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ASCM Insights

Planting the Seeds of Blockchain in Agribusiness

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Something as seemingly simple as a carrot or an ear of corn can have a surprisingly complex supply chain. According to Cointelegraph, agricultural trade is based on complex domestic and sometimes international relationships between farmers and retailers, coupled with intricate supply chain procedures that complicate payments and product integrity. Governments, private investors and experts are noting that this industry is ripe for improvement with blockchain technology.

For example, farmers often face challenges in receiving payments in a timely manner. If farmers are not paid properly and on time, they sometimes have to resort to other financing options to support their businesses. The costs of this financing are then passed on as higher prices for consumers.

Australian blockchain startup Agridigital received almost $4 million (US) to create a private blockchain to improve supply chain finance. Since December 2016, the blockchain has hosted more than 1,300 users, transactions for more than 1.5 million tons of grain and more than $360 million in grower payments. Blockchains enable traders to link payments and title transfers, which reduces the risk that the purchasing party will default on the financial agreement.

Blockchains also can make transactions more efficient. For example, when 60,000 tons of U.S. soybeans were sold to the Chinese government in 2017 via the Easy Trading Connect blockchain prototype, the time spent processing documents was reduced by fivefold because of the electronic smart documents on the platform.

Blockchain can support industry efforts to better manage food safety. For instance, with blockchains, producers and retailers can determine exactly which batch of product is affected by a foodborne illness or other problems. IBM has partnered with several retailers and food manufacturers to create a common blockchain, Food Trust, to share data with both customers and competitors. The idea behind it is that a single record-keeping system can help the industry better manage food safety. 

For supply chain professionals, more transparency often is the goal, and consumers are starting to demand more transparency as well. Blockchains can help here too. French retailer Carrefour is using the technology to share data about its free-range chickens. Customers now have access to multiple details about the chickens, including when they were laid, where they hatched and which farmers cared for them.

Growing with technology

Because blockchain is a relatively new technology, experts only now are beginning to uncover the benefits this platform offers various industries, and they are quick to point out that it not infallible. All members of the supply chain need to participate for the system to work.

The APICS Research, Innovation & Strategy Committee has been monitoring this topic and its potential for supply chain. The committee offers these insights, “Blockchain supports the building of trust by addressing confidentiality and availability of information. As the [internet of supply chain] becomes a bigger part of daily life, a huge focus will be needed on preventing the loss of integrity of information … Blockchain may also be the entry point for daring to move ahead with more advanced applications that use the data for control of my day-to-day business by predictive analytics & automation/robotics.”

The APICS Supply Chain Operations Reference (SCOR) model was recently updated to include insights and guidance about incorporating blockchain technology into businesses and supply chains. APICS SCOR 12.0 also features information about omnichannel, metadata and other emerging business drivers and includes modernized best practices and processes to better align with digital strategy. Visit apics.org/scor to learn more.

About the Author

Abe Eshkenazi, CSCP, CPA, CAE CEO, ASCM

Abe Eshkenazi is chief executive officer of the Association for Supply Chain Management (ASCM), the largest organization for supply chain and the global pacesetter of organizational transformation, talent development and supply chain innovation. During his tenure, ASCM has significantly expanded its services to corporations, individuals and communities. Its revenue has more than doubled, and the association successfully completed three mergers in response to both heightened industry awareness and the vast and ongoing global impact driven by supply chains. Previously, Eshkenazi was the managing director of the Operations Consulting Group of American Express Tax and Business Services. He may be contacted at abe@ascm.org.

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