Why a Walmart VP had a ‘religious conversion’ to blockchain

Frank Yiannas, Walmart’s vice president in charge of food safety, detailed the revolutionary benefits of the electronic ledger technology at MIT's 'Business of Blockchain' conference.

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Frank Yiannas, Walmart's vice president in charge of food safety, was once a "major skeptic" and "non-believer" in blockchain, the electronic ledger technology platform on which bitcoin and other cryptocurrencies are built.

"I always advise people: if you're a skeptic, stay in it; read, learn and more than that, try to do some work in it," Yiannas said. "And, I've come around and I've become a believer. For me..., it's more like a religious conversion. The more I got into blockchain, the more I thought this is the solution."

The problem Yiannas wanted to solve? How to track the origin of every piece of fruit, meat or vegetable sold by a worldwide retailer of food with 12,000 stores – and tens of thousands of suppliers.

"There are these big, mighty food companies, but they have a weakness," Yannas told attendees at the "Business of Blockchain" conference at MIT this week. "I think the food system has one major Achilles' heel. Their Achilles' heel is a lack of transparency."

Walmart and nine other food retailer giants including Dole, Driscol, Tyson, Nestle and Unilever teamed up with IBM to pilot a cloud-based blockchain technology as a unifying electronic ledger. The ledger was built using Hyperledger Fabric, an open-source blockchain platform run under the Linux Foundation's Hyperledger group.

Walmart blockchain Walmart, MIT, IDG

Frank Yiannas, Walmart's vice president in charge of food safety, explains how blockchain reduced the time to track the origin of a package of mangoes from a week to 2.2 seconds.

When the food chain meets blockchain

Walmart tested the blockchain by tracking the origin of its mangos and pork; Yiannas said it worked flawlessly, solving a lack of transparency that permeates not only Walmart, but the world's food supply chain.

The lack of transparency was highlighted this month when grocers around the U.S. began pulling packages of romaine lettuce from their shelves after 53 people in 16 states became infected with E. coli linked to the vegetable.

The contaminated lettuce was determined to be from the Yuma, Arizona region, but the Centers for Disease Control and Prevention (CDC) said no single supplier has been identified – and unless retailers and consumers can confirm where the lettuce came from, all romaine should be thrown away. The CDC has warned consumers that most package labels do not identify growing regions.

The food supply chain today is not a "chain" at all, Yiannas argued, but is instead a fragmented, paper-based system; even when part of the supply chain is digitized, the various systems are unable to communicate with each other.

"For regulatory purposes, we're only required to have one step up and one step back traceability. Why do you think health officials are saying, just throw away all your romaine?" Yiannas said. "If you look at the FDA website, it says this today: It takes us hundreds, sometimes thousands of documents to piece together where the product came from.

"The idea that in the 21st century, after the spinach outbreak in 2006, we're still not at the point where you can scan a package of spinach and find out where it comes from is just not acceptable," he said.

In December, to test Walmart's produce traceability, Yiannas grabbed a package of sliced mangoes from a store across the street from Walmart's Fayetteville, Ark. headquarters. and brought it back to a conference room. He challenged his team to find out from where the fruit came, an effort that took six days, 18 hour, and 26 minutes to get an answer, Yiannas said.

"We do better than most," he said.

In an early pilot of the IBM-run blockchain supply chain, Yiannas again tried tracking mangoes that had been entered onto the distributed electronic ledger, and was able to find the origin in 2.2 seconds.

"Blockchain for us is solving the complexity of many-to-many relationships. The idea that a supplier can get in and then share that information with whomever they want to is really powerful, and suppliers are really interested in that," Yiannas said.

Apart from using antiquated technology, part of the problem for the food industry is the sheer number of products available today. In 1980, a typical grocery store carried about 15,000 SKUs (a stock keeping unit that refers to a specific product). Today, the average grocery offers 50,000 individual food items, Yiannas said.

In the near future, the world's food supply chain will be "omnichannel," where any consumer can purchase any kind of produce from anywhere in the world and have it shipped to their doorstep. "While things are getting better for consumers, things are getting more challenging for those who have to manage the risk," Yiannas said.

Public vs. private blockchains

Blockchain ledgers can solve the complexity and traceability of goods shipments by enabling everyone on the network to see each transaction, from the time a vegetable is handed off by a grower to a shipping company to its arrival at a national and then regional warehouse, right down to the retailer who places it on a store shelf. Each handoff is scanned into the electronic ledger, which then uses a randomly-generated number or hash to verify that transaction. Each set of transactions involving a particular good becomes an unchangeable entry, or block, on that ledger and can be used for auditing purposes.

There are a variety of blockchain permutations, but they fall mainly into one of two categories – public and private (also known as "permissioned"). Public blockchains allow anyone to see or send transactions ,as long as they're part of the consensus process; bitcoin is an example of a public blockchain.

A permissioned or private blockchain, in contrast, is centrally managed and restricts ledger entries to pre-vetted entities; a permissioned blockchain could be within a single company with many global branches or a group of companies who've partnered for a specific business purpose. Who can see the information on a permissioned blockchain can also be protected by a private/public hash key system.

Though it's early in terms of the technology's use in enterprises, there are very promising signs of its efficacy.

How blockchain is breaking out

Bridget van Kralingen, senior vice president of IBM Global Industries, Platforms and Blockchain, said blockchain is already showing great promise for use in a myriad of industries.

"In the financial services industry, we're seeing some really quite radical use cases take hold and take scale," van Kralingen said. "We do believe this tokenization of almost any good or service will take hold and take root. We're actually seeing it being put to good in many places that aren't just about big companies."

Tokenization involves the the conversion of the rights to goods and assets into a digital token that can be tracked on a blockchain. The assets could be stocks and bonds, real estate, oil, cars, or whatever asset you wanted to buy or sell on an electronic ledger.

For example, 40% of small- and medium-sized businesses in Europe are unable to attain financing to export goods; the process is simply too complicated and expensive.

Last year, five banks partnered with IBM to create a permissioned blockchain through which SMBs could receive financing for international trade. To date, 26 businesses have joined the electronic ledger on which they share identification and credit information across geographical and banking boundaries. Cross-border trade finance issues that once took 45 days to resolve could be squared away in less than 10, van Kralingen said.

Blockchain, van Kralingen said, actually changes the way the business world stores and manages data. "And, it's not done by some powerful technology vendor; it's done by the members of the network. It actually has a single, shared version of the truth," she said.

"Trust is at the lowest level in the last 10 years for governments and institutions. [Blockchain] has the ability, I think, to give us a technology that can underpin a business model which is around trust, transparency and permissioning," van Kralingen added.

Blockchain – because of its self-policing security and immutability – eliminates huge amounts of record keeping, which can get confusing when multiple parties are involved in a transaction, said Saurabh Gupta, vice president of strategy at IT services company Genpact.

In shipping, for example, a bill of lading for cargo shipments has traditionally been paper based, which requires multiple sign-offs by inspectors and receivers before goods can be delivered. Even when the system is electronic, those systems are often separate and require multiple parties to sign off on cargo shipments, creating a lengthy administrative process.

Ibrahim Gokcen, chief digital officer at A.P. Moller - Maersk, the world's largest container shipment operator, said there can be as many as 30 entities and 100 people involved in shipping one container of avocadoes from Kenya to a main shipping terminal in Rotterdam.

"There are more than 200 elements of information exchange. It's this complex [series] of relationships that is really creating this mess," Gokcen said. "There's a lot of inconsistent information that's...prohibiting the flow of goods. Peer-to-peer messaging between those parties is extremely costly, cumbersome, extremely labor intensive.

"There's a lack of information sharing; that they don't trust each other was a huge impediment to progress," he added.

Maearsk blockchain IBM/Maersk, MIT, IDG

Ibrahim Gokcen, chief digital officer at A.P. Moller - Maersk, explains the attributes of a blockchain-based, electronic shipment tracking system.

To try and streamline that process, Maersk in March 2017 announced it was testing a blockchain-based ledger to manage and track the paper trail of tens of millions of shipping containers by digitizing the supply chain. In January, Maersk teamed up with IBM to roll out the proof-of-concept shipping platform.

The Denmark-based company has been piloting the blockchain platform with various customers, including DuPont, Dow Chemical, Tetra Pak, Port Houston, Rotterdam Port Community System Portbase, the Customs Administration of the Netherlands and U.S. Customs and Border Protection.

Joining forces: IBM and Maersk

IBM and Maersk have now created a yet-to-be-named New York-based company that will launch a generally available blockchain-based shipment tracking system later this year; it's currently undergoing regulatory review.

Maersk will make the electronic tracking system available to not only its customers, but it will sell it to other shipping companies as well. "We at Maersk will have zero preferential treatment from that entity," Gokcen said.

blockchain maersk ibm Maersk

A new blockchain based, distributed electronic ledger could save the shipping industry billions of dollars a year by replacing a current EDI and paper-based system for tracking cargo and attaining approval from customs and port authorities.

The blockchain-based shipping network will enable a single view via a virtual dashboard of all goods and shipping information for all parties involved, from manufacturers and shippers to port authorities and government agencies.

Each participant in the shipping supply chain can view the progress of goods through the blockchain ledger, understanding where a container is in transit. They can also see the status of customs documents, or view bills of lading and other data in real time. And, because it creates an immutable record, no one party can modify, delete or even append any one of the blocks without the consensus of others on the network.

"This open platform is similar to an apps store where...it's possible for different participants to build their own applications," Gokcen said.

The platform began with core applications: A shipping information pipeline that provides real-time, end-to-end supply chain visibility to all authorized parties who can securely exchange information about shipment events; and the "Paperless Trade" app that will digitize and automate paperwork filings by enabling end-users to securely submit, validate and approve documents across organizational boundaries.

blockchain maersk Maersk/IBM, MIT, IDG

Ibrahim Gokcen, chief digital officer at A.P. Moller - Maersk, explains the complexity of the world's container shipping industry.

In a similar vein, blockchain-based smart contracts – a business automation tool – ensure that all required approvals are in place, helping to speed up approvals and reduce mistakes.

Companies who want in on the blockchain ledger can use a set of APIs to join it to their existing shipping systems through any data visualization application, such as Tableau or Spotfire. "This is paperless trade, and paperless trade allows the end users to submit, authorize and exchange documents all on a blockchain platform," Gokcen said. "Documents themselves are stored off-chain in a secure database, but the events or transactions related to them are stored on the blockchain.

"This creates a one-to-many relationship to remove the barriers of global trade, to eliminate inefficiencies, to reduce transaction costs and to remove some of the middlemen who are not creating value," he added. "There are lots of middlemen... who just buy low and sell high. Those are the middlemen we're trying to eliminate from our supply chain."

Copyright © 2018 IDG Communications, Inc.

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