In “Blockchain technology: Is it ready for prime time?” which will appear in January, we look at the current state of blockchain technologies applied to food and beverage.
In this article, we will show how blockchain networks are initiated and the mechanics of creating them and bringing suppliers on line. We will also look into cost structures and delve more deeply into connection to other systems such as MES and ERP. The panel of experts I invited to participate in this article includes representatives of MES and ERP companies, three relatively new blockchain companies, a high-tech consulting/engineering firm and GS1 US.
So to get started, I asked our panelists the following:
Who initiates a blockchain network—and how? If a food processor initiates a blockchain network, how then does it get its supply chain participants to sign on to it? Who pays—each participant or the initiator—or someone else? Isn’t it possible that a food processor could wind up being a member of several blockchain/supply chain networks, for example when farms and other ingredient manufacturers have initiated their own blockchain platforms? Wouldn’t this get needlessly complex and costly? Aren't there already non-blockchain solutions that are just as effective?
Maggie Slowik, global industry director – manufacturing, IFS R&D
There was a lot of buzz around blockchain a few years ago, but that has fizzled a bit among manufacturers, due to competing solutions and tools which also enable traceability, lack of understanding, and perceived high costs.
Another thing to keep in mind, and a potential hindrance to adoption is that all players in the supply chain must be willing sign up to the same data thread. In the more successful cases, blockchain initiatives are driven by either an OEM or the original manufacturer, rather than suppliers.
Jan Beránek, CEO/founder of U+
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.
(Ed. note: U+ is not a blockchain company per se, but rather a tech consulting firm that provides a comprehensive set of innovation services from ideation and market validation to product/software development and scaling.)
Jayson Berryhill, Wholechain co-founder
Incentives to adopt traceability software include upcoming regulations such as the FDA Food Safety Modernization Act, which will require traceability data for high-risk food categories such as seafood, leafy greens, etc. (see the FDA’s Rule 204). Supply chain stakeholders will need to adopt traceability in order to remain competitive, and will find that adopting blockchain based traceability, which offers a level of security unfounded in traditional data sharing methods, will position them as trustworthy actors capable of providing valuable supply chain information.
While pricing varies across traceability solutions, Wholechain offers a free account for all first-mile suppliers. Supply chain stakeholders such as processors who may belong to multiple supply chain networks can manage all their activities in a single account. To ease data sharing across multiple blockchain networks and traceability solutions, Wholechain and several others use GS1’s EPCIS standards, which enable actors along the supply chain to pass data freely that is interoperable between systems.
Wholechain is a blockchain based traceability solution built to enable trust, coordination, and transparency in fragmented supply chains. Wholechain works across commodities, allowing businesses to manage risks and increase efficiencies while enabling consumers to make more responsible decisions. Wholechain is a partner on Mastercard’s blockchain, former winner of the Fish 2.0 Competition at Stanford for Supply Chain Innovation, and a winner of the FDA’s New Era of Smarter Food Safety Low- or No-Cost Food Traceability Challenge.
Kathy Barbeire, marketing manager of CAT Squared (an onboarding partner of IBM’s Food Trust)
Who initiates? In theory, any supply chain participant can initiate a conversation with their supply partners about building a blockchain network; though, the initiatives tend to be driven by large participants.
How? In 2018, CAT Squared participated in the launch of Blockchain for Arkansas, an initiative promoted by Governor Asa Hutchinson to encourage capacity building around blockchain adoption in the state. As part of that initiative, several Arkansas technology companies began meeting monthly as a learning group. One of the key facilitators of the group was Dr. Dennis Gerson, who has since retired but at the time was IBM CTO at Walmart.
At our first meeting, Dr. Gerson said that about 40% of time spent on their blockchain projects was spent getting all participants to the table and gathering consensus around the rules of governance for the blockchain. There are obvious concerns around which data and how much data should be shared. Obviously, there shouldn’t be a situation where a competitor who supplies the same customer should be capable of seeing another competitor’s data. Any company hoping to take advantage of the benefits of blockchain needs to be committed to building a collaborative relationship with their partners along the supply chain and willing to persevere through challenging conversations.
Participant buy-in? The key to garnering participation from supply chain partners is developing strategies to bring value to all participants in the value chain. The very nature of this technology requires collaborative thinking. If any supply chain partner doesn’t see value in adding an additional cost or an additional step to their process, they won’t participate. So first, the company initiating the blockchain development needs to have a clear understanding of the business value they hope to achieve. For example:
- Are they hoping to differentiate their product through value-added data? If so, what data are consumers willing to pay a premium price to have access to? How will that data be collected and communicated, and how will value be delivered to all participants sharing this data?
- Are they seeking to reduce loss due to spoilage and improve supply chain efficiency? Then they can consider adopting blockchain smart contracts to decrease friction during transaction processes.
The way this works is that (just like a traditional contract) the terms of the smart contract are agreed to by all parties, and once the contract is finalized, the terms are turned into code that lives on the blockchain and cannot be changed without all parties knowing.
Once the terms of the contract are finalized and turned into code on the blockchain, a triggering event occurs. This could be a shipment of product is received or a lot passes inspection or whatever event is defined in the smart contract. This is when participants along the value chain start reaping the benefits of all the work they put in nailing down the details of the smart contract—because they worked out ahead of time what would happen with any foreseeable contingency. For example, if a shipment arrives damaged, or too much product was shipped, or not enough product was shipped, etc. Whatever the issue is, the data is logged, sent up to the blockchain where it’s visible and verifiable by all participants permitted to view the data, and this event executes the appropriate clause within the smart contract, and the settlement process occurs automatically based on that agreement.
By streamlining transaction processes [in] this way, participants remove time wasted disputing agreement terms. And in the food industry, time is valuable when you’re dealing with perishable products being shipped or live animals under stress during transport. The more time you can shave out of the transaction process, the more you’ll be able to reduce loss due to DOAs and spoilage.
In a real-world example from 2018, a consortium of commodity traders ran a pilot sale of 60,000 tons of soybeans from the United States to China on a blockchain platform. They reportedly reduced their document-processing time to one fifth of the time normally needed to process physical paperwork.
Who pays? Most models I’ve seen don’t charge a fee to contribute data. They only charge a fee to a company who wants to use the data, build reports, or develop tools to share the data. When a company does charge a fee, it’s usually based on the number of transactions, so the cost is scalable depending on how much product is produced.
Multiple blockchains? Commercial blockchain developers adopt standards to ensure their platforms are interoperable with other blockchain technologies. Once a company begins contributing data to one blockchain, they can easily initiate an API (application programming interface) to contribute the same data to another blockchain.
The most widely used standard is GS1, which is used to identify, track, and trace critical tracking events and key data elements along the supply chain. EPCIS, which stands for Electronic Product Code Information Services, is a global GS1 Standard for creating and sharing visibility-event data, both within and across enterprises. There are six standard EPCIS event types that represent real-world events:
- Commission is an event signifying the creation of an object. Like the birth of chicks for example.
- Transformation is an event signifying an irreversible transformation of an object. Like slaughtering chickens into carcasses. It’s an irreversible event.
- Aggregation is the grouping of objects into a batch.
- Disaggregation is the ungrouping of objects to a smaller group or individual objects.
- Observation is an event signifying an observation, such as quality testing.
- Decommission signifies the deletion of an object from the supply chain. For example, carcasses that do not pass the quality test are discarded and this event can be represented as a decommissioning.
Kevin Otto, senior director, community engagement, GS1 US
In addition to adopting GS1 standards, having a sound strategy around data governance is crucial. Industry stakeholders have expressed concerns around data storage and permissions on an enterprise blockchain ledger. A key first step for preparing your data for blockchain is to determine “which data” must reside on the ledger and which data can be accessed off-chain. To ensuring interoperability, addressing this topic early in your implementation is essential.
Additionally, blockchain may prove highly useful in supporting an immutable record of product movement through the food supply chain that is fully transparent. As blockchain’s potential application continues to be evaluated, GS1 standards will be essential to ensure interoperability for the information exchange.
Sid Siefken, BlockApps, director of business development – agriculture
Pricing models are normally led by the lead network member or initiator. BlockApps offers a unique model where the lead network member will pay a fee for the network and then they extend invitations to their supply chain participants. Each will have their own user interface and login information for the data that is available to them and the ability to update their information to the blockchain either with a web-based application or a RESTful API. As the volume of data and transactions increases, each participant pays based on the value that they are receiving. For example, a grower would have access to different data than a dealer or input provider. This means that the costs are controlled and proportional for each participant along the supply chain.
TJ Gupta, CEO and co-founder, TagOne
Different use cases dictate who initiates the blockchain. For example, one of the blockchain scenarios we are focusing on relates to supporting the FDA proposed new era of smarter food safety guidelines. As part of this, we are working on building an open source blockchain platform for which we have shared details publicly as part of our award-winning FDA submission under the Global food traceability challenge. A couple of key points from TagOne’s proposal include:
- TagOne will run one or more nodes where we will store our customers’ data. For bigger customers the private node will store their private data separately, while for smaller customer nodes will be shared and data security will be ensured by TagOne managing the node exclusively for TagOne customers.
- Any company/set of companies (not using TagOne) can start their node on our blockchain platform and store their private data exclusively on their node. This will ensure that their private data is secured and still can be validated for immutability when these companies decide to share the data to their partners or auditors.
- We will work with industry leaders to create a consortium based blockchain administration model
Our view is that for broader industry adoption, we need to have an open source blockchain where anyone in the industry should be able to run a blockchain node or provide services for data capturing and populating the blockchain for data immutability. This open-source blockchain platform is the final repository of traceability data, and there will be open standard-based services for posting data in the blockchain. Service providers can build industry solutions for capturing the data at source and then use these open standard-based services to post the data in the blockchain. We are also providing a framework for data capture at source. Key features of this framework include:
- Customers will capture supply chain data via pre-populated Excel/CSV files that will need to be uploaded to the TagOne portal with basic info
- Customers will be added on the TagOne network based on their role in the Supply Chain
- They will get access to an Excel sheet pre-populated with CTE’s (critical tracking events) and KDE’s (key data elements) specific to their role
- At the basic level, they just need to populate a few minimum KDEs to ensure compliance
- We will also provide a mobile app functionality to upload relevant KDEs
We also believe that there will be many blockchains running [in] parallel, and there should be interoperable standards for each of these blockchains to share public data, which will provide end-to-end traceability. This will ensure that each participant in the supply chain can decide to participate in their preferred blockchain consortium. Therefore, we proposed a low-cost solution for participants to join our TagOne blockchain platform to meet the upcoming FDA New Era of Smarter Food Safety requirements.
FE: Should a blockchain track-and-trace system be a standalone system that can run like a smart phone or tablet app? Should consumers have access to some of the data? Or should the blockchain be integrated with ERP, MES, or supply chain management systems?
Marcel Koks, Infor industry & solution strategy director for food & beverage
Blockchain ensures data cannot be manipulated once it is entered into a central or distributed ledger. For food and beverage organizations, this capability is important to providing reliable, unalterable food origin information to retailers and consumers. For example, data entered into a blockchain ledger can eliminate the possibility of a non-organic ingredient later being reported in an organic product, because further upstream in the supply chain, the data of a batch was maliciously manipulated. This is not hypothetical. We have seen this happen, for instance, with horse meat sold as beef.
Here’s where we take blockchain technology a step further. Multi-enterprise supply chain business networks and modern ERP solutions provide the dynamic multi-party interaction capabilities needed for food and beverage organizations to derive value from data and run day-to-day business operations. These capabilities include cross-enterprise planning, multi-party execution and automatic and collaborative resolution of predicted issues in the extended supply chain.
Modern ERP solutions and multi-enterprise business networks are critical to ensure the right information is entered into the blockchain in the first place. Further, ERP solutions and multi-enterprise supply chain business networks ensure data housed in the blockchain can provide cross-functional value across an organization’s supply chain. It is important to note that blockchain, ERP solutions and multi-enterprise supply chain business networks do not compete with one another. Instead, all technologies and solutions are complimentary, helping food and beverage organizations streamline business operations and deliver exceptional products to their customers and end-consumers.
Jan Beránek, CEO/founder of U+
The blockchain track-and-trace system would be a decentralized network, stored in computers across the entire network, but user applications would be created allowing members along the value chain to access the [data] 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 the blockchain technology and are eventually the revenue drivers of implementing such technologies, it makes sense for them to also have access to view the tracking data for the foods which 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 the adequate tracking and ensuring safety of the end product The tracking along the blockchain would, therefore, only be along a portion of the operation required by the agreed-upon standards or regulations across the industry. The data along the critical points could be exported from existing supply chain management systems using an API integration.
Kathy Barbeire, marketing manager of CAT Squared
Since data can never be changed or deleted from a blockchain, you would want to limit the amount of data being contributed to only key elements required to accomplish your goal: transaction and traceability data. Otherwise, the database would grow exponentially quickly, requiring more memory and reducing transaction speed.
TJ Gupta, CEO and co-founder, TagOne
Any good track and trace system like TagOne will require some level of data from a company and its supply chain to enable end to end traceability. If this information is available in the TagOne system because the different supply chain partners captured the data directly in TagOne, then yes, the system can work as a standalone application that uses smart phones, tablets or other means to capture data and access the application.
However, for bigger and even many mid-sized companies, a lot of their operations data is already being captured in their existing ERP/MES systems and we don’t believe customers should have to deal with dual data entry. In these cases, it is imperative that the track-and-trace system like ours pulls in relevant data from these systems to link the supply chain together.
We believe that there are three drivers for transparency in the food and natural products industry:
1. Reduce risk (food safety, regulatory and legal)
2. Improve operational efficiency
3. Build trust with consumers on food provenance
We absolutely believe that consumers should have access to some of this data which is one of the key reasons we built our solutions. TagOne: Engage was developed so that companies can share product and lot specific info with consumers.
Sid Siefken, director of business development – agriculture, BlockApps
From our perspective, it makes sense to integrate to ERP, MES and supply chain management systems. We do so via APIs so that data exchange is as automated as possible. Data sharing confirms the provenance of the food item and provides for traceability at each step in the supply chain. This includes sharing core details about the origin and source of the product, its handling and processing with the consumer. That level of insight into provenance can help give them confidence in what they’re buying from a sustainability and food safety perspective and drive product value. Consumers should be entitled to have access to that kind of information.
Jayson Berryhill, co-founder, Wholechain
In our experience it is necessary for a track and trace system to be both standalone (for smaller businesses), and at the same time integrated to existing enterprise systems (ERP, WMS, etc.). This is because supply chain data inherently passes through a wide range of trading partners from the ‘farm to fork.’
For example, a farmer might need a standalone system to record traceability events, whereas a processor, distributor or retailer might already have existing systems that are hard to break away from. We designed Wholechain with this in mind…the name is meant to signify ‘tools for the whole supply chain.’ In regards to consumers, generally the data that businesses capture within supply chains, particularly higher volume supply chains, can be highly sensitive and proprietary, and in many cases more than consumers might be able to digest in the first place. Here it is simply important to distinguish between the types of data that are interesting to consumers verses the complete body of data that supply chains use for traceability, quality assurance, quality improvement, ESG verification, etc.
FE: How is blockchain integrated into existing ERP/MES/supply chain management/track-and-trace systems? Should it be a separate track and trace module or should it just be transparent to the ERP system—same as network technology is transparent? In other words, do you see blockchain technology becoming a behind-the-scenes utility? How does a food/beverage processor locate a manufacturing system (e.g., MES, SCADA, ERP) that features built-in blockchain technology?
Jan Beránek, CEO/founder of U+
When implementing a blockchain technology, it is important to ask where is the most important place to have the added layer of data security provided by the blockchain. Modern internal database systems within a company can be very secure, but when transferring the information down the supply chain between various suppliers is where the 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. The external systems would essentially minimize the need for the blockchain internally and provide the highest value from utilizing the technology. The processors should be able to continue using their existing MES/SCADA/ERP systems for internal traceability, and in the critical points export the data onto the blockchain for external traceability. This way, the business is able to maintain its privacy of internal operations and keep the costs associated down while being transparent about the safety and origins of their products.
Kathy Barbeire, marketing manager of CAT Squared
As I mentioned earlier, only key data elements would be contributed to the blockchain. Much of this transaction data would be housed in the MES or ERP system. The data would be contributed to the blockchain using API.
This document from GS1 illustrates examples of key data elements required for traceability: Fresh Foods Management Solution: Explore Critical Tracking Events (CTEs) and Key Data Elements (KDEs) (gs1us.org)
As I said, there are six standard EPCIS event types: commission, aggregation, disaggregation, observation, transformation, and decommission. For each of these event types, four dimensions are recorded: when, what, where, and why.
On page 3 of the GS1 document, there is an example of a transformation event where two inputs are creating a new output. In this case, 100 bushels of onions and 50 crates are coming together to create 50 bins of onions. Each input, the onions and the crates, had their own GTINs and their own LOT ID numbers, and they create a new product lot with a new GTIN and LOT ID. So, this is both a transformation event and a commissioning event because we’ve created a new object (The batch of 50 crates of onions).
If this were a more complex product like a batch of chicken nuggets, then you’d have more inputs: like chicken, batter, oil, packing materials, etc. Each would have its own lot number and GTIN, and each would be connected to the new GTIN and LOT# at the plant identified by its GLN (or Global Location Number).
Sid Siefken, Director of Business Development – Agriculture, BlockApps
As I mentioned before, we should integrate into existing systems and do so via APIs. The track and trace module should operate separately, at least for the first phases. It is important to confirm the use case and identify the data gaps and work to close them in its own environment. This allows for continuous data development and integration improvement with participants to confirm that the data is flowing seamlessly.
In regard to blockchain technology going behind the scenes, think about it as a road coming into a developing agricultural area. At first, it’s hugely exciting and the difference it makes in the supply chain is widely touted. As time passes, it begins to be taken for granted. Blockchain technology will likely not go fully backstage but fade into the background as a necessary, but no less transformative innovation.
Jayson Berryhill, Co-Founder, Wholechain
In our system blockchain is just that: the technology that operates behind the scenes. While track and trace is slightly different than end-to-end traceability, it too can use blockchain as a tool that runs in the background.
TJ Gupta, CEO and co-founder, TagOne
For TagOne, blockchain is another powerful tool that helps us drive end-to-end transparency across the supply chain but is not the end solution itself. It is a behind the scenes data store for our TagOne Traceability Management Systems.
Blockchain as a concept is more relevant to a unique business case like supply chain track and trace. As a result, we don’t see it being widely adopted in the short term in areas like ERP, MES, CRM.
The use of the blockchain platform depends on the availability and accuracy of the data captured in the business application such as TagOne. The data needed to run our traceability algorithms in TagOne, can either be entered directly in the system or pulled in from other system our customers are running like the ERP/MES/Other. i.e., the success of the track and trace system depends on the availability of company data and its source will determine if there is the need for ERP’s other systems to work closely with a track and trace system leveraging blockchain
Takeaways
No doubt, the promise of blockchain technology for track and trace has a bright future in promoting food safety, securing transactions, helping to prevent pilferage and adulteration—and having some standards behind it. As GS1 US’s Kevin Otto says, the first step in preparing your data for blockchain is to determine “which data” must reside on the ledger and which data can be accessed off-chain. To ensure interoperability, addressing this topic early in an implementation is essential.
“Blockchain may prove highly useful in supporting an immutable record of product movement through the food supply chain that is fully transparent,” adds Otto. “As blockchain’s potential application continues to be evaluated, GS1 standards will be essential to ensure interoperability for the information exchange.”
But, have the right data and make sure it is accurate—because as TJ Gupta says, “companies need to recognize that blockchain is less forgiving when it comes to data entry errors. Once data is posted on the blockchain, it will be permanent.”
“Blockchain has been a rapidly increasing segment of the technology space in the past several years and we believe that its ability to keep data securely yet trackable throughout various systems across hard goods global supply chain networks will continue to grow its adoption and will soon become a standard requirement for conducting efficient and transparent business, especially in security sensitive fields such as food or medicine,” says Jan Beránek.
The question is whether the blockchain is truly a value-add at this point and across the entire industry, says Beránek. Until the technology becomes mature, affordable, and tangibly useful, it is important to consider the added costs of implementing a system in parallel to the existing systems and whether the added trackability is truly more functional or of added value than current MES system tracking.
Until it becomes a mandate specified through regulation, each processor needs to evaluate carefully whether blockchain technology is the right solution and how to best implement it. “To determine this we at U+ do extensive validation and market testing before writing any code in order to gain as many insights as possible about customer needs, and then be able to make the best-informed decision about the tech to implement,” adds Beránek. Food margins are already very low and the industry is struggling due to labor shortages caused by the global pandemic. Especially for the smaller players, this might not yet be the right timing for adding an emerging blockchain technology to their business.
Finally, I'd like to thank all those who took the time and effort to participate in this discussion. My hope is that if you're considering blockchain-enabled technology for your business, this article will at least help you pose the right questions to system suppliers. You can find more information at the participants' web sites listed below, and you can find much more information on the FE website simply by doing a search for "blockchain."
Resources:
“The FDA New Era of Smarter Food Safety Low- or No-Cost Tech-Enabled Traceability Challenge,” FDA Website; https://precision.fda.gov/challenges/13/results; accessed 12-01-2021.
TechTalk Podcast Episode 1: “Tech-enabled Traceability in the New Era of Smarter Food Safety;” includes transcript; FDA Website; accessed 12-01-2021
For more information:
BlockApps, Inc., https://blockapps.net/
CAT Squared, www.catsquared.com
GS1 US, www.gs1us.org
IFS, R&D, ifs.com
Infor, www.infor.com
TagOne, www.tagone.com
U+, https://u.plus/
Wholechain, www.wholechain.com
