Logistics excellence: how blockchain could help ?

March 3, 2021

With initially a silo operation and the search for an optimum for each distinct service, logistics has been transformed under the influence of marketing constraints to integrate different functions within the company. From the 90s, it became a fully-fledged business sector and today appears as a genuinely competitive lever, allowing the management of physical, information and financial flows under the best possible conditions of cost and quality of service. The case of Amazon, which has put logistics excellence at the heart of its customer value proposition underlines this all too well.

Ongoing transformations

In the agri-food system, major distributors are constantly changing to meet ultra-mutualization, the fast development of convenience stores and the highly competitive environment in which they operate:

  • Concentration of flows within purchasing centres, epicentre of mass distribution. In some cases, more than 75% of references go through national / regional centres before being re-dispatched to national / regional warehouses and then to the different points of sale.
  • Faster delivery, one even two times per day with multi-temperature transportation to come closer to urban centres.
  • Implementation of differentiation strategy.

However, this is not enough. Modern supply chains are confronting with an explosion of complexity and must face multiple parameters: multiplication of supplies, consumer requirements or actors. However, the challenge is to simplify decision-making to favour continuous management of the entire process. This must include more collaboration and sharing between actors with transparent information and higher added-value services (monitoring of product quality, real-time cold chain monitoring, etc.) to achieve sustainable performance.

Agri-food logistics must evolve into a dynamic and interconnected structure to meet demand and build efficient differentiation strategies.

An in-depth transformation is necessary because the current obstacles are multiple (regulations, technologies, maturity, etc.).

A need for transparency

As the agri-food production chains are increasingly complex, it is sometimes necessary to cross-check information from ten or so actors in different countries to trace the product’s route.

Paradoxally, demand for more transparency has never been stronger, partly explained by the different health scandals that have impacted this industry and led to an end-consumer’s mistrust.

The global food system is also faced with recurring issues that reveal a lack of traceability and data reliability across the entire supply chain:

  • Frauds (scandal of horse meat in lasagne for example).
  • Illegal production (an estimated 10-20% of undeclared / non-regulated world fishproduction)
  • Health scandals (WHO estimates that 1 out of 10 patients a year due to contaminatedfood products).
  • Losses and recalls of products.

Blockchain assets

With it distributed and decentralized management mode, the blockchain makes transparent, secure and immutable information available for all actors, from the producer to the consumer.

Products information at all stages of the supply chain is stored digitally (data on the product’s origin, treatments received, expiry data, etc.). We can also monitor the storage and transport conditions and thus ensure the best practices of each actor. The data set makes it possible to authenticate a product, avoiding fraud and thus increasing consumer confidence.

Blockchain technology would make tremendous progress in food safety management: as soon as anomalies are detected, withdrawal and recall of products could be made faster. Henceforth, this technology brings significant benefits for each of the three stakeholder groups:

  • BtoB actors (producers / logisticians / distributors): they all benefit from a shared real-time transparency with multiple productivity gains during liability shift phases (avoiding redundancies of information), a higher food safety risk and a significant reduction in avoidable losses by optimizing supply chain.
  • Controllers (regulators / insurers): the provision of all information offers an unmatched ability to control and guarantee against current sampling as well as instant proof of responsibility in case of problems.
  • Consumers: blockchain offers transparency and helps to rebuild trust. Consumer will also be able to select his products according to his own quality criteria ‘origin, label, etc.).

Nonetheless, the paradigm shift proposed by blockchain still raises many questions:

  • Authentication and authorization: how to control legitimacy and authenticity of the information stored in the blockchain? What are the rules of access to information?
  • Payment system: how are payment made? On blockchains and their integrated crypto-currencies? Separately (which would represent a decrease in potential for productivity gains)?
  • Business maturity: are the industries ready for more transparency and information provision to all?
  • Finally, the operating cost, including energy…

In the agri-food sector, changing of supply sources caused by globalization has created new risks and amplified the consequences of food health problems and related scandals: in terms of public health or brand’s image. The various recent crises have led to consumers mistrust, more aware of possible food health risks.

Securing supply channels is therefore a crucial point for companies. One of the main needs to achieve it is the transmission of reliable data for the entire supply chain.

By placing products quality and information at the heart of their concerns, companies will not only be able to satisfy their consumers needs but also ensure a high added-value positioning.

More reliable food monitoring will enable real-time detection of poor operational practices, possible contamination or optimizing overall process.

All aspects on which brands could communicate on as guarantee of their quality. However, this implies a real change of mind set because it requires collaboration of all stakeholders and more transparency.

Key figures in France

  • In 2015, the official number of products with quality and origin certification (SIQO) represented +1100* products PDO – AOP – AOC – PGI – TSG – RED LABEL – AB/EUROFEUILLE

*This figure does not include organic products

  • In 2016, the turnover at first sale (excluding tax) of products under SIQO is estimated at around € 30 billion excluding VAT, of which € 21 billion for wines and spirits and 4?2 billion for products organic production.

Beyond a few rare of use that are aimed primarily at creating an innovative image, blockchain technology in the food industry is still quite experimental.

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