Launched in fall 2020, the Extensiv Supply Chain Scholarship aims to foster the talent that will drive the future of our industry. Now in its fourth year, the Extensiv scholarship program hopes to inspire fresh ideas and voices in logistics and supply chains.
Continuing our scholarship series, we present Kirti Moteka, one of the Spring 2023 Extensiv Supply Chain Scholarship runners-up, and her essay describing how blockchain technology will enable greater traceability and visibility across the supply chain.
As an undergraduate researcher for the Business, Government, & Society department at the McCombs School of Business at the University of Texas at Austin, I was tasked with understanding the global cocoa industry’s supply chain to explore solutions for the child labor, corruption, and deforestation that occurs during production. Throughout the process, I was able to explore a variety of value chains from the fashion industry to lumber production to medicine development. Across all these case studies, I discovered one thing in common: supply chains need to improve their traceability and visibility. I believe the answer to these needs is through blockchain technology.
Let’s investigate my area of expertise, cocoa production, and how blockchain can be used for agricultural commodities on a mass scale. Blockchain technology (decentralized, digital ledger that records transactions) records monetary and physical transactions between each level of the supply chain. This is done to alleviate farmer poverty, which is the key cause of child labor, deforestation, and illegal farming methods. When a farmer is unfairly paid by a trader or a trader completes an exchange with an exporter, the digital flow of money can be immediately recorded in a blockchain network. Blockchain is known for its immutability and transparency, so none of the transactions can be tampered with; every nominal exchange and the individuals who have interacted are then visible to anyone with access to the database—keeping everyone involved accountable for their transactions.
Currently, surveys, government checks, and field research are the primary ways that information across the value chain is recorded. So, by auditing transactions directly from farmers’ mobile payments, there is credibility and accuracy in the data. Farmers are inevitably more protected and likelier to report their conditions, thus increasing their market and pricing power in a more transparent market. Therefore, the entire value chain becomes increasingly equitable, efficient, and relational.
Koa Chocolate is a prime example of a company utilizing blockchain technology to record the payments made to everyone with the RedTrace system to ensure direct trade. Furthermore, these initiatives assist in reducing waste and the consumption of natural resources (as digital payments are encouraged), transportation costs, and emissions—making blockchain not only equitable and efficient, but also sustainable.
Transactional information on blockchain ledgers can then be shared with consumers, allowing transparency and consumer awareness regarding supply chain malpractices. Since consumers only see the manufactured product and solely interact with the retailer, QR codes on final chocolate bars have been incorporated for buyers to visualize the variation of price from bean to bar—working towards the higher goal of bottom-up pricing based off what farmer needs to survive. Fairchain, which facilitates the use of blockchain-backed information through QR codes, is an example of this solution, as consumers are even able to pay an extra tip to the farmer after evaluating the information given. By providing consumers with information transparency, all levels of the supply chain are held accountable for their actions.
Blockchain-based transactions aren’t just helpful to reach consumers or farmers; they can be used within the supply chain to increase visibility throughout it. Tony’s Chocoloney, a chocolate manufacturer, became known for its blockchain-based BeanTracker: “a monitoring tool for all actors in the supply chain to see where the beans are at any particular moment in time.” The tracker allows one to see where each shipment of beans came from in Ghana or Cote D’Ivoire and the process by which it arrived. Barry Callebaut, one of the largest cocoa traders, became involved with BeanTracker and installed it into its cocoa factories. Not knowing exactly where their cocoa comes from is often a justification that chocolate producers use; but blockchain mitigates this barrier, as every individual transaction should be able to be traced across the supply chain.
The benefits extend to the other downstream supply chain levels too: retailers and manufacturing companies (such as Hershey’s, Nestle, etc. that already struggle with price visibility and information transparency) can use participation in blockchain-based trackers as effective marketing for their products (especially as more consumers demand ethically produced goods). Blockchain software is also easily scalable, allowing economies of scale eventually. Thus, visibility and profit can be improved by distributing informational power from the downstream to the upstream sections of the cocoa supply chain via blockchain.
The cocoa industry is just one of many agricultural sectors that struggles with malpractices across the value chain—coffee, avocados, and even clothing manufactures face many of the same problems regarding labor abuse, unsustainable production methods, and poverty. For small farmers, traders, and exporters—who first will have to be accustomed to blockchain technology—digital literacy increases, which can further help alleviate poverty and educational gaps in developing nations. The vision of using blockchain technology requires sufficient internet connectivity and technology; this is an expensive investment, however, once this foundation is laid it can help isolated, developing communities in ways beyond just economic benefits and fair pricing. So, investing in blockchain technology can result in long-term benefits in a multitude of communities, in addition to connecting consumers, producers, and everyone in between across a supply chain.
Lastly, using blockchain ledgers to record transactions is not only beneficial for increasing visibility in an industry, but can be helpful at individual supply chain levels as well. For example, Walmart uses blockchain to record the origins and storehouse locations of its food before distribution. Beyond the food industry, FedEx and UPS adopted blockchain methods to track package transactions and shipments, and Ford utilizes ledgers to trace cobalt supplies for electric battery production.
Regardless of the different uses, blockchain is helping each of these companies ensure quality, safety, and thus consumer satisfaction in their operations. They can reduce costs, find the most efficient routes for production, and track transactions on a mass scale. Thus, supply chain management in every major sector can find some benefit by incorporating blockchain-based technology into production, distribution, and communication methods.
Through auditing and recording transactions, blockchain technology is incredibly promising— and at the core of solving accountability in supply chains.
Sources:
Fountain, Antoine C. and Hütz-Adams, Friedel (2022): 2022 Cocoa Barometer. Higonnet, Etelle, et al. “Chocolate's Dark Secret.” Mighty Earth.
Lafargue, P., Rogerson, M., Parry, G. and Allainguillaume, J. (2021) “Broken chocolate: visibility in cocoa supply chains”, Supply Chain Management; An International Journal.
Mighty Earth. “U.S. Cocoa Imports: Secretive Mega-Traders Get the Lion's Share.” Mighty Earth, 7 July 2021, https://www.mightyearth.org/2021/07/06/u-s-cocoa-imports-secretive-mega-traders-get-the-lions-share/.
Oram, Julian, and Jackson Harris. “Sweet Nothings Final Report.” Mighty Earth. Sharma, Toshendra Kumar. “Top Companies Using Blockchain to Increase Supply Chain Management.” Blockchain Council, 9 Nov. 2020, www.blockchain-council.org/blockchain/top-companies-using-blockchain-to-increase-supply-chain-management/.
Interviewees:
Marcelo J. P. Paixão, Associate Professor of African and African Diaspora Studies
Kenneth Young, Professor in the Department of Geography and the Environment
Douglas Morrice, Professor in the Department of Information, Risk & Operations Management
Stephen Gilbert, Professor in the Department of Information, Risk & Operations Management
Robert Prentice, Professor in the Department of Business, Government & Society
Brenda Boonabaana, Postdoctoral Fellow in the Department of Geography and the Environment
Antoine Fountain, Managing Director of VOICE Network & Co-Author of Cocoa Barometer
Jackson Harris, Rapid Response and Remote Sensing Analyst at Mighty Earth
Samuel Mawator, Senior Advisor at Mighty Earth
Amourlaye Toure, Senior Advisor at Mighty Earth
