The food and pharmaceutical industries are at a crossroads in their development. Increasingly complex supply chains, a significant lack of consumer trust, and rising regulations are challenging traditional management, quality and logistics systems.
In light of the wave of disruptive innovation, many food, beverage, flavour, and pharmaceutical industry pioneers are turning to blockchain to help solve their challenges of the 21st century. Beyond the hype, blockchain technology promises to redefine how products are presented to consumers, how enterprises in a supply chain can share information with one another, and the underlying safety of food and pharmaceutical products.
The price of globalization
The globalization of the food and pharmaceutical industries is nothing new: since the turn of the century, more cost-effective shipping operations and transportation technologies have allowed more products to move across the globe to reach diverse populations. An unfortunate side-effect has been the rise of a US$460 billion counterfeit goods industry, a record amount of consumer distrust of product labels, large and convoluted supply chains, and a rise in health standards and Customs controls.
At the same time, as food and medicine traverse larger distances on their journeys to consumers, the cost of recalling products has risen apace. As of 2017, the average cost of a recall for a company came out to be an astounding $10 million in direct costs.
While often associated with digital currencies blockchain technology is equally applicable to supply chain dynamics, quality assurance, and logistics processes. More concretely, Internet of Things (IoT) sensors, permissioned data inputs (such as from a mobile device), digital certificates, and even images and videos can all be transmitted to a distributed network using a blockchain at its core.
As data is automatically written onto the chain it becomes publicly visible to and unchangeable by any interested third party. Information about specific products can then be aligned and configured in real-time, as the product travels throughout its supply chain. As a result, a digital network is created in which products can be publicly examined by third parties such as governments, insurance companies, consumers and other enterprises, before or after they reach the aisle.
Most importantly, all data written onto a blockchain is collectively agreed upon by a group of ‘consensus’ operators who determine the validity of the information being processed. Once agreed upon, data cannot be modified unless all operators consent to such a change. By distributing responsibility, new forms of transparency, oversight, and accountability are created.
Consider the need to track and trace cold chain pharmaceutical products. Using blockchain, a pharmaceutical manufacturer, transportation company, client, and insurance company can all monitor the conditions of a product batch as it moves from one destination to the next. As long as the product pallet is scanned (either automatically or manually) each time it reaches a new destination, a digital trail is created for the particular product.
In such a manner the parties involved can more easily demonstrate compliance with regulation, ensure the quality of the product is maintained, and improve records of a particular shipment. Traceability solutions can be designed to allow multiple parties to publicly verify the quality of the product ‘from farm to fork’ including proof of origin. Since all information that is inputted must contain a timestamp, supply chain stakeholders are heavily incentivized towards being more transparent. From such a perspective, using blockchain to track and trace products re-centres business models around honest and accountable product management by providing easy mechanisms to identify fraud.
However, beyond mere track and trace, blockchain can also be used as a more comprehensive ‘supply information system’ (SIS). Once clear data flows are established between different stakeholders in a supply chain, it is a short step to improve or diversify the type of data sent to the blockchain and additional solutions for managing different parameters of a product can be created. While enterprises are only beginning to experiment with blockchain-based supply chain solutions, an entirely new digital economy awaits implementation.
Altogether, as consumer trends indicate the need for greater transparency, accountability, and traceability in food and pharmaceutical supply chains, blockchain technology provides a means for incorporating trust into the process itself. Whether this is to demonstrate the origin and journey of a particular product, file for insurance using newly available data, or for managing product recalls, blockchain functions as both a cost-effective and sustainable solution that can include an entire supply chain at one time. Most importantly, the consumer is at the centre of the value chain, while a new emphasis on transparency and authenticity provides honest businesses with a clear means of differentiating themselves from the competition.