The food industry is closely tied in with all stages of the supply chain, from the picking of raw materials all the way through to the consumer’s shopping bag. Tracking the route, authentication, and safety confirmation of each product is a challenging task, but blockchain technology can offer a solution.
Blockchain has been powering multiple spheres for years, and the food industry is no exception. Consumers want to know where their meals come from, and retailers must be able to control the supply chain and immediately detect counterfeits or foods that can cause foodborne illnesses. In the case of a foodborne disease outbreak, the situation gets extremely dangerous for everyone; food suppliers and retailers encounter lawsuits, loss of customers and revenue, and for ordinary buyers, things can end with major health problems or even fatal outcomes.
Blockchain technologies come to the rescue. While many are still learning about blockchain implementation, American retail giant Walmart became a pioneer in introducing blockchain to improve its food safety practices.
How does Walmart fit in?
Walmart is an American multinational retail corporation that runs a chain of hypermarkets, grocery stores, and discount department stores. Walmart owns over 11,000 stores and clubs worldwide, and nearly 60 of them are operated under different names.
The company has constantly developed and innovated its supply chain, enabling workflow optimization. This has helped them reduce prices, cut costs and attract more customers. These factors have undoubtedly contributed to Walmart’s success. Walmart still does everything to maintain its status as a market leader and tries to respond to challenges in a timely manner.
The agriculture supply chains: core challenges imposed on food safety
A typical food supply chain can be described as a long, globalized, and interconnected process. These features, together with probable human error, often cause food safety problems and carry high risks. There are hardly any retailers that have never encountered at least one of the following challenges: foodborne diseases, food fraud, food recall, and illegal production.
Foodborne illness results from contaminated, tainted, or counterfeit food. The World Health Organization (WHO) named such diseases a major cause of human sickness and mortality. The WHO’s report stated that every year around 600 million people in the world get sick from contaminated food, and 420,000 of them die. The risk of experiencing an outbreak is not directly related to a country’s income, either; anyone can suffer illnesses caused by bacteria, viruses, parasites, toxins and chemicals.
For example, in August 2020 the US experienced an outbreak of Salmonella Enteritidis infections potentially linked to packed peaches. The outbreak affected 12 states: 78 people got sick and 23 of them were hospitalized.
The next huge issue is food fraud, which means any deliberate action by legal entities or individuals with the aim of deceiving customers and obtaining unlawful advantage. There are at least 7 types of food fraud: dilution, substitution, concealment, unapproved enhancement, mislabeling, counterfeiting, and grey market production.
Dilution happens when a cheap liquid ingredient is added to a high-value product. One of the most common foods to get diluted is olive oil. Extra virgin olive oil is considered high quality and healthy product, and it is more expensive than rapeseed or sunflower oil. It is difficult to detect inauthenticity, so olive oil remains vulnerable to food fraud.
Substitution involves replacing an ingredient of high value with another of lower value which doesn’t alter the food’s overall characteristics. Honey, olive oil, juices and fish are among the products that are often partially substituted with cheap ingredients.
Concealment is about hiding low quality products or food ingredients. Many harmful foods are colored to cover defects. Poultry, for example, is often injected with hormones to conceal disease. In 2016, Italian officers seized over 85 tons of olives stained with copper sulfate solution to improve their color.
Unapproved enhancement involves the addition of unknown or undeclared chemicals to artificially enhance the quality of the product or percentage of other attributes. A high-profile case occurred in China in 2008 when it was discovered that melamine was added to milk and infant formula to increase the nitrogen content of diluted milk. It gave the appearance of higher protein content and helped “chemical” milk pass quality control testing. The consequences were disastrous. Contaminated infant formula consumption took the lives of six infants and made more than 300,000 babies sick. Many Chinese parents still don’t trust local brands and prefer to buy expensive foreign formulas.
Mislabeling means that the product is labeled or marketed incorrectly for economic gain. In simple words, the goods claim to be something they are not. It is usually related to organic food which in reality contains non-organic ingredients. Re-labeling dates on expired products also belongs to this type of food fraud.
Counterfeits are goods or ingredients that are illegally produced as nearly perfect copies of real food products. The deadly outbreak of methanol poisoning in the Czech Republic and Poland in 2012-2014 was one of these cases. The main wave of the outbreak occurred in September 2012. At least 51 people died after consuming poisoned alcohol, and many suffered irreversible health damage.
Grey market production is defined as the phrase suggests. Grey market foods are non-counterfeit products that are manufactured by legal owners in one jurisdiction but sold in another. In 2006, Mars Canada, the famous chocolate bar company, discovered that Bemco Cash & Carry Inc. was purchasing Mars products in the United States and reselling them in Canada at a discount.
When it comes to illegal production, the problem is that often neither the company nor the customer knows how the food was made. The World Wildlife Fund study concludes that between 5% and 50% of all the food sold globally may be illicitly produced. For example, an analysis of food fraud incidents that occurred between 1997 and 2017 was done in the UK entailing the collection of data from the Rapid Alert System for Food and Feed and FERA’s Horizon Scan. Out of all the incidents involving beef, 75% were related to illegal production.
The last problem mentioned above is food recall. It refers to the removal of food from the market when it’s believed to be counterfeit, has the wrong brand or has triggered an outbreak of foodborne illness.
Probably the biggest food recalls that happened in 2019 in the US were connected with poultry products. Due to possible foreign matter contamination, 11,760,424 pounds of chicken strip products sold under the Tyson brand were recalled. The reasons for the recall of P.F. Chang’s Home Menu chicken pad thai and chicken fried rice products were misbranding and undeclared allergens.
Checking the lists of recalled foods in the United States, it is possible to generalize about the causes for product removals from the market: they are either undeclared ingredients or the potential for contamination with Salmonella, Listeria monocytogenes, Cyclospora, or E. coli.
Due to increasing volumes of imported food, changes in the environment around the world, developments in people’s habits and preferences, and the emergence of new viruses, new challenges to food safety will keep arising.
Why blockchain is a worthwhile solution for food supply chain management
First, what is a food supply chain? It can be described as all the processes by which food from a field or farm gets to our dining tables. The chain works on the domino principle, where each tile is connected to the previous one and they are directly dependent on each other. Accordingly, if there is a problem with one tile, or link in the supply chain, the whole game is affected.
In the food supply chain, products move from farmer to consumer and go through processors, distributors and retailers. From analyzing food safety cases, it becomes clear that the main challenges for traditional food chains are traceability and transparency. Even if the retailer knows which supplier made a particular food item, they still cannot trace it back to secondary and further suppliers that are linked to the farm. The transfer of data within the chain inevitably causes complexity and delays.
See how this solution can identify counterfeit goods and protect businesses
Do you really know your food? Case study on a high-profile story
Let’s start with one story which took place in 2013 and grew into a Europewide scandal. It all began when the Food Safety Authority (FSA) of Ireland decided to test ready meals and cheap frozen beef burgers for traces of DNA from other animal species that were not originally declared in the list of ingredients. The results were shocking: horse DNA was found in over one third of the beefburger samples, and pig in 85% of them.
After the Irish findings, the UK FSA asked the whole industry to test its beef commodities. It turned out that “beef” in frozen lasagna and spaghetti bolognese was up to 100% horse. The supermarkets which were selling the “mixtures” of pork and horse instead of pure beef apologized to their customers, but they claimed themselves to be victims of fraud.
Although the Irish survey had identified several factories as sources of contaminated or adulterated beef products, defining the real culprits was extremely difficult as every side pointed the finger at their suppliers. Probably, the biggest problem was a complex international supply chain.
As a result, it took about 2-3 months to assign responsibility for the crime, but that’s too long: criminals had plenty of time and it was difficult to catch them. Several perpetrators were punished, and in 2019, a Paris criminal court found four more people guilty of falsely labeling horse meat as beef. They were charged with fines and imprisonment, one of them received a suspended sentence.
Why did that situation cause such resonance in society? Firstly, eating pork or horse meat is unacceptable in some cultures and religions. Secondly, people were concerned about meat quality and potential health damage.
Here is what blockchain could do
What if those supply chains were based on blockchain technology? Tracing contaminated foods with the use of blockchain would take only a few seconds, not days, weeks, or months. The technology itself offers real-time, continuous traceability of products, literally from field to fork. Furthermore, using blockchain solutions instead of paper-based ledgers, the suppliers are obligated to add and store all the information in immutable blocks. Blockchain has a transparent nature; the data is open and accessible for every supply chain participant.
What was done before Walmart applied blockchain?
Walmart has always tried to keep up with the times and manage its supply chain more efficiently. So, what steps has Walmart already taken to improve its own business and help its customers to purchase goods at lower prices?
Removing links in the supply chain
Back in its early years, the company began to innovate its supply chain by removing several links within it. Founder Sam Walton, who owned several Ben Franklin franchise stores prior to the opening of the first Walmart store in 1962, selectively procured wholesale goods and delivered them directly to his stores. In the 1980s Walmart started working directly with manufacturers, and that helped cut costs and optimize its supply chain management.
Later Walmart adopted a supply chain initiative named Vendor Managed Inventory (VMI). Through VMI, manufacturers took responsibility for managing their own products in Walmart’s warehouses. Eventually, Walmart could count on almost 100% fulfillment of orders for goods.
The corporation’s supply chain has constantly developed since then, and among recent innovations is the Walmart blockchain tracking system.
Strategic supplier partnerships
Walmart has a long history of strategic sourcing to find products at the best price, so it has established a strategic partnership with most of its suppliers; the company demands the lowest prices possible in exchange for long-term and high-volume purchases. Walmart noted in its letter that food safety is also a shared responsibility, and one way to achieve this goal is through close collaboration with suppliers.
Walmart also optimized its supply chain management by forging links with suppliers to improve material flow with less inventory. Retail stores, warehouses and suppliers have a relationship such that their network can be described as operating almost as one firm.
Walmart’s inventory tactic
Walmart’s inventory tactic is a logistics procedure called cross-docking. That means that products from a supplier or manufacturer are distributed directly to a customer or retailer with minimal processing or storage time. Such practice allows Walmart to reduce inventory and shipping costs, shorten transit times, and eliminate inefficiencies.
Walmart distribution centers are usually located around 130 miles away from the stores, so the drivers deliver goods there, then products are stored, repackaged, and distributed without extra storage time. This inventory tactic led to significant cost cuts, and the customers could enjoy shopping at very competitive prices.
Despite good results from the measures already taken, the supply chain still required innovation. Blockchain intended to add transparency to the decentralized ecosystem and generally digitize the food supply chain operations.
How did the Walmart blockchain story begin?
Most traditional supply chains, including those that Walmart operated before, rely on the paper-based manual method of capturing information. Once it is necessary to track down important data, it becomes highly time-consuming. Corporations get headaches from the volume of information they receive from suppliers and consumers in hundreds of locations. Nobody has enough time and human resources to deal with every unit of product or ingredient and operate the processes quickly and accurately.
Walmart strived to make the traceability process much faster so that they could act immediately and identify contaminated foods more efficiently. Accomplishing these goals would also help improve health and save lives. Therefore, they took blockchain technology into consideration and put it to the test. The starting points in the story of blockchain implementation, or Walmart and IBM blockchain collaboration to be exact, were food safety issues and an archaic supply chain system.
Let’s go back to 2016 when Frank Yiannas was a Walmart Vice President for food safety (he’s currently an FDA Deputy Commissioner for food policy and response). Frank Yiannas once noted that their customers deserved a more transparent supply chain, adding that the one-step-up and one-step-back model of food traceability was outdated for the 21st century.
He has always been an advocate for consumers, and he’s now a globally recognized pioneer in using blockchain technology to create a more digital and transparent food system. However, initially, Walmart representatives including Mr. Yiannas weren’t so positive about blockchain adoption.
The problem is that the blockchain-based supply chain wasn’t the very first novelty in the industry; other systems that Walmart had tried before never scaled in the end. Later Yiannas realized that the previous systems were centralized databases, while blockchain implied a decentralized shared ledger which “was made for the food system”.
Former Senior Director at Walmart Technology Karl Bedwell (these days a Chief Information Officer at Comprehensive Pharmacy Services) also shared that blockchain technology might be a good option due to its focus on transparency, trust, and immutability.
Walmart’s steps to master blockchain technology
Once skepticism faded into the background, Walmart began exploring the possibilities of using blockchain to optimize supply chains. Since the food system overall is a shared responsibility, Frank Yiannas pointed out that traceability wasn’t a goal: the ultimate goal was transparency.
Two POC projects in partnership with IBM
Soon after confirming their business interests in blockchain, Walmart partnered with IBM and started to develop two proof of concept (POC) projects. These were two pilots: the first was about putting pork on a blockchain in Walmart’s Chinese stores, and the second aimed to trace the provenance of mangoes sold in the stores in the US. In this way, work on the Walmart blockchain tracking system started in October 2016.
Pork and mango supply chains weren’t chosen randomly. China is the most populous country and at the same time the biggest pork consumer and producer in the world. Pork was also involved in many food safety scandals in China, and Walmart faced accusations as well. For example, in 2011 the American giant was blamed for mislabeling ordinary pork as organic.
To enhance food safety in China, the retailer opened the Walmart Food Safety Collaboration Center in Beijing. A spokesperson for Walmart, Rebecca Lui, announced that they had joined forces with IBM and Tsinghua University to improve the way food is tracked, delivered, and sold across the country. Together they aimed to bring novelty to the supply chain.
Concerning mangoes, they were often susceptible to Listeria and Salmonella contamination, so Walmart was planning to trace these sliced fruits from South and Central America to the US and demonstrate cross-border transfer and accountability. Realizing both projects the American retailer was also hoping to increase public confidence in supply information.
As mentioned in the Walmart blockchain case study, work on the mango pilot began with Yiannas’s experiment when he bought a packet of sliced mangoes at a random Walmart store nearby and asked his team to find out where they originated from as quickly as possible. The team got to work immediately and had an answer seven days later. However, for Walmart, it wasn’t fast enough.
Using IBM’s blockchain solution based on Hyperledger Fabric and created specifically for the two products – mangoes and pork – Walmart successfully completed its pilots. With regard to pork in China, the credibility of the system used to be a major problem. After implementing a new solution that allowed the uploading of certificates of authenticity to the blockchain, the issue was no longer relevant. And the time needed to trace the provenance of mangoes in the US decreased significantly – from 7 days to 2.2 seconds. Thus, the aims of both pilot projects were accomplished.
Walmart and IBM building Food Trust
After the negative experiences of traditional closed systems, and being satisfied with the results of the pilot projects, Walmart adopted blockchain technology and reached out to other food companies and even retailers to follow their example. The Walmart team was only concerned about compatibility with other blockchain-based tracking systems, and later the Hyperledger team announced a partnership with Ethereum.
The next step Walmart took was another collaboration with IBM and the setup of IBM Food Trust, involving such industry players as Nestle and Unilever. IBM Food Trust was the first food safety solution that contributed to creating a more transparent and secure global food supply chain. The network now includes authorized members – from suppliers to consumers.
Since the launch of the IBM Food Trust solution, over 300 suppliers and buyers have joined the network, accounting for millions of packed food products found on the shelves.
Walmart China continues its blockchain experience
The use of blockchain in Chinese Walmart stores didn’t end with the successful implementation of the pilot project. In 2019 Walmart China teamed up with VeChain, PwS and others to launch the new Walmart China Blockchain Traceability Platform based on the VeChainThor blockchain.
The first batch which was tested included 23 product lines. Utilizing blockchain technology, supply chain participants shared their portion of data, and also promoted the visibility and management efficiency of the whole chain. Within a year, Chinese Walmart planned to track more than 50% of packaged fresh meat, 50% of packaged vegetables, and 12.5% of all seafood sales with the use of VeChainThor.
Since China has encountered multiple scandals related to food safety, for Walmart, consumer confidence in food safety is a key argument. This Walmart tracking platform targets its shoppers directly. Now, every consumer can use a smartphone to scan a QR Code and get information regarding the source and ingredients of their food, geographic location, logistics data, and inspection reports. All data is time stamped and cryptographically signed by the party that records it.
Walmart’s lettuce on blockchain in the US
Food safety in the US is a hot topic as well. In 2018, the States experienced a large outbreak of E. coli O157:H7 in romaine lettuce, and Salmonella in a number of products – eggs, cereal, raw turkey, pre-cut melons, and even crackers. Altogether, the outbreak led to 210 confirmed cases of which 96 people were hospitalized, and 5 died. Health officials at the Centers for Disease Control warned Americans not to consume lettuce originating from the Yuma growing region in Arizona. However, not every pack of lettuce was saying where the product came from, and experts couldn’t quickly identify which lots were specifically associated with the diseases. Consequently, millions of romaine lettuce bags had to be recalled from the market.
Walmart was also among the retailers that had to recall contaminated leafy greens. Following the case with romaine lettuce, Walmart issued a letter to its suppliers. In essence, the letter announced that Walmart Inc. was encouraging suppliers to put their food products on the blockchain. The retailer referred to its pilot projects in collaboration with IBM and a number of suppliers, and their promising results. Walmart officials shared that with blockchain technology they could reduce the amount of time required to track a food item, and that would make the recall process faster and more efficient.
Canadian stores have also joined
Another news story on Walmart’s use of blockchain appeared in 2020. Its Canadian stores have adopted a blockchain-based supply chain platform called DL Freight as the national standard for invoicing and payment management. Walmart Canada set a goal to increase savings, efficiency and trust between Walmart and its supply chain partners. The solution has been deployed across 60 shipping carriers.
As of 2018, Walmart was tracing over 25 products from 5 different suppliers applying IBM Blockchain powered by Hyperledger Fabric. Besides mangoes and pork, such goods as strawberries, leafy green vegetables, chicken, dairy, packaged salads and baby nutrition are now by necessity tracked with the use of blockchain technology. The solution helps to trace not only the final product but also the ingredients.
With blockchain, what is really tracked now?
Considering the two pilot projects realized by Walmart, it should be mentioned that in addition to blockchain, the corporation also applied artificial intelligence (AI) and the Internet of Things (IoT). IoT technology – sensors and RFID tags – allowed the recording of real-time data as food items were traveling through the supply chain.
In the pork pilot project, everything started with recording the entire production process, with RFID and cameras at the slaughterhouse. Once the meat was ready to be transported, it was put into shipping trucks that had GPS systems along with temperature and humidity sensors. This system organization ensured that meat arrived in distribution centers under safe conditions. Purchasing managers there could track all the necessary product information remotely.
So, what exactly is recorded with the help of the Hyperledger blockchain technology? The chain starts with the farm origin, then the batch number is added, followed by factory and processing data. Other necessary information that goes to the blockchain includes expiration dates, storage temperatures, and lastly shipping details.
Walmart is also using AI to analyze policies and variables that affect the supply chain and predict retail patterns. Walmart even applies technology to forecast traffic on the roads, and in this way speeds up the delivery process as well.
To sum up, how does blockchain help?
Traceability. If you buy foods containing multiple ingredients from numerous sources and countries, tracking every element on a traditional supply chain is almost impossible. The first thing blockchain does is simplify traceability. Blockchain technology allows companies to track components, identify their authenticity, and prevent counterfeit or grey market goods from getting into the supply chain.
Transparency and trust. Second is the opportunity to find out about the provenance of goods. Customers care about the country of origin, brand authenticity, and under what conditions their food was produced. Blockchain implementation enables retailers to define the origin and recall problematic goods on time. Meanwhile, consumers receive the necessary information to help them make the right choices according to their cultural, religious, and ethical preferences.
Immutability. Before adding any information on a blockchain, the data must be strictly structured and verified. Data is then written to a block and the block is chronologically chained to a neighboring one using cryptography, which also enhances security of the system. Once the information is recorded, no one can edit or alter its content as the blockchain concept implies immutability. Why is that an advantage for a food supply chain? It helps prevent corruption and significantly lowers the probability of food fraud.
Efficiency. Using blockchain, supply chain members record transactions in real time and provide other participants with up-to-date information on supply and demand. The blockchain guarantees accurate and efficient shipment tracking. Speed is another contributing factor to efficiency. Tracing contaminated foods to their source usually takes around 7 days, but with blockchain technology, it is possible to accomplish it in 2.2 seconds.
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Walmart blockchain innovation: the impact on the food industry
Walmart has become one of the blockchain technology testers, and a pioneer in the adoption of this technology. The Walmart and IBM blockchain partnership resulted in the creation of a system which saves time and money, and increases transparency and trust among supply chain participants. Working with numerous suppliers, Walmart now requires blockchain implementation from many of them.
Although blockchain technology is not a panacea against foodborne diseases, it is still a powerful tool that enhances the ability to trace contaminated food, gives companies an opportunity to identify the source of a foodborne illness outbreak, and helps them organize more effective food recalls. Retailers can learn where the problem began, draw conclusions, and use their knowledge and collected data to prevent future threats from foodborne diseases.
The age of the traditional supply chain is clearly coming to an end, and it is important to make the transition to new technologies on time. Whether it is the food industry, pharmaceuticals, or any other domain, blockchain can deal with the current challenges. You only need to contact a competent blockchain development company that will translate your business-specific ideas into secure, scalable, and profitable solutions.