In blockchain we trust: knowing the source of our daily bread
This demand calls on the FMCG industr...
Consumers are increasingly taking ethical and environmental considerations into account when making food choices.
This demand calls on the FMCG industry to show where our food comes from, the conditions in which it has been created and processes used to bring it to our plate. This, along with more tight control of origin country when it comes to imports, means that businesses are faced with the growing need to achieve transparency in their food sourcing process.
With incidents like the 2018 romaine lettuce E.coli outbreak still fresh in the minds of the public, the need to build secure systems to trace products from farm to fork has never been so important. However, with food supply chains crossing multiple continents and many companies - from growers, to processors and packagers - making sure what comes out of the ground is what goes on your table is a huge challenge. Typically, food supply chain data is kept across many systems. This prevents food providers – not to mention consumers – from gaining a comprehensive overview of transactions.
Blockchain offers a solution to these challenges. The immutable and permanent trail of transactions held on blockchain systems are a welcome asset in the mission for transparency across complex supply chain ecosystems. Private, permissioned blockchain, where users are verified before they can join the network, provides a unique approach to security and privacy. This allows participants to share data without revealing highly sensitive information.
Blockchain’s role in supply chain visibility could also create real-time risk mitigation. With blockchain, it would be possible to identify exactly where in a supply chain a corrupted batch of produce became contaminated, giving suppliers the opportunity to mitigate and manage risk from travelling further along the chain. This plays a particularly important role when it comes to food, where identifying contamination quickly can literally mean the difference between life and death.
When it comes to food, trust is vital. Again, blockchain can deliver. Permissioned blockchain is by far the most effective way to ensure the information stores can be trusted. Since blockchain has an in-built proof mechanism, data cannot be altered or tampered with, providing a single source of truth on the product’s history. With a full journey in sight, suppliers and retailers can take extra precautions over their data to improve product safety and reduce fraud.
As solutions come to the fore, one thing is clear: the goal for supply chains to have more integrity, inclusivity and interoperability is well underway. The aforementioned E. coli outbreak in 2018 spurred the FDA to encourage a more rapid adoption of technologies to detect water source problems and usage of blockchains to better trace food to the source to improve detection and resolution. Blockchain is poised to offer the FMCG industry its most valuable tool to transform the way we consume food and deliver meaningful insights as to where our food comes from.
Examples of Industry Projects
R3 have partnered with Ripe Technology, Inc. the innovative startup bringing blockchain to the food industry, to improve transparency and trust in food and agriculture supply chains through the digitization and enterprise adoption of blockchain. The cooperation will enable ripe.io to continue its mission to build long-lasting trust and confidence in the food supply chain through a platform where everyone will be able to access transparent and reliable information on the origin, the journey, sustainability and the quality of their food. Ripe.io are using blockchain to produce a real story of food with complete traceability that connects the many players involved in the processing chain.
For more information on procurement, supply chain and logistics topics - please take a look at the latest edition of Supply Chain Digital magazine.
By Charley Cooper, Managing Director at R3
NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”