Block chain is the buzzword of 2019. Everyone’s talking about it, everyone thinks it’ll change the world, but what actually is block chain? Is the hype surrounding block chain justified? Harrij Schmeitz explains it to us, but also puts it in a different perspective: transparency. Transparency is becoming more important, and this trend is being accelerated by block chain.
Harrij starts with a critical comment: “My biggest objection as a professional is that block chain is seen as a universal remedy. Everything you can do with block chain, you could also do with another application. You don’t need block chain for that. Programming is more difficult in these other applications, but not impossible.” Block chain results in a number of advantages in a technical field, making things easier, but it doesn’t mean companies get to stop working on putting their data in order.
Block chain = database
“Put simply, block chain is a database that digitally stores your data, a so-called digital ledger,” Harrij explains. “It’s now being hyped because the technique of the block chain is the same as the technique used to make bitcoin.” Several concepts behind this database make it “much more exciting.” Transparency, for example, is an important concept behind block chain. “Block chain is a technology used because some parties in the sector are insisting on more and more transparency,” he continues. Harrij emphasises companies shouldn’t become obsessed by block chain as a new technology, but that they should mostly ensure they can meet the transparency requirements. “These are lifted to a higher level because of this new technique. It’s all about more information, more details, faster availability, and so on.”
That transparency could also be realised on an A4 sheet of paper, but a system like block chain speeds things up enormously. “Walmart and some major players in fresh produce showed that it takes 6 days, 18 hours and 26 minutes in case of a food safety issue in sliced mangoes to get all data complete from retail to grower. With the block chain application it took 2.2 seconds,” Harrij explains. He comments that a well-set up ERP system is similar to block chain if you put the data of all of your suppliers in your ERP. “Block chain offers technical opportunities to realise this traceability quicker and simpler.”
“Besides, block chain has unique characteristics making it unique,” Harrij continues. With that, his explanation becomes slightly more technical. Block chain has, for instance, a strict registration (logging) of who changes what at which moment in the data. Additionally, it’s been created on the principle of consensus. Meaning: data can only be changed if both parties agree to it. If the buyer and the grower disagree about the quality of the product, they first have to reach an agreement before it can be changed. Thirdly, there’s the governance model, meaning anyone can see where the product came from, and which links form the product’s supply chain. “That’s the transparency.” And finally, it’s immutable, meaning no party can change the information. “The entire supply chain is actually digitised.”
Everything is public
Transparency is becoming more important as a result of various global incidents. This trend was started earlier, but it became more important with the arrival of block chain. “Traders have to realise a change in the field of transparency is headed for them, and they have to be ready for it.” The food scandals resulted in a cooperation between IBM and Walmart in the US. “Walmart said: ‘we want to know where products come from in a second.’ IBM realised that.” The result is that more retailers want to use this technique to increase transparency. “Based on this technology, new tracking and tracing applications are developed.” Because of the problems with E.coli in Romaine lettuce in the US two years in a row, retailers Walmart and Sam’s Club have now compelled all growers of leafy vegetables to make all data of their crops available for the retailers using a block chain application before September 2019.
That this transparency can come back to you like a boomerang has been proven by Albert Heijn. Last year, this Dutch supermarket chain announced they would start using block chain to offer complete transparency in their supply chain. This was presented mid-September. One week later, Dutch newspaper Trouw published an article that the block chain’s information showed one orange grower in Brazil, who supplied the fruit to the supermarket, was convicted for abusing workers, among other things. According to the newspaper, the workers were forced to sleep in an old chicken coop and they were not fairly compensated. “That’s transparency!”
No more hide and seek
Because of this transparency that allows consumers to find out where a product comes from, a supermarket should be certain things are all right in the supply chain. “Growers and traders live in a transparent world. That can be painful, because everything is public,” Harrij says. In other words: supplying anonymously is no longer an option. “Traders still think they can keep their growers a secret, sourcing is an important USP of trade, after all.” Harrij explains this using an example from the flower world, where new varieties always caused a stir. “Everyone always thought you could keep it a secret, but you can find out anything just by googling for 15 minutes.”
“We in business have to realise this will happen and it will become the new reality. You can no longer play hide and seek, that’s over,” Harrij says. “Besides, you have to make sure your company is set up in such a way that you have the knowledge of processing that data. Data quality will become more important than product quality.” That doesn’t just mean the data of growers a trader usually works with has to be in order, the data of volumes bought extra also has to be correct. “The question is how far along we are with this.”
“In the end it will result in a more closed and shorter supply chain, and companies will decide to build more permanent lines, based on a completely open data stream,” Harrij mentions a final development. That trend was started a while ago, but is now becoming more significant.
schmeitz@ficenter.nl