Q&A: Blockchain Technology for Food & Beverage Supply Chains

Blockchain technology is becoming increasingly valuable for applications in the security and finance sectors. As the technology matures and becomes easier to implement, many believe the additional data security that blockchain tech provides can be immensely beneficial to applications across supply chain networks.

The following Q&A with U+ Founder and CEO Jan Beranek provides insights into blockchain's potential applications across food and beverage supply chains. We discuss whether the value of additional system security can justify increased costs. We also explore standardization challenges to implementing blockchain tech, and solutions to these obstacles.

What blockchain services do you offer to food processors?

At this time, blockchain technologies are rather costly. While they provide an extra layer of security, many companies throughout the supply chain need to be in alignment with each other to benefit from track-and-trace capabilities. Non-blockchain standards for the safety and visibility of food supply chains such as GS1 currently exist, providing a certain level of compliance and tracking off-chain. Regulators such as the FDA are starting to consider enacting blockchain requirements, which could help align various businesses within the industry and soon be a significant driver of increased value.

At U+, we offer a comprehensive set of innovation services ranging from ideation and market validation to product development and scaling. Blockchain technology is slowly making an entrance into the supply chain process, but as it applies to the complexities of the food industry, its value proposition is still not clearly established. The first thing we would do to help our customers is determine whether blockchain technology would provide adequate value for their supply chain and tracking capabilities. To justify building or integrating a blockchain solution within a client’s business, it needs to provide additional revenue, reduce costs, deliver a competitive advantage, and/or meet compliance requirements. After the validation and market testing stages, if we determine that blockchain technology would benefit an existing product or service, we implement it in the system architecture.

What enables smaller and medium-sized processors to start using blockchain tech?

There are several key blockchain players in the food tracing technology space, namely IBM's Food Trust, Ripe.io, FoodLogiQ, and TE-Food, which allow consumers to verify product journeys. Due to the complexity and varied needs of each customer, some level of customization and onboarding is still required; at the same time, top players have made the process smoother. Many food processors are already using blockchain technologies—for example:

• TE-Food touts 6,000+ customers to track food from its origin to destination
• FoodLogiQ is working with big name customers such as Chipotle and Whole Foods on the consumer side, and Conagra and Tyson on the manufacturer side
• There are also blockchain companies working on other applications within the food industry, including crop insurance, financial transactions, and supply-chain optimization, all of which could help level the playing field for smaller farmers and producers

Can a food processor end up being a member of several blockchain-based supply chain networks?

This question taps into one of the core challenges of blockchain adoption at this point in the technology adoption cycle. It makes little sense for one single player to build a blockchain for internal use, as modern data security is less expensive and sufficiently secure. Likewise, overlapping blockchain networks adding unnecessary redundancy would also unnecessarily increase costs as well as create complexity in tracking the information end to end. The collaboration of a significant number of companies within the industry is eventually most likely to be organized by a centralized standards organization such as GS1 and motivated by regulations from an oversight body such as the FDA.

Should a blockchain track-and-trace system be a standalone system that runs like a smartphone or tablet app?

The blockchain track-and-trace system would be decentralized, with data stored in computers across the entire network, but user applications would be created allowing members along the value chain to access the relevant to their needs. There would be different interfaces for different users, such as the producer, distributor, or consumer. Since consumers are one of the key beneficiaries of blockchain technology and are eventually the revenue drivers of implementing such tech, it makes sense for them to also have viewer access to tracking data for the food they purchase. Implementing on-chain tracking for every step in every business along the supply chain would be very costly and not necessarily important for adequate tracking and safety of the end product.

Tracking along a blockchain would therefore only be along a portion of the operation required by industry standards and regulations. The data along the critical points could be exported from existing supply chain management systems using an API integration.

How is blockchain integrated into existing ERP/MES/supply chain management/track-and-trace systems?

When implementing blockchain technology, you must decide where you need the added layer of security the tech provides most. Modern internal database systems within a company can be very secure, but when transferring information down the supply chain between various suppliers, key information must be kept intact.

Given that blockchain implementation is significantly more costly than traditional databases, the blockchain would likely only be integrated to the external layer and not be part of behind-the-scenes utilities. External systems would essentially minimize the need for the blockchain internally and provide the highest value from utilizing the technology.

Food processors should be able to continue using their existing MES/SCADA/ERP systems for internal traceability, and, at critical points, export the data onto the blockchain for external traceability. This way, the business is able to maintain the privacy of its internal operations and keep associated costs down, all while being transparent about the safety and origins of their products.

What successful blockchain applications do you have up and running?

Our managing partner Sean Sheppard has invested in several blockchain ventures and one of his portfolio companies, Red5 Pro, is successfully using blockchain technology for its live video streaming platform. The tech enables the company to provide low-latency streaming, opening up new opportunities for data transactions due to a high level of synchronization and security.

Do you have any other insights to share?

As a rapidly evolving technology, we believe blockchain’s ability to keep data both secure and trackable throughout various systems across global hard goods supply chain networks will ensure its continued adoption. We also expect the tech will soon become a standard requirement for conducting business efficiently and transparently, especially in security-sensitive fields such as food or medicine.

The question is whether blockchain tech is truly a value add across the entire industry at this time. Until the technology becomes mature, affordable, and tangibly useful, we must consider the added costs of implementing a system in parallel to existing systems and whether enhanced trackability is truly more functional than, or delivers more value to, current MES system tracking.

Until regulators make blockchain mandatory, companies must carefully evaluate whether this technology is the right solution for their businesses. They also need to determine how to optimize implementation. To determine this, we at U+, do extensive validation and market testing before writing any code; this ensures we gain insights into the most critical customer needs. We can then make the best-informed decisions about which tech to implement.

Food margins are already very low, and the industry is struggling due to labor shortages caused by the global pandemic. Looking at the smaller players, this might not yet be the right timing for incorporating an emerging blockchain technology to their business.

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