Lessons learned so far from implementing a food blockchain project - by Leontien Hasselman-Plugge, CEO at SIM – Supply Chain Information Management
"Blockchain is a revolutionary technology; it will change everything."by Leontien Hasselman-Plugge, CEO
It seems nowadays that implementing a blockchain is the next best thing since sliced bread and will solve all issues in the food industry. The economist named blockchain the "trust machine" and blockchain pilots in the food industry pop up everywhere claiming success. Often these are proof of concepts to test using the technology for traceability and provenance and not implementation on an industrial scale.First of all a short explanation: A blockchain is a decentralized ledger which records transactions and stores this information on a global network in such a way that the data entry can never be changed at any future point. The blockchain provides a neutral platform where there is no third party needed to authorize transactions, but rather a set of rules that all chain participants, both users and the operators of the system, must follow. It was originally developed for financial settlements, but the technology underpinning crypto currencies like Bitcoin, can be used in a very different elegant way for the food industry. Will the use of blockchains in the food industry be a game changer? At SIM we are building a blockchain application and I'd like to share some first lessons learned during this journey.
- The first food blockchains are almost all private, permissioned blockchains and not yet public
- The "smart" of smart contracts is that it brings supply chain partners together
Smart contracts are self-executing digital contracts. Contracts in the supply chain between actors digitize agreements on for instance quality, provenance data, food safety certification and social compliance certification of a product. For me the most interesting part of a blockchain project is to have all of the supply chain partners around the table (often for the first time) and discuss the minimal data points and KPIs they need to know on both the product, the origin and the journey of the product as well as basic data on all the supply chain actors and the activities they have towards the product.
Once these have been defined, these contracts are converted into computer code, stored and replicated on the system and supervised by the network of computers that run the blockchain (no more paper). If products move through a supply chain and are according to the specification and the agreements, the transactions can result in ledger feedback such as receiving the product, proactive issue management or transferring money automatically. The latter, I believe, can transform the industry.
- The blockchain can bridge the gap between the consumer and the ones making our food
This is one of the ways to create a win-win. You often see the burden of the additional data entry and traceability costs are bourn by the primary production actors who benefit the least of the margins on the end product. If we want to use blockchain as a traceability and provenance tool used on an industrial scale, we must make sure there is a clean win-win and ultimately a financial gain as well for the first mile. The business case for all value chain partners needs to be crystal clear.
- It is a trust machine, but ultimately it needs people to keep it going
One essential feature of the blockchain is that participants can share some data with all, some data with one partner and other data with none. The fascinating promise of the blockchain is that it can be the technology that enables supply chain partners to come together for the first time and decide what information is necessary, and enable financial transactions between partners that just starting to trust each other. But this can only happen if they continue to open up and share data and everybody starts participating in the chains.