How we used blockchain to make supply chains transparent and traceable
August 3, 2018
Sustainability, transparency and responsibility, both environmental and social, are vital enablers for the businesses and ecosystems of the future. In a world where adding value is increasingly a matter of social impact, blockchain has the potential to optimize supply chains for a new era of growth.
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The benefits of the digital revolution are not limited to the digital world. Access to accurate information can have a tremendous impact on the physical world as well. Many companies are now making a concerted effort to improve sustainability, protect the environment and take corporate citizenship to the next level. But in order to do so, they need actionable insights into every aspect of their operations.
Blockchain has the unique ability to provide these insights in real-time, illuminating every link in the supply chain in a way that is both fully verifiable and intrinsically secure. As a decentralized, distributed database, it enables businesses to track products and raw materials from their point of origin straight through to the point of sales, greatly increasing transparency in the entire
This makes the technology valuable for a wide range of industries and ecosystems where traceability is an essential aspect of safeguarding both quality and social responsibility, from foods like produce, meat and fish to resources like wood and palm oil. Still, the proof of the pudding is in the eating. Which is why we decided to put blockchain to the test in a very practical way.
We often tend to assume that slavery is a thing of the past, a cautionary horror straight out of the history books. But sadly, the practice is alive and well on many of the African plantations that supply the world’s cocoa beans. Annually, the region consisting of Côte d’Ivoire, Ghana, Nigeria and Cameroon, is responsible for 70 percent of the 3.5 million tons of cocoa beans produced, to satisfy the world’s voracious appetite for chocolate – in part through the use of child labor and modern slavery.
Tony’s Chocolonely was founded with a specific mission in mind: to banish slavery from the chocolate industry entirely, paving the way for a world where cocoa products are 100 percent slave-free. The company goes to great lengths to bring this goal to fruition. Embracing technology as its ally, it strives to create an end-to-end value chain in which all actors are able to take responsibility for their segment of the chain, jointly contributing to the elimination of predatory labor practices from source to sale.
Recognizing technology is an important facilitator for chain traceability and transparency, Tony’s has invested in a virtual traceability platform on which it monitors its resource flow from bean to bar. Blockchain could help Tony’s Chocolonely bring their vision closer to reality; we discussed the possibilities with their supply chain manager and pitched the idea for a real-world implementation of the technology at our Innovation Accelerator. The response was enthusiastic. Working closely with Tony’s Chocolonely, we were able to develop and pilot a working blockchain prototype which was successfully tested in the field by stakeholders in Côte d’Ivoire.
Blockchain is a tremendously versatile technology with many potential applications within any given ecosystem. Our shared goal in this project was to translate that potential from theory into practice, building something that would actually add value in the real world. We didn’t want to mire ourselves in endless development and ideation, but we also didn’t want to miss the mark in terms of utility.
To tackle this challenge, we got together with Tony’s Chocolonely at our Innovation Center and started out by mapping the value chain from bean to bar. Once we had a complete overview, we began pinpointing the existing issues that blockchain would be able to solve. That gave us a clear picture of the opportunities, along with a set of questions that needed to be answered before we could move on to the next phase.
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Which parties in the supply chain would be most supportive? Who could we bring on board quickly? How small could we start without sacrificing results? Where would our efforts achieve the greatest impact? And which region stood to gain the most from this project?
This approach helped us remain focused, selecting for both speed and effectiveness. Thinking big and filtering down, we identified Côte d’Ivoire as the ideal region to pilot our blockchain solution. Working with the local cooperative of cocoa farmers and the international trader they supplied, we were quickly able to set up a small ecosystem and start testing in the field.
We deliberately avoided overdesigning the system or introducing IoT requirements that might have taken years to implement fully. Instead, we rolled out the minimum viable prototype and trained the users in Amsterdam, which allowed us to start collecting real-world insights quickly. Weekly calls with users in Côte d’Ivoire allowed us to further shorten the feedback and development cycle.
What makes this project unique is that it wasn’t just a theoretical model. We were able to test it in practice, collecting feedback from real users in Côte d’Ivoire. This contributed to an atmosphere of enthusiastic collaboration, where all parties involved were fully on board and committed. And when it comes to testing innovative technologies, getting that commitment is absolutely essential to success.
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The blockchain prototype allowed us to track the point of origin for specific shipments of cocoa beans, increasing transparency throughout the entire supply chain. Each new batch was logged in the system, giving us real-time insights into the overall mass balance of cocoa beans as they moved from the farms to the cooperative and onward to the exporter. This level of transparency is essential to a company like Tony’s Chocolonely, as it allows them to trace issues with any given shipment back to the source and take steps to prevent those issues in the future. Products can be linked to specific shipments of raw materials and vice versa, increasing the level of traceability and transparency across the value chain.
The advantages of blockchain in the supply chain carry over to other industries as well. The ability to trace food from farm to table in real-time allows for faster and more granular quality control. Risks to public health can be addressed as they emerge and regulatory standards can be upheld more effectively. Consumers can evaluate whether their favorite brands are living up to their promises without the need for trusted third parties, because the blockchain itself provides the transparency they seek. Likewise, those companies will themselves be able to evaluate whether their ecosystem partners are meeting their obligations toward quality, sustainability and corporate social responsibility.
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The ability to trace food from farm to table in real-time allows for faster and more granular quality control
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Meanwhile, expanding the system’s coverage creates additional opportunities. Tracking sales volume on the blockchain allows you to identify shortfalls and overruns and adjust their supply chains accordingly. Connecting the front-end and the back-end of the value chain in a single source of truth will help you reduce costs and optimize their logistics and commercial operations. A blockchain supply chain solution was recently tested by a consortium involving AB InBev, Accenture, APL, Kuehne + Nagel, and a European customs organization. They concluded that the blockchain solution can reduce the data entry requirements by up to 80 percent.
Tony’s Chocolonely is on a mission. They want to trigger lasting change in the chocolate industry, abolish modern slavery and serve as a shining example of what a company can achieve when its heart is in the right place. That’s what motivates them to be a pioneer and embrace innovative technologies: if adopting blockchain will help them achieve their goals, they want to start learning how to use it as quickly as possible. They understand that experience is the key to wielding new tools properly.
This outlook will serve them well as blockchain technology continues to develop and mature, and it’s a perspective we recommend to everyone. Blockchain has the potential to be an extremely rich and valuable source of information for your company: always correct, always verifiable, always real-time and up-to-date. What can you do with that in terms of your supply chain and your core business? How will you benefit from it? And how are you going to figure that out?
The only way to answer those questions is to start experimenting. The approach is up to you: do it alone, find a partner or work with a startup. Insofar as they help you get started with the technology, these are all valid strategies. The most vital step is that you start learning. That way, you’ll be able to understand what blockchain can do for you. You’ll be able to stay one step ahead of the competition. Even if you ultimately decide to purchase an off-the-shelf solution once the technology has matured, you’ll still need real-world experience with blockchain to be able to put it to good use. The only way to gain that experience is to experiment with the technology, and the best time to start doing that is now.