How blockchain can transform the consumer goods supply chain

By Nina Lund, Managing Director, Worldwide Consumer Goods, Microsoft

26/05/2017

Supply chains are becoming increasingly globalised, growing ever more complex, with raw materials and products being transported across many disperse geographical locations. Food distributors face an especially tough time as recent years of extreme global weather patterns disrupt their normal supply lines. Procurement teams are left making tough choices about where to source, working with unfamiliar suppliers and less visibility into the full supply chain.

That diminished visibility can create many challenges for unwitting companies, including being blamed for food fraud or just losing track of shipments. Food fraud alone is estimated to cost the global industry $30-40 billion every year. And it is widespread; recently, Interpol seized 2,500 tons of adulterated food in 47 countries.[i]

Supply chain visibility is not just important for tracking fraud—it’s also key to pinpointing tainted products. Bacteria can work its way into a package of peas without any intentional tampering. If an issue is discovered, by regulators or consumers, they need to be able to quickly isolate the problem to ensure consumer safety and minimise damage to their reputation. Without deep visibility into the supply chain, small mistakes can have significant costly and reputational consequences.

What if retailers and consumer goods manufacturers could make sure there were no holes in their supply chain and provide transparency into how that food had been treated during transportation and storage?

As digital techniques mature, their different use cases broaden. Blockchain is a technology that has already been present in the financial services industry for some time, and increasingly there is interest to deploy it for transparency reasons when it comes to food.

Blockchains are digitally-recorded ledgers stored in transaction groups called blocks, which are then distributed and stored across a network of computers and servers. As transactions are made, they are consolidated into a new “block” containing data that builds upon the previous block and stored in a chain, hence the name “blockchain.”

This creates a linear record of entry that has complete integrity—each block is secure and the incorporated data is preserved immutably across multiple ledgers.

Blockchain technology empowers businesses to maintain transparent, secure record keeping, track the provenance of goods, and provide a method to engage in secure transactions.[ii] For retailers and consumer goods companies, these capabilities can mean the difference between a widespread recall and pulling a few tainted packages, or even precluding issues in the first place.[iii] With blockchain, companies can use smart contracts to make and verify transactions in near real time—streamlining business processes and saving money.

Let’s look at how blockchain is transforming retail and consumer goods supply chains.

Micro-level goods tracking and efficiency

Many of today’s supply chains span countless stages and many geographic locations, making it hard to track goods or trace the origin of incidents.[iv] Blockchain dramatically enhances transparency, enabling all parties to trace a product’s journey along the supply chain.[v] If a restaurant or a grocer can quickly identify all parties involved in the supply of sensitive or high-value categories, they could potentially save significant amounts of time and money with dates, locations of inspection, and inspection results all visible in the distributed ledger.

Wal-Mart is trialing blockchain to address this exact problem.[vi] By tracking the provenance and supply chain journey of individual packages of produce and pork, they aim to pinpoint and prevent outbreaks of illness. A blockchain database enables Wal-Mart to acquire vast amounts of supply chain data that the company can use to deliver food to stores more efficiently, reduce spoilage and waste, and cut costs.[vii]

Streamline the supply chain with smart contracts

Smart contracts are one of the most revolutionary aspects of blockchain. Instead of being drawn up on paper, contracts between parties are written as code into the blockchain and recorded into a ledger. These contracts are incredibly difficult to tamper with thanks to the cryptography-based transactions of blockchain. The contracts are then executed according to pre-determined triggering events, such as transferring funds the moment a shipment arrives at the store.[viii]

At the National Retail Federation (NRF) convention in January, Mojix introduced a supply chain management tool that uses blockchain-based smart contracts. Mojix uses RFID hardware to carefully track the delivery of goods, ensuring reliability and providing data on reducing overhead for retailers. Then, Mojix combines that data with smart contracts based on Microsoft’s Azure Blockchain-as-a-service platform.

Scot Stelter, Mojix’s vice president of product marketing, explains how a smart contract can specify an exact product flow along the supply chain. “At each step of the way, that’s a smart contract, where effectively a box gets checked, cryptographically locked and published to the blockchain,” he said. “When I am at the end of the chain, I can track the provenance of berries so when they arrive I know if they are fresh. All parties to a contract have to agree that all the boxes are checkable…”[ix]

Implementing blockchain

The potential for blockchain to revolutionize retail supply chain efficiency is clear. Microsoft supports the rapid, low-cost, low-risk, and fast-fail platforms that enable developers to experiment with a growing number of distributed ledger technologies. The recently launched Blockchain-as-a-Service (BaaS), built on Microsoft Azure, helps organisations like Mojix develop, test and deploy blockchain applications using Azure DevTest labs. With Microsoft, developers are experimenting with retail processes and applications on a flexible, scalable and trusted cloud platform.

Get started today

Learn more about the decentralised applications already being built with blockchain here. Start a free trial of Azure and start building your idea today.

LinkedIn: Nina Lund

Twitter: @lund_nina