WAL-MART, IBM DEVELOPING INSTANT FOOD TRACKING PROGRAM
Feb. 27, 2017
Spinach was pulled off grocery stores shelves and disappeared from restaurants in the fall of 2006, when an E. coli outbreak resulted in 205 confirmed illnesses and three deaths across 26 states.
Frank Yiannas, vice president of food safety at Wal-Mart Stores Inc., described it as a "worse-case example" for food safety. It took time for officials to identify the exact source of the contamination in the supply chain; meanwhile consumers stopped eating spinach, and stores stopped selling it.
"If you had traceability systems you could do it really quick and know if it was the implicated lot or not," Yiannas said. "By doing it quickly, you could protect consumers. You could certainly protect unaffected products and allow the sale of products that were unaffected."
Wal-Mart and IBM are developing a better solution through the use of blockchain technology. The companies are working together on a pilot program they believe has the potential to reinvent the way food is tracked worldwide as it moves through the supply chain -- from producers, distributors and grocers -- before reaching consumers.
A blockchain is a digital, distributed ledger used to record transactions securely. To this point, the technology has been linked closely to the financial services industry. But Wal-Mart announced last year it was partnering with IBM to develop blockchain ledgers to use in the food system, tracking pork in China and an unspecified produce item in the U.S.
"We've been, what I call, pursuing this holy grail of traceability for over a decade," Yiannas said. "When we came across this blockchain technology we thought, 'This has the potential to really be a disruptive technology and be a solution to facilitate traceability and transparency.'"
Food-borne illnesses affect about 48 million Americans -- or 1 in 6 -- each year, according to estimates from the Center for Disease Control and Prevention. In addition, 128,000 people are hospitalized and 3,000 die annually.
While problems like the spinach outbreak threaten consumers, they also present challenges for retailers, distributors and producers who race to track the source of recalled items in the supply chain. Currently, Yiannas said, records regarding food are generally kept on paper, leaving a complete view of the distribution network difficult to attain. The Food and Drug Administration requires companies to track one step ahead of them and one step behind in the supply chain.
From days to minutes
With blockchain, the time to find the exact source of the issue -- like in the case of the spinach outbreak -- can be trimmed from days to minutes. Annibal Sodero, an assistant professor of supply chain management at the University of Arkansas Sam M. Walton College of Business, said the implications for food safety are huge.
"You know at what point contamination happened," Sodero said. "You know which pallets, which cases were involved. You will know at which stores and distribution centers. So for traceability it will be a snap, really, to find the source. It's a huge cost to have to pull everything from the stores instead of just pulling that batch that got contaminated."
The benefits of a digitized food system also have potential to reach further than traceability, according to Wal-Mart and IBM. Detailed information collected as part of the digital ledger could help improve efficiency -- and lower costs -- in getting products from the farm to consumers. A more efficient system of tracking food could also help reduce food waste.
Improved transparency throughout the supply chain should be possible as well because of the amount of information available. With blockchain, the risk for fraud or tampering would be reduced because of the digital database.
"Blockchain isn't magic fairy dust," said Brigid McDermott, IBM's vice president of blockchain business development. "But what blockchain does that is truly unique is to create this trusted system of record. You've never before had the ability for an entire ecosystem to look at data and be confident that everybody else is looking at the same data and that everybody else trusted the same set of data."
Yiannas said transparency and traceability are not new concepts in food safety, but recent technological advancements have made the development of a shared digital database more of a reality. It's more likely now for farmers and producers -- even in remote places around the world -- to have access to a smart device and insert data into a blockchain.
McDermott predicted it will take some time, but the reception from different players has been good so far.
The bigger view
Ultimately, Wal-Mart and IBM hope to extend their work across the entire food system.
"This isn't IBM and Wal-Mart," McDermott said. "This needs to be something that the larger ecosystem uses. ... Each retailer has a huge number of farms. Each farm has a huge number of retailers. So you want to make sure that people don't have to use 50, 100 different systems. At the end of the day, this is most useful if everybody is using it."
Investments in blockchain technology are expected to increase this year, according to a study conducted by Deloitte.
The research firm polled 308 executives at companies with $500 million or more in annual revenue and 55 percent said their organizations would be at a competitive disadvantage if they failed to adopt the technology. Even more, 42 percent of respondents in the consumer products and manufacturing industry plan to invest $5 million or more this year.
Sodero said it makes sense for Wal-Mart to invest in blockchain for its food business because of the retailer's size and scale. But he believes that the global company will face competition in the race to adopt a standard others will eventually follow.
"We already know for a fact that when there's a new technology out there there will be this interplay of power," Sodero said. "So they better get this right and they better get adoption. They need people to adopt their own technology so that they can be sure that this becomes the standard."
Wal-Mart's blockchain tests could be wrapped up in April, according to Yiannas. The companies will evaluate results and determine the next step, including the possibility of rolling blockchain out on a larger scale.
Yiannas said the technology looks "very promising" and has value to all stakeholders, including consumers. He imagined a day when customers can pick up a food item, scan it with a smart device and retrace its route through the supply chain.
"Everybody is doing a lot more online shopping," Yiannas said. "When you buy something online you have the ability to track where it's at and where it's going. It's an idea that should be available to the food system in the 21st century. So we're going to work really hard to make the idea reality."