An Introduction to Blockchain in Supply Chain

Blockchain’s applications in supply chain have always interested me, but I have never been able to find a good introduction article to exactly how it applies in supply chain and what it can do. I wrote this article to serve that purpose – starting with a brief introduction to supply chain and its problems, showing how blockchain can address them, and concluding with a case study showing it in action.

A company’s supply chain is all the steps involved in getting raw materials, transforming them to products, and getting those products in the hands of customers. This includes acquiring raw materials, sending them to the proper facilities to get assembled, storing the intermediate and finished goods, and getting them to customers.

Many challenges come with these goals. For example:

  • A supply chain consists of multiple separate players. Supply chains routinely consist of hundreds of steps among many different vendors worldwide, each separately controlling their supply chain data. There’s a lack of transparency with each vendor only having data about what they add to the supply chain – and routinely not from anyone else. This also complicates decision making for the entire supply chain, since there is limited visibility into the various processes that exist between vendors.
  • Say one supplier ships a certain amount of a raw material to another supplier, who’s expecting a completely different amount. There’s now a record discrepancy – who is right? What’s more, a malicious actor working somewhere on the supply chain could modify key data, causing the rest of the chain to get thrown out of whack and leading to delays and angry customers.
  • Counterfeiting is a $1.2 trillion market and is only expected to grow. It doesn’t only impact luxury handbags. In developing countries, the WHO believes 10-30% of medicine is counterfeit, posing a serious risk to public health.

How does blockchain solve these problems?

Recall that blockchain is decentralized – no single party has control, and everyone has access to the same data. Every aspect of the supply chain is logged on the blockchain: everything from purchase orders to inventory numbers to where products are being stored. Since there is only one place for all parties on the supply chain to record and access information, everyone knows what everyone else is doing. Decisions can be made with confidence that all available information is available.

Blockchain’s immutability aspect also plays a key role. No single party can tamper with data on the blockchain at will because all other parties need to approve it (consensus). All parties have confidence that the data they see is truthful and accurate.

A product’s journey, from raw materials to finished goods, is logged on the blockchain, allowing for completely traceability on its true origin and touchpoints. Participants can see where a product was through every step of its life, and if an issue is identified with a certain part, all impacted products can be easily identified. All products can be verified for authenticity. Counterfeiting becomes a problem of the past, simply because counterfeit products cannot show up on the original manufacturer’s blockchain.

These benefits all sound great, but I think a great way to really hammer a point home is to give a concrete example. So let’s talk mangoes.

Although it doesn’t pop up often, foodborne illness is a problem, and if an outbreak happens, it can take weeks to find its source. If investigators can’t point to a specific farm, they advise to avoid produce coming from a certain area or avoid that produce altogether. For example, in 2018, an E coli outbreak in romaine lettuce led to 210 people across the US being infected. The CDC pinpointed the outbreak to lettuce grown in Yuma, Arizona; the problem was consumers had no way of knowing where their lettuce was grown. While the investigation was ongoing, stores were forced to remove millions of bags of lettuce, not to mention the lost consumer confidence in romaine lettuce altogether.

Walmart set out to develop a better method for traceability in the food system. Blockchain was the answer.

Walmart’s proof of concept for whether a blockchain-based food tracing system would work was to trace the origin of mangoes sold in Walmart stores. Walmart’s VP of Food Safety brought a pack of mangoes to his team and asked them to identify which farm they came from, as fast as they could. After frantic emails and calls to suppliers, the answer came back seven days later.

Walmart developed a solution where every farmer, supplier, and distributor uploaded common key information to the blockchain about every pack of mangoes they handled – information like its location, harvest date, pack date, and quantity. This information being tracked in one area allows insight to every pack of mangoes’ whereabouts, from when it starts as a seed to when it gets to a customer’s table at home.

Even though the backend was blockchain-based, suppliers didn’t need any blockchain knowledge to interact with it. Walmart’s solution allowed inventory data to be uploaded to the blockchain from sources ranging from paper to Excel sheets to sophisticated ERP systems.

With the new blockchain solution in place, the time needed to trace a pack of mangoes to its origin dropped to a whopping 2.2 seconds. Problems, like disease outbreaks or spoilage, can be traced back to their origins, allowing Walmart to find out where something went wrong and the extent of the damage.

Compare seven days to 2.2 seconds. That’s seven days that disease-riddled produce continues to sit on shelves, or seven days where all of that type of produce, with disease or not, can’t be sold. That means either more of the public gets sick, or more farmers and producers suffer economically. Instead, Walmart has data on where every single pack of mangoes was grown and distributed. Once the source of an outbreak is traced, this data allows Walmart to pull only the mangoes that were from the contaminated area. Consumers can scan a QR code on the back of a mango pack and be told exactly where it was grown and packaged, giving confidence that it is not infected.

Walmart also found additional benefits with its blockchain project. The new traceability allowed Walmart to identify that some mango shipments were sitting at customs for 4 days, an inefficiency that was previously difficult to identify. Shortening this time by one or two days means more shelf life, in turn leading to less food wasted because it expired too soon.

After Walmart’s success with mango tracing, Walmart expanded its program to include meat, poultry, dairy, and even multi-ingredient products like baby food (allowing traceability of each single ingredient to the farm that grew it). And this is only the beginning.

I hope that was an insightful introduction to how blockchain can be used in the supply chain world and opened your eyes to its many possibilities for improving how today’s supply chains work.

Thanks to George Levy, Logistics Bureau, Blockgeeks, Hyperledger, Walmart, Elizabeth Crawford (Food Navigator), Ron Miller (TechCrunch), and Reshma Kamath (BRI) for providing information on this article.