Private blockchains and the food supply chain

I listened to this WSJ podcast on the possibilities of the blockchain fixing our food supply.

They were discussing in broad terms a project where IBM and some large partners were building a private blockchain to document and monitor the food supply chain.

I am not a private blockchain expert certainly, but the supply chain for perishable foods, the reporting rigors, the costs and issues of the business are something I know well first hand. A process that appears from this podcast and my experience with the crypto space, a natural fit for the blockchain to address.

To be clear, the food supply chain status quo in NA is a serious mess. It has always been one.

There are government certs. There are the rigors of HACCP but it simply doesn’t work in a trusted way that is efficient enough to protect people, especially with perishable goods that require refrigeration.

Today, every food producer, regardless of size is required to keep records of all ingredient sources and map delivery of ingredients to the lot number of the product by sku. So that at any point in the chain that there is a problem, it can be determined what product is contaminated, pull it, alert the public, then figure out the root cause of it and inform all others using the problematic ingredients.

In the podcast, they talk about a bad load of frozen Mango taking 16 days to track back to the source and pull the product. This sounds very realistic to me.

Source identity, verifiability and speed of communications and action are the thee broken pieces of a three-piece system.

With little or no automation, no streamlined communications disaster systems, no real visibility to anything during transport, and built on legacy systems over a century old, it is a pressing public safety problem. The only real change that has occurred in decades is a sharply escalating price of insurance as this reality becomes more out of control.

The blockchain as an infrastructure can fix this in concept. It’s perfect technologically in many ways.

It will require dramatically changed reporting behaviors up and down the supply chain. Require connects to sensors that are not yet there, but it could possibly as a platform enable a solution for this horribly thorny and critical piece of our food supply.

In a recall situation for example, something that takes days to decipher could happen in abstract in a minute or less. Lives could be saved literally.

I believe this will happen and many are working on this. That is good news on some fronts.

But there is another, darker side to this scenario.

A telling vertical case study of private blockchains replacing current supply chain plumbing in a way that will stifle competition and bolster the dominance of the current players, potentially hurting the economy, killing off the small players and harming us, the customers.

The artisanal food market that drives innovation and healthy eating in our food supply is shrinking dramatically as is.

It is mostly a cost equation, as the cost basis for someone making pickles or herbal infusions for example, are prohibitive for most artisanal or startup business models. From insurance costs to the percentage points taken by the handful of huge distributors and the stores themselves—be they Whole Foods or Albertsons.

It is a shrinking ice cube in the sun business model that simply doesn’t work well, if at all, for smaller vendors.

I think this private chain spoken about in the podcast will certainly get built. Many will and I can see Amazon building one to handle every piece of the Whole Foods and home delivery grocery distribution business.

I fear though that in this case, it will accelerate a process of restricting artisanal food producers, already crowded out by the costs and costly compliances in place today.

You make granola, ketchup or organic bread, let’s say.

Not only will you have to enter the info at the kitchen or processing place, you will most likely need to pay to be on the chain, possibly pay to insure your correctness of your info, post a bond even to prove your capacity to respond quickly, but also every supplier down your chain will have to do so as well.

This will in effect remove the smaller Green Market suppliers, remove a large number of the artisanal makers and shrink choice on the shelves for the customers.

Consumers will have a safer industrial product pipeline with less choice, less competition, less healthy food. We will all lose except the current incumbents.

This narrative is an interesting reality check on the use of private block chains. Or moreso, a scenario on how this technology can hurt and limit choice and innovation, not help in this one vertical instance.

The market and health needs for accountability and real-time information in the food supply chain are very real. I know this from the inside.

The blockchain is a near perfect tech platform to build it on.

But the economic drives of the monopolies involved is to do this in a private proprietary chain with no transparency, no openness and in most ways potentially more restricting than the current broken model.

This is an important discussion.

One that orgs like ConsenSys should surface and include the community, the food industry, the artisanal makers and us, the consumers in the discussions around it.

Rather than rebuilding a proprietary limiting system with a highly-functional blockchain closed system, is there a model to do this as an open system that will not only protect us all from food safety concerns but democratize the process and increase choice?

Bringing in more vendors into our stores. Increasing variety for the consumers. And still allowing people up and down the chain, large and small alike, to build prosperous businesses.

There is a market and human side of the vast potential of the blockchain.

This is one example—of many to come especially with private blockchains—where it is time to get ahead of the reality and think through the options and repercussions.

A private non-transparent blockchain making the current, inefficient system safer in some respects but debilitating in others is not progress in my mind.

This is our food supply. This change is coming and it is wise to make it best for everyone.

Or in the very least, approach it with eyes very wide open.