How Blockchain will Transform the Food Supply Chain

Introduction

In 2030, the global population will reach 8.5 billion; in 2050, 9.7 billion; and in 2100, 10.9 billion. Rapid population growth and negative anthropogenic influences on nature significantly increase the risk of exceeding Earth’s capacity to regenerate, leading countries worldwide to set high targets for lessening their harmful environmental effects. As a result, the food business is not only a significant contributor to climate change (through emissions of greenhouse gases) but also among the sectors most severely affected by its consequences.

The food supply chain (FSC) is crucial to our culture and economy. There are various stakeholders in the FSC system, including consumers, farmers, industries, manufacturers, distributors, retailers, and the government.

Due to information asymmetry, everyone from producers of farmed foods to consumers plays a unique role in the FSC. In addition, the manufacture, transportation, and other processes involved with FSCs have become more complicated due to globalization. The complexity of the supply chain, on the other hand, raises the risk of product theft and a loss of trust among the people in the chain.

One in ten individuals gets sick from consuming contaminated food, says the World Health Organization (WHO). In addition, food production processes are becoming increasingly complex due to globalization. 

Many technologies have been explored in recent years to solve food insecurity and food recall efficiency. However, blockchain is a potentially game-changing technology. It has already been used successfully in financial areas, such as Bitcoin, and it is getting attention from organizations associated with the food supply chain.

As blockchain has features like decentralization, security, immutability, and smart contracts, it will likely improve sustainable food supply chain management and traceability. This article will examine how blockchain technology can impact the future of the food supply chain by bringing about these revolutionary developments.

Understanding the Food Supply Chain

A food supply chain, often known as a food system, is a series of steps that explains how food moves from a farm to a consumer’s table. Processes include creation, processing, distribution, consumption, and disposal. 

• Human or natural resources are needed at every stage of the food supply chain to ensure that our food reaches us safely and on time. 

• Food supply chains work like a domino effect, with food moving systematically from producers to consumers. At the same time, money flows back to those who work at various stages of the food supply chain. 

• Because a food supply chain works like a chain of dominoes, when one part is affected, the whole chain is concerned, which often shows up in price changes.

What is the Food Supply Chain?

The food supply chain includes all food product steps from manufacturer to customer and consumer. Now more than ever, food supply chains have gone through a massive time of growth. While this could have positive effects on the food supply initially, it will ultimately lead to the chains needing to be more cohesive. In addition, due to the logistical challenges posed by transporting perishable goods across great distances, it is generally more difficult for consumers to determine exactly where their food came from.

The food supply chain consists of many different stages, including: 

• Production: Our food supply has its roots in the manufacturing process. Food shall meet national and international quality and safety requirements.

• Handling and Storage: This refers to food’s last processing procedures. This is the final step before sending food for processing.  

• Processing and packaging: This is where food, whether from plants or animals, is turned into something that can be eaten. The food must be completely safe before being packaged for distribution. 

• Distribution: Once the food is ready to eat, it is transported and sent to the right store or source.

• Retailing: Retailing is getting goods from the supplier to the consumer. It includes everything from getting the food to selling it. 

• Consumption: This happens when a customer buys food from a store.

How Does It Work?

The food supply chain contains many parts. However, the whole process starts with the farmers who provide the raw ingredients. This includes the seeds they need to grow crops, their animals, and the tools they need to work. The next step is farming and raising the livestock to prepare the produce and meat for harvest.

After that, the food preparation phase begins. This is where makers and butchers get their supplies, chop the meat, process the vegetables, and package it. After packing, the commodities proceed to grocery stores, restaurants, and other places before reaching consumers’ tables.

Even though there are smaller steps and processes in every part of the chain, this is how the chain usually works. 

What are the Problems with the Food Supply Chain?

The food supply chain faces many problems that can affect its efficiency, safety, and sustainability. Some of the most critical issues are:

1. Increasing Demand for Food Shipping Traceability

• The traceability of food shipment has gone from a luxury to a necessity due to food shippers and customers’ demands.

• Today’s food business needs traceability systems that meet food safety standards and reassure consumers.

• Consumer agencies have pointed out that people are becoming more aware of the risks of food poisoning throughout the entire food supply chain.

• Experts in food safety and OSHA agree that many cases of food poisoning have their roots or spread across the food distribution system.

• Record keeping is required across the entirety of the food supply chain, beginning with the point of purchase and continuing through to the product’s destination.

• There is a need for precise traceability requirements for consumer safety, brand security, and legal compliance.

2. Poor Communication Between Food Supply Chain Partners

• Despite technical progress, the food supply chain still has communication problems.

• There are many actors in the complex supply chain, each using a different mode of transportation and communication.

• Complex systems increase the likelihood of communication breakdowns, increasing the risk of problems, including late deliveries, bacterial contamination, food poisoning, and spoiling.

• Meetings between persons from various supply chain segments for the same commodity might bring further difficulties and dangers. The food supply chain must improve communication to fix these harmful issues.

3. The Potential of Food Fraud

• When people think of food fraud, they often think of organized crime. Contrary to popular opinion, many organizations make and distribute fake food or use food transportation for illegal activities.

• Food theft is mainly a European problem but significantly affects the global food supply chain.

• The US FDA’s Food Defense branch now investigates imported and domestic food fraud charges.

• As the chance of food fraud goes up, laws get stricter, which adds more obstacles to the supply chain.

4. Lack of Honesty and Transparency

• Honesty and transparency in logistics have always been problems for the shipping business.

• Transparency and honesty problems have been around from the beginning of the business. But when hiding facts or covering up mistakes leads to food poisoning and possible harm, it is essential to deal with these problems.

• Several food supply chain actors have adopted continuous communication records to solve this challenge. These logs record food safety information such as cargo container location, temperature, and humidity.

• Checks and reports sometimes involve photos and videos.

5. Growing Regulations

• People often think that regulations in the supply chain are put in place to protect people, but sometimes they can hurt people.

• Transportation delays in the food supply chain can affect product freshness and safety.

• The ELD Mandate is a recent law in the United States that mandates the use of electronic recording devices by carriers to monitor drivers’ work hours.

• Even though many companies follow federal driving safety rules, others have cut driver hours because of the ELD Mandate. Smaller carriers may even have to close because of the costs of installing ELD systems.

• The ELD Mandate has led to higher shipping costs, a lack of drivers, and delays in shipping goods, including fresh and perishable foods.

• Even though the ELD Mandate will likely cause less trouble shortly, more and more rules will continue to hurt the food supply chain.

• These challenges, however, are not unsolvable through the collective efforts of knowledgeable shippers, carriers, farmers, manufacturers, and suppliers.

6. Costs going up in the supply chain

Running a food supply chain has various costs, including:

• Energy and fuel costs: Energy and fuel costs are big because fuel prices are rising quickly in Europe, the US, and worldwide.

• Logistics and freight: Logistics and shipping costs have significantly risen in volatility since the outbreak.

• Workforce: Manpower is a big problem for many businesses, such as restaurants, food services, and farms.

• Investment in new technology: Investing in new technology can be costly, but it can pay returns in the long run. Also, delaying modernization may cost significantly more in the long term.

  Because these costs are so high, keeping an eye on running costs is always hard.

What is Blockchain Technology?

Blockchain is “a distributed, digital ledger that can’t be altered” and “is used to record transactions, monitor assets, and establish trust.”Decentralization, immutability, security, and smart contracts are the major components of the blockchain’s underlying technology, and when properly utilized, they can have a substantial positive impact.

Blockchain’s Potential Impact on the Food Supply Chain

In 2022, the Blockchain in the Agriculture and Food Supply Chain Market Size was estimated to be worth $285.34 million. 2031 it is expected to be worth $738.68 million, a 43.76% CAGR.

Decentralization

Decentralization removes the requirement for transactions to be approved by centralized authorities and overcomes information inequality by facilitating transactions directly between users. It guarantees that every authorized user on a network has the same amount of power. Users work together to verify transactions, save duplicate records, and share the ability to view past activity at any moment. 

The whole food supply chain, from farmers to consumers, can benefit from capturing product data. Records are copied and stored across multiple parties and can be retrieved on demand. 

For instance, the end users, the consumers, can get detailed information about the goods, such as their authenticity, where they come from, etc. In addition, supplier quality can be monitored by manufacturers to ensure they are receiving adequate raw materials. A decentralized supply chain can eliminate information imbalance and build trust.

Security 

Data security is possible using the blockchain consensus mechanism. Proof of Work (PoW) is one of the consensus mechanisms; it needs all transactions to be confirmed by other users. Users must define computer calculations for a transaction to be approved and data to be added to the database. The elimination of centralized control over the network and the guarantee that the failure of a single node does not bring down the entire system are two ways decentralization might reduce the possibility of hacking. 

Technically, hacking is only possible if most users are taken over, which requires much work and time. Consequently, the difficulty of hacking behaviour decreases as the complexity of the blockchain network increases and the number of users grows. When applied to the food supply chain, blockchain can prevent hacking and data theft by keeping all records and data inaccessible to unauthorized parties.

Immutability

Blockchain guarantees the originality and authenticity of records and gives authorized users the same power to post and review information. This means users will be notified before changes to previously stored data are made. As a result, the immutability feature can reduce the need for manual data entry. This feature is beneficial when there is a food recall because it keeps everyone involved from changing the past to get out of their responsibilities.

It’s strong proof for looking into the possibility of a food shortage. Supply chain visibility helps businesses track down the origins of individual ingredients and negotiate better terms with their vendors. It also proves that the product inside is organic, halal, fair trade, etc., giving shoppers more trust in their purchases. 

However, immutability only sometimes ensures the legitimacy of the raw data, and accurate starting information is essential. As the number of transactions increases, blockchain may be a valuable strategic tool for motivating participants in the food supply chain to assume accountability and provide/record quality information.

Smart Contract

Smart contracts, digitalized versions of traditional contracts that go into effect if specific requirements are met, are another integral part of the blockchain. Smart contacts can increase transaction speeds and reliability. For instance, after products have arrived at the warehouse, payment can be paid to the producers automatically.

Compared to the conventional supply chain, the programmed contract can reduce administrative work, quicken processing, and require less human labour. For example, when delivering a container of roses and avocados from Kenya to the Netherlands in 2014, Maersk discovered that more than 30 people and organizations were involved. As a result, it took 34 days to complete the shipping process from start to finish, and it didn’t even consider the time lost or gained due to missing paperwork. Moreover, since a smart contract relies on the consensus of all parties involved, no one user can independently alter its terms. Thus, it can replace “the letter of credit” for commercial transactions.

When all of these benefits are combined, blockchain can eliminate the dangers of conducting business in an untrustworthy setting, improve supply chain visibility and transparency, boost efficiency, and safeguard the interests of all parties involved. In such a scenario, blockchain can maximize digitalization, shorten processing times, increase efficiencies, and reduce unnecessary costs.

Traceability

The International Organization for Standards provided the first definition of traceability in 1994: “the ability to trace the history, application, or location of an entity by means of recorded identifications.” Traceability, as defined by the Codex Alimentarius Commission, is “the ability to follow the movement of a food through specified stage(s) of production, processing, and distribution”.

According to the definition proposed by Bosona and Gebresenbet, “food traceability is part of logistics management that capture, store, and transmit adequate information about a food, feed, food-producing is the correct animal or substance at all stages of the food supply chain”. This allows the product to be checked for safety and quality control, traced upward, and tracked downward at any time required.

Many researchers have identified four benefits of food traceability: improve efficiencies (food safety, operational efficiency, and brand reputation); meet stakeholder demand (meeting stakeholder requirements and ensuring food is authentic); meet legal requirements; and achieve global alignment (supporting international standardization and preserving natural resources).

Good traceability keeps accurate records of where products go. This helps companies see the supply chain more clearly, make better choices, and avoid quality risks. When goods can be tracked both forward and backwards along the supply chain, it speeds up locating and isolating them from their respective suppliers, which speeds up quality control and recalls. In addition, customers’ understanding and confidence in the products they purchase can be improved by displaying the movement of resources and products.

Therefore, food product traceability is valued since it increases product worth. In addition, the tracking system can be used as a promotional instrument to win over new clients and retain existing ones. Keeping detailed records allows businesses to check on their suppliers and ensure they deliver high-quality goods. Thus, a reliable traceability system can be a strategic asset in building confidence among business partners. Governments and non-governmental groups have published rules to encourage and encourage the food industry to develop their traceability systems for food safety and quality in response to food dangers and customer demand. For example, the European Commission (EC) Food Law Regulation 178/2002 requires food traceability from origin to consumer.

There are many government agencies and non-profits with the mission of protecting consumers’ health through food regulation. For example, the FDA oversees food and drug regulation in the US, whereas the FSA in the UK and the SFDA in China are responsible for similar tasks, respectively.

In addition, the global supply chains are getting more complicated because different areas have different rules. This puts more pressure on international companies to be able to track their products. Using blockchain allows global standardization to be flexible for all countries and areas, and companies can avoid doing the same work twice. In addition, traceability is useful for sustainability since it allows organizations to track their environmental effects.

Traceability is recognized as crucial because it can separate successful and unsuccessful food companies during a recall by increasing the speed of the recall and decreasing associated expenses. For example, recalling a product today may take days or hours, but in the past, especially for processed food, it may have taken weeks or months.

On average, a recall takes the FDA 57 days, but it might take ten months. Because current traceability systems rely so much on paper or proprietary databases, efficient target recall is challenging. The greater the delay in recalling potentially hazardous products, the greater the risk to public health. It can also harm a company’s reputation and raise severe worries about the safety of its products. Therefore, a system for efficiently tracking and tracing production can be a “life saver” for consumers and businesses.

One of the initial studies of blockchain in food traceability concluded that it is an appropriate choice for ensuring efficient traceability in the food supply chain.

Benefits of Blockchain in Food Supply Chain

Blockchain Improves Food Traceability

Food safety is enhanced by blockchain because it eliminates the need for several tracking solutions and simplifies the supply chain. Manual traceability solutions like paper records are time-consuming and imprecise. Private traceability databases also hinder stakeholder collaboration and transparency.

The complicated nature of the food supply chain makes it more likely that food will need to be recalled and takes a lot of cooperation from all parties involved. The efficiency and reliability of food recall tracking are both improved by blockchain technology. It is a reliable way to stop food fraud, improve efficiency, save time and money, lower risks, and build trust.

When blockchain was combined with the IoT, it increased both transparency and accessibility.

In 2016, Walmart and IBM tested their blockchain-based traceability solution in a pilot program. The two companies worked together to track mangoes from a shop to their farm. Using the current traceability system, it took roughly seven days for all stakeholders to get in touch with one another and learn the necessary facts about mango movements. 

The need to find and wait for responses from several parties can be eliminated with blockchain technology. Instead, each person in the supply chain records what happens to mangoes, and these records are ready to be checked at any time. Compared to traditional methods, blockchain significantly shortens the time it takes to trace—from roughly seven days down to 2.2 s. AgriDigital and CBH group also did a pilot study in the Australian grain business and found that the blockchain network made it easier to track products. 

Blockchain Improves Food Supply Chain Transparency

In the present food supply chain, many significant brands limit information from consumers to maximize profits. Because of this lack of openness, customers might not know enough about the goods they buy or their suppliers. Food security can be affected by a lack of information, especially regarding products with unique needs, like halal food, where supply chain transparency is essential to ensure quality and keep customer trust. 

The Sanlu milk scandal shows that governments and agencies. However, publishing policies and conducting frequent inspections on food quality can be subject to bribes and cover-ups by giant brand firms. The inability to verify or delete data without raising concern is a significant problem when dealing with centralized supply chains.

Because of blockchain’s decentralized nature, authorized users can conduct transactions and view records without the interference of a governing body. Every registered user can view the transaction history and receive a copy. In doing so, information asymmetry is reduced, and transparency is increased through the supply chain. Due to blockchain’s immutability, recorded information cannot be altered without the consent of all users. Because of this, supply chain data can be retrieved and checked at any moment. 

By digitizing and maintaining product certificates and information on the blockchain, authorized individuals can quickly and easily access the most up-to-date information with little to no effort and without the possibility of data tampering or error. In 2016, Walmart and Tsinghua University collaborated on research to investigate the feasibility of utilizing blockchain to monitor the supply chain of Chinese pork.

Blockchain Can Be Combined with IoT Devices

The term “Internet of Things” describes the system of interconnected gadgets and infrastructure that facilitates information sharing and exchange. Examples of such networks include WSN, GPS, GIS, and RFID.

With its help, sensors can automatically record data like temperature and humidity, which is crucial for preserving the freshness of perishable foods. In addition, the Internet of Things streamlines monitoring procedures and reduces human error. 

However, problems like data privacy, security, integrity, and confidentiality must be solved. Integrating blockchain and IoT can strengthen supply chain protections. Blockchain has enhanced many aspects of IoT solutions, including their scalability, security, auditability, efficiency, interoperability, and overall quality. 

Examples of how blockchain and IoT can work together include an agri-food traceability system based on RFID tags, a blockchain-based agriculture system, and test studies by WWF and Belagricola to stop illegal fishing and track grain quality, respectively. In addition, blockchain and the Internet of Things work together to assure the integrity and authenticity of food records without requiring human involvement.

Blockchain Can Improve the Efficiency of Food Recall

Using blockchain in the food supply chain improves sustainability by making operations more efficient and making it easier to remember specific foods. In addition, stakeholders benefit from more transparency and faster reaction times when product data is updated on the blockchain almost instantly. 

For instance, Walmart learned that fresh mangoes imported from other countries could be kept at the country’s border for up to four days. In addition, Walmart can reduce the time it takes to inspect products by using the blockchain to keep track of their distribution. As a result, supply chain efficiency is improved, and waste is decreased when information is made more readily available.

Significant amounts of food are lost due to random recalls. In addition, multi-ingredient food product recalls can be time-consuming and labour-intensive because of the complexity and quantity of ingredients.

Product recalls can be more targeted, and information can be retrieved quickly thanks to blockchain-enabled traceability systems. This allows for identifying the source of any problems and removing them from the supply chain. In addition, businesses can use exact customer demand predictions based on POS data, allowing for better-informed decision-making.

The Challenges of Blockchain in the Food Supply Chain

Lack of Deep Understanding and Knowledge of the Blockchain Technology by Companies

• Supply chain management using blockchain technology needs a more widespread introduction.

• Studies show that many people in supply chain management need to understand how blockchain technology can be used fully.

• The level of understanding about blockchain significantly affects people’s sentiments toward its adoption. People who know more about the idea and have more experience tend to have a more positive view of how blockchain can be used.

• Companies often choose blockchain as a solution before figuring out the real problem. Unfortunately, this shows that blockchain still needs to be better understood.

• Some businesses use blockchain without considering whether it’s the best way to solve their problems.

• In Walmart’s pilot study on tracing mangoes, the faster tracing speed shouldn’t have been credited to blockchain. Instead, it should have been credited to removing the manual validation process.

• The mango pilot project needs to verify the blockchain’s immutability, which preserves fresh fruit.

• Different technologies may need to be used at various points in the supply chain.

• Understanding blockchain technology’s costs and benefits helps solve business problems.

• Sometimes, other technologies may be better options than blockchain.

Technology Scalability Issue

• Blockchain scalability is a significant challenge, termed the “scalability trilemma” by Ethereum’s founder, Vitalik Buterin.

• It is difficult, if possible, to accomplish decentralization, scalability, and security all at once, says Buterin. In the case of Bitcoin, for example, decentralization and safety are given higher priority than scalability.

• The network’s capability is based on how scalable it is. Currently, platforms like Ethereum can handle 15 transactions per second, while Visa can handle 45,000 transactions per second.

• Blockchain gets a high level of decentralization and security through a complex mining process and transaction replication on each node. But this can make approval take longer, especially when there are a lot of transactions.

• Finding a good balance between scalability and security is essential since high scalability increases security risks, and low scalability leads to too many transactions and a slowing network.

• There are a lot of users and transactions in the food supply chain, which could hit a scale of petabytes per year. So, coders are working hard to find ways to make blockchain more scalable while keeping it secure and decentralized.

• Pearson et al. say that using blockchain in the food supply chain might be easier in niche areas where the benefits of blockchain are needed, like tracking organic products.

• Different parts of the food supply chain may have different needs for using blockchain. This could change the balance between decentralization, scalability, and security.

Possibilities of Raw Data Manipulation Before Uploading to Blockchain

• While blockchain technology can potentially improve record-keeping, issues with raw data manipulation, such as tampering with the Internet of Things sensors, are problematic.

• Verifying the accuracy of raw data is challenging.

• Products can be damaged on purpose without blockchain users knowing about them.

• Third parties, such as states and certifications, can join the blockchain network to check the data regularly and ensure it’s real.

• The fact that blockchain records can’t be changed can be used as a strategy tool. So that Suppliers can be encouraged to take responsibility for their goods and give accurate information from the start.

It Is Hard to Require All Stakeholders within a Food Supply Chain to Adopt Blockchain

• From farmers to customers, everyone must participate in the food supply chain for the Blockchain system to work.

• Stakeholders can sign up to be authorized users to share information, check on transactions, and look at records from the past.

• Customers have the right to ask for and check the history of a product.

• Getting everyone involved can make information more transparent and save time. However, it can be challenging due to different degrees of knowledge and infrastructure.

• Small and medium-sized businesses (SMBs) and developing countries may have trouble using blockchain because of the prices of setting up and using it.

• It’s essential to make blockchain “SME-friendly” by making it easy to set up and having low costs at first.

• Some studies show that the money it saves can pay the cost of putting blockchain into place.

• Partially replacing the system with blockchain is more practical than completely replacing it.

Regulations/Laws Need to Be Updated

• Policies are required to protect users’ rights and trading secrets in the blockchain’s open database.

• The external environment for blockchain deployment was analyzed by Tse et al. using PEST, which considers political, economic, social, and technological variables.

• Governments can use blockchain to get information about the supply chain and reduce food risks.

• With the Blockchain White Book release and the introduction of associated projects, China has shown interest in and support for blockchain development.

• ISO Blockchain (TC307) is working on making blockchain guidelines for the whole world.

• No comprehensive blockchain policies have yet been established for the food supply chain.

• Policies and regulations are recommended by Leong et al. and Pearson et al. to safeguard users. These regulations should include standards for uploading, owning, using, and storing data.

• Kamilaris et al. suggested that the lack of rules could stop many people from using blockchain.

• Before making blockchain technology available to the public, detailed rules and procedures must be implemented to protect user rights.

What does the future hold for Blockchain technology in the Food Industry?

With widespread food contamination worldwide, it is more than just essential to establish responsibility and guarantee transparency throughout the food supply chain. Blockchain technology can help track down the source of a contaminated product (even if it’s just an ingredient) and stop dangerous illnesses from spreading further. 

Blockchain enables faster disease control with shorter response times and decreases food waste by allowing selected recalls that improve recall management. According to the UN Environment Programme’s (UNEP) Food Waste Index Report 2021, about 17% of the world’s food production may be lost, and 13% of this waste comes from stores.

Furthermore, precise data on food products produced from Blockchain supply chain solutions eliminates uncertainty and aids retailers in making decisions about how they manage the goods, such as obtaining the correct information on the shelf-life of fruits to prevent throwing away food that is still fresh. 

Conclusion

The food distribution system stands to benefit significantly from blockchain technology. Blockchain’s decentralized and transparent nature can help address issues, including food theft, inefficient supply chains, and a lack of trust between parties.

Blockchain’s immutable records and smart contracts improve traceability, making verifying and tracking each step of a food’s journey possible. This increases food safety, accountability, and fraud detection.

Moreover, blockchain enables real-time data sharing, simpler processes, and shorter reaction times by facilitating increased collaboration and communication among all actors in the supply chain. This leads to more efficiency, lower prices, and better inventory management.

Blockchain also builds consumer faith by giving them access to accurate and detailed information about where food comes from, how good it is, and how long it will last. This gives consumers the power to make decisions based on accurate information, supports ethical sourcing practices, and encourages transparency across the entire food ecosystem.

FAQs