Why should enterprises apply Blockchain to food traceability?

Lina Network

September 23, 2020

In recent years, Blockchain traceability has raised a lot of discussion in the fields of food supply chain and agriculture, which attract the attention of businesses, farmers, internationals organizations and experts. However, not many people understand why this technology is necessary for the food industry.

In this article, Lina Network will provide an overview about traceability, the challenges in transparent traceability and the potential of applying Blockchain technology in food supply chains.

1. What is food traceability?

According to European Commission, traceability is “the ability to track any food, feed, food-producing animal or substance that will be used for consumption, through all stages of production, processing and distribution”. More specifically, traceability includes the process of “tracing” (backward traceability) and “tracking” (forward traceability). When consumers purchase a product, they can “trace” product information back to the manufacturer, while the producer can “track” in the opposite direction.

There are many reasons why businesses should adopt food traceability, such as import and export requirements, food safety issues, brand reputation, etc. However, the two most important reasons that need to be mentioned are: (1) the ability to investigate and resolve the consequences of foodborne illnesses; (2) building trust with consumers.

Control foodborne diseases outbreak

Fresh food sold in supermarkets is usually hygienic and safe, but nothing is absolute. For example, in 2011, there was a large E.Coli outbreak in Europe. It took several months to find the cause of the food-related crisis, leaving extremely serious consequences. The whole food industry witnessed a loss of 1.3 billion USD to investigate the source of the disease, plus another 236 million USD to solve the medical repercussion. The United States encountered a similar situation in 2018, which resulted in hundreds of people being infected and the entire food supply chain was affected. Therefore, a transparent and effective traceability system is essential for consumers, farms, businesses and the entire food industry.

Build trust with consumers

From the consumers’ perspective, traceability is the tool to ensure health safety. Every year, there are many food-related crises in Vietnam that make consumers lose their trust in clean food, such as pork tapeworm infection, pork infected with African cholera, pesticides in vegetables, etc. The survey conducted by the Ministry of Industry and Trade in 2019 partly reflects the anxiety of consumers, with 83.8% of respondents saying that food for sale is not hygienic, and 74.8% stated that it is difficult to trace the origin of food.

Consumers are becoming smarter and more demanding with product quality. Traceability is an indispensable factor to build trust with the community, because it is a tool for consumers to actively verify the origin and information of products, creating a flow of information exchange between producers and consumers.

2. Barriers in food traceability and supply chain transparency

Traceability and transparency in the food supply chain is an important issue, not only for consumers but also for farmers, businesses and the entire food industry. However, there are certain barriers that hinder this achievement.

Transparency in the food supply chain

Most food supply chains go through a non-profit intermediary organization to manage their database. This requires all participants to fully trust that organization, but still cannot guarantee absolute transparency. In a few cases, the database and system is controlled by a large and influential enterprise in the supply chain, which can easily lead to data manipulation. Moreover, data centralization is not safe since the server can be attacked from both outside and inside.

This is one of the main reasons why Blockchain technology is so welcome in the food supply chain, because it’s characteristics of decentralization, transparency and immutability can solve this problem.

Read the article “05 outstanding features of Blockchain technology”.

Difficulty in information exchange

In order to achieve transparency in traceability, it is necessary to have a common layer of information exchange for all participants in the supply chain: farmers, processors, manufacturers, distributors, retailers, etc. In practice, this is very difficult to achieve because the food supply chain is extremely complex both vertically and horizontally. Participants often suffer from geographic distance, technology platform incompatibility, policy, finance, etc. preventing information exchange. Comprehensive traceability only occurs in simple supply chains, with few participants, and close geographical distance.

Huge investment required

In order to build a comprehensive and transparent traceability system, intensive investment is required at the early stage. However, the majority of participants in the food supply chain are small and medium enterprises; they can hardly meet the financial and production scale requirements to set up the system. Furthermore, most farms prioritize investment in production and processing technology over a supply chain management system such as traceability.

3. The potential of applying Blockchain in traceability

The flow of food supply chains can be visualized in a simple line like this: Input suppliers provide raw materials to the farms, harvested products are transported to the aggregators, then to the processors, final products will be distributed to restaurants, wholesalers and retailers, and finally to consumers.

The vertical food supply chain

In reality, the flow of information throughout the food supply chain is also linked in a straight line as shown. This limits the exchange of information between parties in the supply chain, hindering traceability. If viewed horizontally, the supply chain will be much more complicated because of the intersection of many chains, forming a complex network. Therefore, traceability will benefit from the decentralized nature of Blockchain technology. All parties in the supply chain will be directly connected to each other without an intermediary, forming a closed circle network. As a result, exchanging information in complex supply chains will become more convenient and efficient.

Blockchain connects all parties in the food supply chain, forming a closed network

How can Blockchain solve the problems of traceability?

When an enterprise participates in the traceability system, they are given accounts to post information related to the batch. Information entered into the system will be automatically encrypted and stored into the Blockchain ledger; any updates will be saved in history and stored information cannot be changed. The information will then be updated in real-time sync to other copies of the ledger on the same network. This helps to solve the following problems in the food supply chain:

  • Transparency: All batch information can be tracked and traced, thereby ensuring transparency in the supply chain. All participants and consumers can extract product information through a shipment code (such as a barcode or QR code).
  • Information exchange: The Blockchain platform creates a common layer of information exchange for all parties involved in the supply chain in the form of decentralization. Because using a private Blockchain network (Permissioned Blockchain), every participant identity will be verified, no intermediaries, ensuring trust between parties within the network.
  • Cost saving: Blockchain technology automates all operation activities, eliminating intermediaries, thereby reducing unnecessary costs.
  • Increase productivity: Thanks to the ability to update information automatically in real time and standardize all data stored on the system, product information can be accessed easily and quickly. A typical example is Walmart’s experiment using the Blockchain platform to trace the origin of mangoes, which shortens the traceability time from 7 days to 2.2 seconds.

The Blockchain platform still has a downside: large investment costs in the early stages of building the system. Even so, this investment is still fully worth the value this technology brings to the food supply chain. Currently, there are several businesses around the world that have successfully applied Blockchain to traceability, such as Walmart and IBM Food Trust.

4. A traceability solution – IBM Food Trust

More than just a traceability application, IBM Food Trust is a Blockchain-based food ecosystem, connecting all parties in the supply chain. IBM Food Trust is created under the cooperation of the retail giant Walmart and the world’s leading technology corporation IBM. IBM Food Trust is deployed on the Hyperledger Fabric private Blockchain network, with 3 operating layers as follows: (1) The technology layer – Hyperledger Fabric, (2) The platform layer – IBM Blockchain Network and (3) The solution layer – Integrated modules, onboarding services and developer zone.

The 3 operating layer of IBM Food Trust

The IBM Food Trust traceability solution enables consumers to track the journey of food, from farm to table. Currently, IBM Food Trust has more than 100 partners globally, with prominent names such as Walmart, Unilever and Nestle.

Read the article “The giant Walmart apply Blockchain technology to digital transformation”

The application of Blockchain to traceability in Vietnam will be more difficult, but the benefits are extremely huge. Lina Network is proud to be the pioneer in providing the transparent traceability solution on the Blockchain platform, which is called Lina FarmTrust.

5. References

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