Supply Chain Management by Blockchain Technology

The days of blockchain application have just begun and as with any new technology, blockchain will hit a few roadblocks especially with the government’s regulators across the globe. As the true essence of blockchain application is to take the power away from the hands of the powerful by decentralizing information and handing it over to the people, democracy in the true sense. Nonetheless as with any movement, if people see value the technology brings into their lives, they will rally behind it and blockchain application will become mainstream in most industries including agriculture in the coming years.

The agriculture industry is now looking for ways to alleviate the complex issues related to farming and distribution. They have a strong need for supply chain intelligence, especially for technology that supports traceability of critical products data through the supply chain across all of affected businesses. Currently, there’s however no easy, accurate and efficient way to identify the exact origin of an agricultural product.

Blockchain could here play an important role. While many of the existing technologies are inadequate or too costly to help, blockchain technology has all ingredients to become a real problem-solver. This technology records information in a distributed ledger in a way that is both secure and immutable. By being distributed among many users these ledgers are resilient with no single point of failure, and they can be (depending on design), transparent to all users. The blockchain technology thereby removes the need for formally identifying both parties to the transaction thus major cost savings can be achieved.

There are three main things that should be emphasized, where the platform aims to contribute:

• The importance of blockchain technology usage for more than the financial sector. The usage of Blockchain Technology in agribusiness is a business priority.

• The importance of the traceability monitoring software for farmers

• The necessity for strict monitoring of the health of plants and emergencies management by Governments. It is fundamental part of food security policies. The role of the blockchain technology in policies implementation.

The blockchain technology has been developed in an accelerating mode. This outstanding development was possible due to the huge number of investments related to the technology. The technology was created to support the creation, existence and security of the cryptocurrency new financial trend. However, this financial reasoning has proven its limitations and the development of new business lines is a necessity in order to create a business-based justification for the huge amount of investment. During the last two years some new business initiatives were launched especially in the field of real estate and marketing management. There are industries where the transactions need to not be altered by a third party and transparency and traceability important needs. The technology was developed as being entirely public and open source. Now, the investment world is waiting for new innovation in the blockchain field. In the context, due to the new requirements related to food security and pest control, it largely appears outstandingly necessity for software applications for farm management but also for public (governmental) monitoring and emergency management. This is important just because 80% of the farms are not connected to a monitoring platform and not own a digital management system.

The main problems are related to traceability, transparency, and emergency management especially in small and medium farms. It is a chronic problem related to monitoring activities that should be executed by retailers, food processing and governments. These issues negatively affect food security and farming insurance sectors. According to a report from AgriDigital using blockchain could solve many of these shortcomings/problems. The use of this technology could lead to improved product tracking and tracing origin of products, efficient supply chain management, fair pricing and decreased transaction fees, etc.

• Farm & food processing management. A high potential for farming, is the ability to create in very coherent manner the management files/data that create the base for traceability and transparency.

• Efficient Supply Chains. Possibly the highest potential for blockchain in agri-food is monitoring and traceability, where it can be very helpful in monitoring the supply chain of products. This technology seems to have the best potential to bring overall provenance and transparency throughout the food supply chain. The blockchain technology offers significant opportunities including increased transparency and data integrity, “with immutable provenance data from farm to table”, allowing a visible assurance of authenticity

•Product trackingBy providing both parties with access to information on similar transactions, as well as on the current stock price of goods, even suppliers in rural areas are able to determine what their harvest is currently worth and sell it to distributors at a price that reflects global market conditions.

•Tracing origin.By establishing a blockchain-driven ecosystem for the registration, payment, and transport of crops or other agricultural products, retailers can also verify easily that the product they are receiving is exactly what they paid for (product origins). From a consumer point of view, using transparent distributed ledger could give consumers confidence about where their food comes from and how it was produced. With monitoring the consumer food chain, they can have a better idea of the origin of the food, the date on which it was created and the efficiency with which it occurred, instead of relying on the existing systems that can be manipulated easily.

•Fair pricing and decreased transaction feesBlockchain can provide an easy solution for both buyers and suppliers seeking to negotiate a fair price for their product. Using Blockchain, commodity buyers are able to deal with their supplier directly and transfer payment via mobile. This may ensure that farmers receive fair payment for their produce and the retailer pays a fair price as that would save the retailer money in agents. Ultimately, this technology enables farmers, manufacturers, and retailers to justify premiums for certain products.

•Minimizing Human Error.Blockchain can also be used to minimize physical and financial losses in the agricultural sector caused by human errors. By adopting blockchain technology tasks can be taken from the workforce in many ways and automate them, minimizing the amount of resource that is wasted or misused. Also, Blockchain can present information to farmers regarding diseased products throughout their supply chain. By drilling down into this data set, the farmer can then minimize future losses.

Logics of Blockchain Technology usage is presented below:

The main functionalities provided by using Blockcain Technology to manage the value chain From Farm to Fork are related to transparency, trust, and rational monitoring. From practical point of view the technology should fulfilled the following services:

• Food safety. Consumers have grown suspicious of the food they are consuming. Food fraud costs the global food industry an estimated $30-40 Bn annually. Food allergies and food food-relatedness are much more common now than 25 years ago and consumers are beginning to demand the information related to the food they are consuming. As this trend continues to rise, big food chains will have no choice but to use blockchain for ensuring accountability, traceability and quality of the food. Blockchain will in fact become competitive edge for brands competing in the competitive FMCG space.

• Supply chain.Food supply chains in most developing nations are inefficient due to information asymmetry. This directly results in low farmer income as farmers do not receive their due share, even though they are the most important part of the chain (the food producers). With blockchain the food supply chain gets simplified, as the data management across a complex network that includes farmers, brokers, distributors, processors, retailers, regulators, and consumers gets simplified and transparent. Improved data sharing can also help reduce the $1 trillion problems of food waste. Farmers and all members of the supply chain can access all the information throughout the chain. This will make the entire supply chain more democratic and efficient resulting in lesser food wastage and higher remuneration being paid to the stakeholder adding the greater amount of value.

• The inputs. Farmers are often unaware if the inputs they are buying are authentic. Local level retailers are selling fake products to farmers to increase their profit margins. At times even the retailers are unaware if the products supplied to them are authentic. Big agriculture-input players are also losing millions of dollars due to pilferage or duplication, which also impacts their brand image. Blockchain application will solve this problem by increasing the traceability of each product sold, from manufacturer to end buyer. Retailers and farmers can simply scan the blockchain barcode on each product via their smartphone and get to know about the authenticity and source of the products they are buying.