Utilizing blockchain technology in agriculture
Have you ever found yourself stuck in the produce aisle of a grocery store debating over a selection? You have been craving a sweet, crisp apple. Organic apples are your preference, but they are double the price of the conventional produce. You wish you could verify the source of the apples to justify the price, but in the end, you realize you just have to place your trust in the supply chain involved in placing those apples in the bin in front of you. This common scenario highlights one of the biggest issues with the current food supply - the lack of transparency between the suppliers, distributors and consumers. One new technology is poised to solve that problem – blockchain.
You may have heard of blockchain technology recently due to the popularity of Bitcoin and other cryptocurrencies. Blockchain is the underpinning technology making cryptocurrency transactions possible. Basically, blockchains are digital ledgers that are permanent, transparent and secure, with no institutional intermediary management. Instead blockchains are maintained and kept secure by a network of participants. Blockchain can be useful for logging all kinds of transactions. In this article, we are focused on the food supply chain, but blockchain can be useful for creating visibility and integrity into any type of supply chain.
So, let’s follow those apples through the food supply chain and see how blockchain can improve visibility and efficiency along the way.
Those apples originated at a particular orchard as blossoms on trees, and they were cultivated by some of the most important producers in our society – farmers. Farmers are starting to combine traditional methods with new technological solutions to improve visibility in many aspects of their business. There are several ways farmers can benefit from blockchain technology.
Sync with sensors
If the farmer is already using Internet-of-Things (IoT) devices, such as crop sensors, blockchain can be used from the very beginning as seeds or trees are planted. As the IoT devices collect data about the plant health, that data can be stored in a blockchain, creating a sequential log of the life of the plant from planting to harvest.
Another impressive feature of blockchain is how they integrate with smart contracts to automate payments when certain milestones are achieved, such as product received into processing facility. This eliminates the lag time for farmers getting paid for their product. Smart contracts can also be configured to spread out payment to farmers throughout the year versus the traditional method of paying farmers seasonally.
After the apples are harvested, they move on to processing. This involves packing, storing, sales and marketing. There are many instances in processing where blockchain can be used to increase operational efficiency.
As each apple moves through the processing facility, it’s location can be tracked and entered into a blockchain ledger automating record keeping. This blockchain carries with it each fruit’s origin and certifications and possibly other data, such as the conditions under which it grew and its quality when picked. The tracking during processing is just continuing the sequence of records of the fruit’s journey.
Sorting and storing conditions
In order to ensure top quality be maintained during processing, the quality of the fruit and the environmental conditions in which the fruit is stored can be logged into the blockchain.
Tracking sales and finance
As the processors are securing sales of apples to the distributors, all of the sales, shipping and payment information can be included in the blockchain.
By the time an apple reaches a distributor, it has quite a digital ledger record. Blockchain can give distributors insight into how much inventory will be available for purchase and when. That visibility allows distributors to plan accordingly, better anticipate their inventory, and avoid food waste. Is an order stuck at customs? Both processors and distributors will be notified immediately and can quickly deal with any issues that may threaten food spoiling. With blockchain, distributors also have record of the food quality, origins and certifications, and food storage history. Because of this technology, distributors can ensure that they are offering customers the best possible selection.
So, now the apple is finally in the hands of the consumer. The consumer debating whether to trust the organic certification can view the entire journey of that apple, if they are so inclined. One day, they may simply be able to scan the apple’s QR code in the store and quickly see the entire blockchain ledger: the source, certification and complete voyage of the apple in question. All of the improved efficiencies along the supply chain, due to blockchain, mean lower product prices for consumers.
Because blockchain technology is relatively new, it’s use in supply chains is still being sorted out. For the technology to become widespread in supply chains, there are a few obstacles to overcome:
Understanding and trusting the technology
It is important that the participants in the supply not become bogged down by becoming experts in the details of blockchain. There are already many out-of-the-box blockchain applications geared towards different industries, several with a focus on supply chains. It is important to choose a trusted partner to help guide businesses through the process of planning for and implementing this technology. Many technology consultancy firms are well-versed in blockchain.
Investment in technology
Implementing new technology can require hefty start-up costs and extra time for testing, but usually ROI is realized quickly. For mid-to-large companies, start with buy-in from leadership level, and have them drive the message of why blockchain is valuable for the business. For small farmers, start with a basic blockchain for simple record keeping. Once the foundation is established, smart contracts and integration with IoT device data can be added over time.
Getting everyone on board
Blockchain is most useful when all participants involved in the supply chain are equipped with the right technology and committed to the technology. If there are gaps in the digital ledger, the integrity of the product could suffer.
Over the next few years, technologists anticipate a surge in the use of blockchain for recording transactions and data. Supply chains are a prime environment to benefit from all that this technology can offer. Blockchain is the answer for automating record keeping, reducing lag time along a supply chain, and improving product integrity and traceability.
Follow Amanda on LinkedIn