Image credit: sourcetrace.com
Orchard-fresh, delicious, unwaxed, juicy-red Himachali apples, many of us living in big metros would gladly pay a premium for a boxful of local and seasonal fruit which comes straight from the source. Digitalization of the supply chain is helping transform the food and beverage industry by making it easier for consumers and procurers to authenticate the source of food products. And a growing segment of new age farmers are rethinking their supply chains so they can cut down on the inefficiencies of legacy systems and ship directly to customers, without giving away a share of their profits to middlemen. In this article, we will look at a few blockchain technology led innovations that are helping usher in this kind of change.
But before that let’s take a minute to understand how Blockchain functions in the context of the F&B industry.
Blockchain in the Context of the Food Industry
Blockchain technology is revolutionizing the food industry because it allows digital information to be recorded and shared, but not edited. Blockchain allows for the creation of an electronic chain of transactions which can be made visible to different stakeholders, in a permission-based manner. Not only does this technology make it impossible to alter, tamper with or destroy information, it provides many useful security features and eliminates the reliance on outdated paper or email-based communication. This helps to tightly knit players, promote information exchange and transparency across multiple vendors, suppliers, transport authorities and resellers, making it a perfect foundational solution for F&B businesses.
Let’s look at a few applications of blockchain technology and the many advantages it brings.
Farm to Table in Lesser Time
Did you know that on average it takes two to three months for apples picked from the tree to make its way to your plate, when you purchase them from controlled atmosphere retail stores? While there has been a dramatic shift in awareness, with more consumers willing to pay a premium for freshness, regionality and taste, the harvesting and marketing practices within these sectors has not kept pace. Third-generation family-owned business owners in Himachal Pradesh like Aalisha Chhajta found a way to exploit this need gap to better serve their customers and pay farmers a fair price.
In an interview to Outlook Magazine, a consortium of new age apple growers observed that a large part of their profits were being diverted to commission agents and middlemen which prompted them to innovate and sell direct to consumers via Instagram and Facebook. The creation of these IT-systems backed digital marketplaces helped dramatically cut down the time taken for products to reach customers. And today, producers like Chhajta are able to take pre-booking orders from buyers and give them a clearly visible timeline by tracking delivery of goods through a highly-reliable logistics chain. Adopting a broad-based system to trace products as they are transported from source to warehouse to the final destination has helped cut down time taken for delivery, with customers in locations as remote as Andaman and Nicobar, or in metros like Chennai, Mumbai and Kolkata, now getting fruits in just four to nine days.
Authenticity and the Importance of Geographical Indicators
Kashmir Saffron is the best in the world, and only a handful of districts like Budgam, Kishtwar, Pulwama, and Srinagar grow this rare medicinal herb at a high altitude of 1600 Mts above sea level. But until recently, Kashmiri farmers had to compete with lower-quality Saffron from countries like Iran and Spain. All that changed when Kashmiri Saffron earned a Geographical Indicator (GI) tag that authenticated its place of origin, and overnight, the price shot up, going from Rs 1.4 lakh to 2.10 lakh per kg. Today, KashmirI Saffron has become the most expensive spice globally, and a large part of this success comes from being able to trace and validate the source of this much in demand product.
Blockchain technology makes it possible for producers and retailers to provide irrefutable proof that a particular food product has indeed been grown in a specific region in compliance with preferred methods of cultivation and production. Blockchain technology can help verify that food meets quality specifications and can help trace perishable goods as it moves from origin to destination, to reinforce the claims of a GI tag. Third-party auditors, compliance authorities and customers can easily verify information to authenticate provenance. This has a cascade effect on business, because consumers are willing to pay more for certified products that are ethically sourced, and retailers can mark up products for sale if there is more information attached to those goods.
But data related to operations, pricing and sourcing can be sensitive and lend a competitive advantage to growers and producers who are careful about sharing data indiscriminately. Blockchain offers robust data management tools offering stakeholders granular control on who gets access to what data and when. Upstream suppliers can grant permission-based public access to information, while curtailing visibility of sensitive data such as sourcing costs, while enabling easier sharing of useful data to other nodes in the supply chain to help maximize value for all.
Minimizing Food Wastage by Improving Efficiency Across The Value Chain
Around 14% of all food is wasted before it even reaches store shelves with products perishing by the time they make it from harvest to the supermarket shelf. There is an urgent need, therefore, to improve communication between warehouses, transport authorities and retailers which continue to operate in silos. Modern trade stores today source products from 1000s of brands and manage a high volume of inbound supplies from warehouses to the point of sale. With omnichannel marketing, online retailers have the additional pressure of handling deliveries in a time-sensitive manner, across multiple touchpoints, and direct to home. This requires tightly coordinated communication between various players, and disparate systems within enterprises.
Order Management Systems (OMS) tools need to synchronize with Transport Management Solutions (TMS) and Warehouse Management Systems (WMS). Any snag in communication can result in longer waiting times at warehouses by truckers, leading to lower freshness or loss of perishable goods. Blockchain helps ease these bottlenecks and leads to significant cost savings every step of the way by making it easier for different systems to talk to each other. Unified solutions offered by platform creators like ParamNetwork have shown to improve warehouse inbound efficiency by 20%, additionally helping reduce fees and penalties levied by transporters. This in turn boosts the quality and freshness of food products, and helps reduce food wastage, which is a win-win solution for all parties concerned.
Easier and effective Recall
There was a scare in July 2021, when India’s top food regulator, the Food Safety and Standards Authority of India (FSSAI) recalled dried oregano imported by Keya Foods and issued an advisory regarding the presence of salmonella in some batches. The notification was withdrawn when investigations revealed that traces of salmonella were only found in consignments sent to Sweden and not India. It was later found that the defective batches of the condiment had suffered from improper drying due to heavy rains in summer in Chile. Such instances are not uncommon and being able to pinpoint the exact origin of a defective or unsafe product becomes critical when it comes to edible products. When a particular food, or beverage or drug is found unfit for human consumption, public safety is at risk and time is of the essence. Businesses also seek to protect themselves from the economic fallout of product recalls which can wipe out brand equity and be disastrous for the bottomline.
Blockchain helps isolate the consequences of such incidents and makes it possible for authorities to take immediate action because it allows them to identify with accuracy the exact site of contamination and correct the issue, without disrupting globally integrated supply chains. Legacy systems are wholly inadequate in this case because they make it difficult to trace and verify business-critical information. For instance, it took more than a month for European regulators to determine the exact source of a 2011 E.coli outbreak that resulted in 53 deaths and 4000 cases. Apart from the irreplaceable loss to life, the event led to the huge production losses and fear in the minds of the public. This forced the EU to compensate farmers 220 Mn Eur for losses incurred and income lost, arising from that isolated incident.
A decentralized blockchain-based database then makes eminent sense for modern-day food manufacturers and suppliers because it does away with the need for mass recalls. And individual nodes in the supply chain can feel assured that they have all the data they need at their fingertips, which can be shared on-demand, with regulators, warehouses, logistic and transport partners and the public at large.
We hope you enjoyed reading this article on how blockchain and digitalization of various nodes in the supply chain can transform the food and beverage industry by helping the entire ecosystem realize higher profits, boost customer satisfaction and unlock new opportunities.
About the author:
⦃param⦄ is built on a proprietary blockchain ledger that enables companies to have a supply chain protocol for enterprise interconnect, data exchange and trust. In simpler terms, ⦃param⦄ enables multi-tier synthesis for knowledge, commerce, and information across n-tier supplier environments for enterprise clients.
Vaidee is a staunch Bangalorean, when he’s not hands-on coding, he loves to travel and drive to untamed places. Fondly called Vaidee or abbreviated as YD on a Starbucks cup of coffee; studied Engineering at BITS and Management from Stanford.