triggering health, ethical, social, and environmental concerns.
Today, we're going to look at how the food industry deals with supply chain issues, and how companies are turning to blockchain technology to try to solve those problems.
Common Food Supply Chain Problems
The deliberate substitution, tampering, or misrepresentation of food has increased significantly because of the complex global food supply chain system. This costs the food industry an estimated $49 billion worldwide each year, as reported by NSF International. Some food categories which have been a victim of food fraud include olive oil, milk and milk products, fruit juices, tea and coffee, honey, maple syrup, spices, seafood, and many others. The tainted milk scandal reported in China in 2008 is one such severe case that made news in recent years.
Seafood is one category with stark reports of illegal production and entry into the supply chain. The global fishing industry struggles with issues related to illegal, unreported and unregulated fishing (IUU). A 2015 report highlights that IUU fishing accounts for 10% to 22% of the total global fisheries production. Protocols are abused and thus fall short in fighting over-fishing, violation of international maritime laws, evasion of taxes, and crimes related to slavery and fairness in competition.
“An estimated 600 million – almost 1 in 10 people in the world – fall sick after eating contaminated food and 420,000 deaths are reported every year, resulting in the loss of 33 million healthy life years,” according to the World Health Organisation’s factsheet dated December 2015.
Ohio State University noted in a 2015 study that “the total national cost of food borne illness, up to $93.2 billion a year, [is] an increase from $77.7 billion in 2012.” The Centers for Disease Control & Prevention estimate that each year, 1 in 6 Americans falls sick after consuming contaminated foods or beverages.
Food Recalls & Losses
Food recall is a major fallout of abuse in the food supply chain which weighs on the profitability and reputation of companies. Based on a study conducted in 2010 by GMA, “It was found that the average cost of a recall to participating food and consumer product companies is $10 million, in addition to brand damage and lost sales.”
Over the years, some of the best brands and companies in the food industry such as Cadbury, Pepsi, Coca-Cola, Kraft Foods, Tyson Foods, Nestle, ConAgra Foods, the Peanut Corporation of America, Blue Bell Creameries, and others, have all suffered losses due to recall and withdrawals from the market. In 2015, Chipotle suffered outbreaks of infections resulting in its stock price plummeting by 30% during the year. It reported a 14.6 % decline in restaurant sales during Q42015 and estimated that $14- $16 million will be spent on dealing with crisis management.
Supply Chain & Blockchain Solutions
Technology giant such as IBM (IBM), and retailers like Wal-Mart (WMT) are working alongside start-ups to digitally secure supply chains through the use of blockchain, which provides shared, traceable, and transparent record keeping.
In October, Wal-Mart launched the Walmart Food Safety Collaboration Center (WFSCC) in Beijing, targeted to “analyse root causes of food borne illness, and developing scalable solutions that can be made available to the entire food supply chain across China.”
Walmart, IBM and Tsinghua University have collaborated to improve the way food is tracked, transported and sold to consumers across China by applying the power of blockchain technology. Blockchain can overcome the vulnerabilities of the supply chain due to inaccuracies caused by the traditional paper tracking and manual inspection systems. It would facilitate digital tracking and storage of all product information (such as temperatures, dates, batch numbers, shipping details) at all levels and at each stage of the supply chain. This would enable faster and accurate detection of problems.
Likewise, Project Provenance Ltd is working towards greater transparency in the fishing industry by tracing the origins and histories of products’ by combining RFID tags with the blockchain.
The breakdowns in the various supply chains don't just affect profits - its toll is much greater. The use of blockchain can help create more transparent and less vulnerable supply chains to promote better businesses, ethical practices, and healthier lives on this planet.
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