Walmart has declared yet another supply network technology mandate and the open question is whether prior learning, technology maturity and needs for industry buy-in have provided necessary learning. In this industry analyst focused editorial commentary, Supply Chain Matters explores the purpose, actions, industry governance and technology considerations that involve such mandates.
Action and Purpose
It’s happened again, another mandate from global retailer Walmart regarding mandatory use of advanced technology. Somewhat similar but different to the infamous RFID enablement mandate over 15 years ago, Walmart hopes to leverage its vast buying and market influence towards broader industry-wide adoption of an advanced technology platform focused to solve a challenging business problem.
Last week, the global retailer issued a letter to select food suppliers of lettuce, spinach, and other greens to join the retailer’s food traceability blockchain technology initiative. Direct suppliers will have until January 31, 2019 to join while food supply network participants such as farmers, wholesalers, 3PL’s or other trading partners are requested to join by September 30, 2019. 
The stated purpose of insuring more responsive food safety and product recall response through product traceability of the end-to-end food supply chain is a valid industry-wide challenge that merits a doable, technologically-enabled response. Past incidents of Salmonella or E-coli related illness linked to leafy vegetables remain an important critical concern for both retailers, food providers and definitely consumers. This year featured another E-coli illness outbreak suspected to have originated in lettuce grown in Arizona. The exact farm source has still not been determined.
Walmart initially announced efforts to explore food safety technology in October of 2016 in collaboration with IBM and Tsinghua University. At the time, the government of China has identified food authentication and supply chain tracking, specifically related to the pork supply chain, as a critical concern to quickly find and eliminate sources of food contamination within that country.
The origins of what was termed as the Food Trust network itself was subsequently established by Walmart and eight other large food providers, along with IBM.
Similar to the RFID mandate of years past, meaningful benefits for all supply network participants, objective governance in industry-wide adoption of common data and product identity standards are necessary end-goals. Factoring the burden of added costs to deploy and operate the technology across all tiers of the supply network are challenges as-well. This is especially the case for those participants at the lower tiers of this supply network, which include both large or smaller farmers who operate on the slimmest of margins. They will likely shun efforts that impose added labor burdens to input data into multiple food safety technology platforms, let alone supply-chain wide governance or verification platforms.
Blockchain Technology Approach
In a nutshell, blockchain technology supports a decentralized ledger of two-way transactions to exchange monetary or physical assets. Originally developed to support digital Bitcoin currency use, this technology is a shared digital ledger, or a continually updated list of incremental transactions. The decentralized ledger keeps a record of each transaction that occurs across a fully distributed or peer-to-peer network, either public or private.
The Walmart chosen technology is the IBM Food Trust Cloud-based blockchain platform. This Cloud and subscription-based platform is described by IBM as an “open-sourced technology such as Hyperledger Fabric.” The words “such-as” should be focused upon because it can sometimes imply a proprietary or nuanced implementation of an available open-standard that can be patented to preclude other use without a granted license.
IBM further emphasizes its collaboration with the GS1 based standards organization “to drive industry standards for sustainability, food safety, and quality assurance.” That collaboration was announced in September of last year and involved not only IBM but Microsoft to leverage the GS1 standards in their respective blockchain applications directed at supply chain related needs.
One of the concerns expressed with current blockchain focused technology used for supply chain transactional and identity verification needs is the ability of the blockchain technology to be able to scale to real-time information transfer needs.
For its part, IBM points out that existing deployed blockchain networks, such as Bitcoin, are public and anonymous, namely that any organization or user can join and see any transaction that happens on those networks. Such networks typically require resource-intensive computations to help prevent fraudulent transactions, hence a speed limitation. IBM’s Food Trust approach is described as being “permissioned” in that invited members know exactly with whom they are transacting. Participants also determine what data is seen by whom, thereby providing information on a less real-time need-to-know basis. Obviously, other blockchain start-ups or competing technology providers have counter arguments as to the current speed and scalability of a given blockchain platform. That represents typical market shakeout.
In its reporting of the Walmart mandate, The Wall Street Journal indicated that farmers themselves can utilize a desktop or laptop computer to enter product origin data. According to the report, IBM is expected to announce a mobile app for Food Trust access sometime this month. Such an App will obviously require added testing.
Cost and Other Factors
According to a report by business network CNBC, Walmart has declined to indicate how much use or input to the blockchain platform would cost farmers and other produce supply chain participants.
Supply Chain Matters visited the IBM Food Trust web site, which describes a tiered, subscription-based pricing schedule determined by the size of company that is participating. (Small, Midsized, Enterprise) As an example, subscribing to IBM Trust Certification is priced at $100 monthly for small, $1000 monthly for midsized, or $10,000 per month for enterprise use. Additional services include IBM Food Trust participation priced at similar levels, and a one-time “virtually-guided” onboarding service of $5000.
Walmart or other large supplier participants in the blockchain platform will have to manage and determine how or if monthly subscription costs are to be allocated among smaller, lower-tired players, particularly farm operators and regional distributors.
A further concern should be integration of blockchain data into broader supply chain visibility, transactional or analytically-based decision-making needs. Larger growers leverage existing B2B EDI messaging systems that grocery industry participants have utilized for quite some time. Leveraging blockchain for added insights in decision-making or for payment needs can be a broader benefit down the road, depending on cost and industry-wide adoption.
Takeaway
There has been a lot of industry learning that has occurred since the former RFID mandates. While today’s Cloud-based technology readily addresses B2B and supply-chain wide network connectivity and information transmittal needs, the question of who pays and who gains remains fundamental to be addressed.
Walmart has selected a business challenge that has obvious multi-stakeholder concerns, but industry adoption and trust remain a hurdle to overcome. As an example, the original Food Trust collaboration had included food retailer Kroeger as a participant. What about Amazon-Whole Foods participation ?
IBM previously announced blockchain proof-of-concept initiatives involving global shipping, with specific partner Maersk Line. In May, Supply Chain Matters highlighted an industry report of pushback from the number two and three players Hapag-Lloyd and CMA CGM claiming discomfort as to industry governance that makes it an industry-wide process platform. Actions such as these are rather common for industry-wide technology adoption as network participants protect their competitive interests. There are often concerns as to which parties will gain additional revenues with the offering of a technology-enabled service that can provide benefits for the industry and for industry supply chain teams. We have observed this phenomena in other major tech deployments involving broad industry adoption, including prior RFID initiatives and some form of an objective, industry-wide steering team is often required. The same concerns will pay out for any industry-wide Internet-of-Things (IoT) focused initiatives.
For IBM, the stakes are high in terms of maintaining a technology first-mover advantage while convincing industry participants that the economics, business value and services implementation cost factors of its blockchain technology compels initiatives to move beyond proof-of-concept.
Other enterprise, specialty blockchain and B2B network technology providers are also positioning for industry and business process specific blockchain proof-of-concept initiatives, stressing more openness and flexibility in platform use. They include Microsoft, OpenText, Oracle, SAP, to mention a few.
As always, industry-wide governance and adoption will be the ultimate goal and determinant to common technology adoption.
Bob Ferrari
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