Tracking down a bad food product sold by any grocer is obviously important for the customer, but it also can help a supplier more quickly recover the recall cost and intangible costs tied to reputation.
When a customer shops at Wal-Mart they expect great prices, but product safety is the utmost concern, according to Frank Yiannas, vice president of food safety at Wal-Mart. He recently provided an update on the retailer’s “blockchain” partnership with IBM. Blockchain is a technology platform that allows more transparency in the food supply chain, which includes many stakeholders from the farm, to the pickers, to the packing houses and the logistics of shipping to stores.
Yiannas said protocol requires retailers like Wal-Mart to pull all the products linked to a food recall from the shelves and coolers until it is deemed safe. In many cases, the fresh product is lost because of the time it takes to trace an issue through the supply chain. He said an average recall costs about $10 million. Combined with the cost of food borne illness — $93 million annually — this creates much waste and unneeded cost burdens in the food chain.
Wal-Mart and IBM launched blockchain last year in China where food safety is of paramount concern among a distrustful Chinese consumer base. The retailer just finished piloting the process in the U.S. He said suppliers and universities also participated in the U.S. pilot, though he didn’t disclose their names.
Yiannas said in 2006 a massive bagged spinach recall greatly reduced the spinach supply for several years as it took suppliers time to recover. The recall took two weeks to trace, and all the spinach on the shelves was pulled and destroyed. In reality, the contaminated product only involved one supplier’s production one day on a single line.
“It took six to seven years for the spinach farmers to recover,” Yiannas said. “Fast traceability is huge, and being right is crucial.”
Bridget McDermott, vice president of blockchain business development at IBM, said the goal of blockchain is to accelerate the tracing of food from days and weeks to mere seconds. This will enable precise and rapid recalls to preserve consumer trust in the food industry, while also increasing traceability and transparency in the food supply chain.
McDermott said the problem with tracing the food supply chain without blockchain is that it’s very fragmented and also involves many stakeholders using their own systems which do not talk to other systems. She said many certificates, audit records and other required items are kept in paper form. She said this fragmented system is why it takes so long to find the source of a recall through traditional tracing programs.
With blockchain, stakeholders along the food supply chain each take part and enter their records into the system. Product packaging is also embedded with a QR code that facilitates traceability. Blockchain also fosters trust among participants across the chain as they share information so food can be digitized in a way that makes the food supply safer.
Yiannas said while traceability is vital, it’s not the only or most important goal with blockchain. He said consumers want to know more about the origins of the food they consume.
Yiannas and McDermott recently shared results of two tests using blockchain. In China they traced pork, and in the U.S. it was mangoes. The products were tracked through the supply chain. Results of the tests have been encouraging, according to Yiannas.
LIFE OF A MANGO
Yiannas said the life of a mango begins when seeds are planted. It takes about five to eight years before a tree matures to produce fruit. Mangoes are picked by hand at farms primarily in southern Mexico. The mangoes move to a packing house where they are scrutinized by packers. They are loaded onto ships and transported to ports in California.
The mangoes are sent to another processing facility where they are peeled, diced and packed as refrigerated fruit sold in Walmart U.S. The fruit package has a “sell by date” to indicate the shelf-life the product has left. The mangoes are shipped to a Wal-Mart co-packer via the retailer’s own logistics team out to stores. Wal-Mart has to get that product from the backroom out to the sales floor where employees can again trace the product back to the farm with the retailer’s smart app. The product is merchandised and sold within the freshness period stated on the packaging. The customer gets the product home and must consumer rather quickly before the freshness expires.
Without the blockchain technology it took Wal-Mart nearly seven days to trace the mango back to the farm. That time was reduced to two seconds using blockchain. Yiannas said early trials in the U.S. and China have shown blockchain technology can successfully trace food products from suppliers to retail and ultimately to consumers. Farm origination details, batch numbers, factory and processing data, expiration dates and shipping details were digitally connected to food items and entered into the blockchain network at each step of the farm-to-fork process.
Computers in the blockchain, called nodes, contain a copy of a ledger of transactions. When a transaction is made, at least two nodes must approve it before the transaction is added to the ledger. Blockchain provides users a secure database that is auditable and in which transactions can’t be altered, according to McDermott.
“This is just the start of our blockchain exploration. We plan to continue to test the technology, by including more data attributes, for example,” Yiannas said. “And we will continue to test how we can use it to improve food traceability and transparency by collaborating with others throughout the supply chain. This means farmers and suppliers, and other retailers.”
REDUCING FOOD WASTE
Wal-Mart also said blockchain technology has a role in reducing food waste by helping retailers better manage the shelf-life of perishables. He said when the store operator has visibility back to the farm it can help determine how much shelf-life is left for the product.
Yiannas was asked if Wal-Mart would be able to divert shipments to closer stores when the shelf-life is limited. He said the retailer will leverage all the information it can glean from its participation in blockchain.
Yiannas also believes blockchain participation could help reduce the estimated 30% to 40% of food waste in the U.S. through supply chain optimization. He said freshness matters, and the average family wastes about $1,000 annually in food which is equal to one bag of groceries a week.
Many times that waste is fresh items not consumed before their expiration. This waste is estimated at $29 billion annually.
Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Propak Logistics.