From coffee bean to cup: Starbucks brews a blockchain-based supply chain with Microsoft

While the coffee chain explores a new tracking system and mobile app, two surveys show that not everyone is fully on board with the much-hyped distributed ledger technology.

A farmer collects coffee beans, harvesting crops.
Andresr / Getty Images

Starbucks is working with Microsoft to develop a blockchain-based supply chain tracking system and mobile app that will allow customers to track the supply chain journey of the beans they buy and the coffee they drink.

In March, Starbucks announced a "digital transparency plan" that would let it verify their coffee beans as 100% ethically and sustainably sourced.

Last year, Starbucks worked with more than 380,000 coffee farms to ensure ethical sourcing. However, digital real-time traceability will allow customers to know more about their coffee beans, the company said.

"Perhaps even more important and differentiating are the potential benefits for coffee farmers to know where their beans go after they sell them. Starbucks is...innovating ways to trace the journey that its coffee makes from farm to cup – and to connect the people who drink it with the people who grow it," the coffee chain said in a blog post.

This week at the Microsoft Build 2019 conference, the coffee company announced its "bean to cup" program. It uses Microsoft's Azure-based blockchain service, which creates a transparent electronic ledger over which supply chain participants can input transactional data. Combined with a user interface and mobile application, the technology will allow Starbucks customers to trace the journey of coffee beans from the time a grower packages them to the time they hit the coffee chain's counters.

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The mobile app will show customers information about where their packaged coffee comes from, where it was grown and what Starbucks is doing to support farmers in those locations. It will also include where and when the coffee was roasted, associated  tasting notes and other details.

Starbucks mobile app Starbucks

Starbucks' mobile "bean to cup" tracking app may look like this.

Starbucks is among a growing number of produce retailers to let customers trace their food's journey from farm to store shelf. For example, IBM's blockchain-based Food Trust blockchain network, launched in August 2017, is used by more than two dozen food retailers and suppliers, including Dole, Driscoll's, Golden State Foods, Kroger, McCormick and Company, Nestlé, Tyson Foods, Unilever and Walmart.

IBM and Microsoft are not alone. SAP has also launched a blockchain-based service; it's used by companies such as Bumble Bee Foods to track and trace the origin of its tuna. Food suppliers add QR or bar codes to shipping labels that can be scanned and entered into a blockchain database, which becomes a transparent ledger for all participants to see as shipments travel along the supply chain.

Pharmaceutical wholesalers and other firms have also been using blockchain cloud services to authenticate their products and avoid counterfeit drugs.

Just as Starbucks is doing with its beans, jewelry and gem suppliers have also been using blockchain to ensure their stones are ethically sourced and not part of the blood diamond trade, which uses slave labor in war-torn regions of Africa to mine precious gems.

Blockchain and the on-going hype

Consultancy Deloitte LLP today released the results of a survey of 1,386 senior executives in a dozen countries showing that Fintech remains a blockchain leader. But more organizations in other sectors – such as technology, media, telecommunications, life sciences and health care, and government – are expanding and diversifying their blockchain initiatives.

Fifty-three percent of respondents said blockchain technology has become a critical priority for their organizations, a 10-point increase over last year's results. Moreover, 83% see compelling use cases for blockchain, up from 74% who said that last year, "and respondents' overall attitudes toward blockchain have strengthened meaningfully."

Last year's Deloitte survey showed blockchain adoption reaching a turning point, with momentum beginning to shift from "blockchain tourism" and exploration toward the building of practical business applications.

The 2019 survey, conducted from February through March, revealed "signs of blockchain's increased maturity" in a variety of industries that have been exploring the technology.

"But not everyone is fully on board," the Deloitte report said. "Though a majority of respondents call blockchain a top-five priority, only 23% have already initiated a blockchain deployment – down from 34% [last year]. Attitudes about blockchain may be improving, but 43% still see blockchain as overhyped, up from 39% last year."

The dissonance could reflect a growing pragmatism, Deloitte noted, one that it also noted in last year's report. That dissonance and caution may reflect the technology's health as it evolves into a more grounded business solution, the consultancy said.

Meanwhile, research firm Gartner released its own supply chain technology survey  today showing supply chain leaders are failing to find suitable uses for blockchain. By 2023, 90% of blockchain-based supply chain initiatives will suffer "blockchain fatigue" due to a lack of strong use cases, according to Gartner.

Only 19% of survey respondents ranked blockchain as a very important technology for their business, and only 9% have invested in it. "This is mainly because supply chain blockchain projects are very limited and do not match the initial enthusiasm for the technology's application in supply chain management," Gartner said in its report.

"Supply chain blockchain projects have mostly focused on verifying authenticity, improving traceability and visibility, and improving transactional trust," said Alex Pradhan, senior principal research analyst at Gartner. "However, most have remained pilot projects due to a combination of technology immaturity, lack of standards, overly ambitious scope and a misunderstanding of how blockchain could, or should, actually help the supply chain. Inevitably, this is causing the market to experience blockchain fatigue."

As blockchain continues to develop in supply chains, Gartner recommended organizations remain cautious about early adoption until there is a clear distinction between hype and its core capabilities. "The emphasis should be on proof of concept, experimentation and limited-scope initiatives that deliver lessons, rather than high-cost, high-risk, strategic business value," Pradhan said.

Still, Starbucks sees value

Starbucks has not yet experienced blockchain fatigue. Gerri Martin-Flickinger, Starbucks CTO, said in a blog post that the company has a "world-class team of technologists engaging in groundbreaking innovation.. and this is increasingly critical to how technology has to show up for us."

Starbucks did not detail when the blockchain-based supply chain and mobile app would go live, but it did say it's currently interviewing coffee farmers in Costa Rica, Colombia and Rwanda, "learning more about their stories, their knowledge and their needs in order to determine how digital traceability can best benefit them.

"We're forging new ground here, so we're excited to report more in the coming months," Michelle Burns, Starbucks senior vice president of Global Coffee & Tea, said in the post. "While high-quality, handcrafted beverages are so important, it's the stories, the people, the connections, the humanity behind that coffee that inspires everything we do,.

"This kind of transparency offers customers the chance to see that the coffee they enjoy from us is the result of many people caring deeply."

Copyright © 2019 IDG Communications, Inc.

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