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Sekuloska, J.D.;  Erceg, A. Blockchain Technology in Local Food Supply Chain. Encyclopedia. Available online: https://encyclopedia.pub/entry/24249 (accessed on 18 May 2024).
Sekuloska JD,  Erceg A. Blockchain Technology in Local Food Supply Chain. Encyclopedia. Available at: https://encyclopedia.pub/entry/24249. Accessed May 18, 2024.
Sekuloska, Jovanka Damoska, Aleksandar Erceg. "Blockchain Technology in Local Food Supply Chain" Encyclopedia, https://encyclopedia.pub/entry/24249 (accessed May 18, 2024).
Sekuloska, J.D., & Erceg, A. (2022, June 21). Blockchain Technology in Local Food Supply Chain. In Encyclopedia. https://encyclopedia.pub/entry/24249
Sekuloska, Jovanka Damoska and Aleksandar Erceg. "Blockchain Technology in Local Food Supply Chain." Encyclopedia. Web. 21 June, 2022.
Blockchain Technology in Local Food Supply Chain
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This entry is adapted from the peer-reviewed paper 10.3390/computers11060095

Blockchain is a promising technology for a transparent supply chain of food. However, many barriers and challenges still exist that hinder its wider popularity among farmers and food supply systems. The blockchain technology will show if and how governmental and private efforts could address these challenges to establish blockchain technology as a secure, reliable, and transparent way to ensure food safety and integrity.

supply chain management blockchain local food supply chain

1. Blockchain and Supply Chain Management

The supply value chains are dominant business models in today’s global economy. The supply chains enable companies to increase competitiveness and efficiency by distributing the activities in the most efficient location. The supply chain management (SCM) is an integrated system consisting of interrelated subsystems, processes, and activities that continuously should be improved to bring significant enhancement to all parties engaged [1] (p. 158). Its complex process involves several commercial and financial transactions employing many entities, shareholders, information, and documents. Research conducted by Reference [2] showed that companies will need to create a strategy for supply chain digitalization and will need to access new technologies. One of those technologies is a blockchain, for which half of the respondents stated that it has significant importance for further development and digitalization of the company’s supply chains. Therefore, SCM is seen as a potentially significant area of blockchain application [3][4]. Big multinational companies such as IBM and Maersk started a joint venture for blockchain commercialization in global trade activities [5]. Although recently, focuses are about the blockchain [6][7][8][9], blockchain application in SCM initially attracted only minor research interest [10]. This has changed in recent years, and one can find an increasing numbers about blockchain implantation in supply chain management [11][12][13]. Still, the research on blockchain implementation in SCM are scarce [14][15]. There are some about the risk of blockchain use in SCM [16] and the financial contribution of blockchain [17][18][19][20]. However, it [21] was stated that there is an increased number about blockchain in SCM.
Further research [22] focused on the data integration in  supply chain (SC) with blockchain technology and [23] made the first one about blockchain technology’s potential application in SCM*. On the other side, it [3][24] used logistics professionals’ expert to explore blockchain technology’s potential uses and possibilities in SCM. Furthermore [3] created application clusters of blockchain technology in SCM and logistics from available best practice examples. Finally, [25] concluded that there is no complete viewpoint on using blockchain technology in SCM.
Implementing blockchain technology in SCM will most likely disrupt all industry sectors. Another research [26] presented the relationship between SCM and blockchain technology through the sales process between two companies (producer and supermarket is presented. They presented the sales process between company A (producer) and company B (supermarket). After the sales process is concluded, a contract is recorded, coded, and saved into a blockchain structure. The contract is initiated after the conditions of negotiations are satisfied. Next is transferring the money and goods following the contract. It is essential to state that these activities do not rely on an intermediate. Thus, it speeds up the transaction, promotes cost reduction, and improves trust within the network [26], and all participants in the process have a copy of the ledger [27][28].
Since every network member can access the same data, it fulfills one of the significant blockchain promises—transparency—and provides a single point of truth [29]. Transparency in the supply chain is the most significant thing, but it is the most challenging area for improvement in SCM and logistics [30]. Logistics professionals think that blockchain technology has enormous potential for SCM and logistics [31]. It represents a needed platform for economic revitalization [32], which will change the current supply chains and disrupt how goods were produced, marketed, purchased, and consumed our goods [33]. Looking at all of the previous studied implementations, blockchain technology can be the holy grail [34] for logistics and SCM.
Nevertheless, as is often the case with new technologies, the push for blockchain is propelled mainly by journalists, consultants, and technology providers [24] since the logistics operators state that they do not have enough knowledge about blockchain [35]. Another research [25] recognized possible blockchain use in logistics based on innovation theory and innovation framework-related characteristics [36], including complexity, compatibility, relative advantage, observability, and trialability. The use of blockchain applications will be in various transformation phases and will need various degrees of consensus and collaboration and regulatory and legislative endeavors [37]. The framework for adaptation can help in blockchain-usage scenarios in SCM based on their originality and organizational effort [38]. Based on that, four blockchain application transformation stages can be talked about: (i) single-use, (ii) localization, (iii) substitution, and (iv) transformation. Based on the potential of the use of blockchain in SCM, there are several potential advantages and disadvantages of blockchain technology in SCM (Figure 1).
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Figure 1. Advantages and disadvantages of using blockchain for supply chain [38].
The advantages of the blockchain technology used in SCM offer improvement in the current SCM, but at the same time, it creates new ways for how companies deal with their partners in supply chains and how they produce, sell, and deliver products. Additional benefits can be seen in cost reduction since shipment tracking and document management can be stored in a decentralized way, and the information is administered promptly and available in a timely way [35][39][40].
One of the case exemplars of blockchain use in SCM is the food supply chain, where blockchain can increase transparency and help traceability. There are significant benefits of blockchain [24], but a bit less likeness of the adoption of blockchain technology for facilitating origin track, since all the activities through which products have gone are detectable from the production stage to packing and distribution [41].
The blockchain technology potential in the supply chain is confirmed by the top use cases for the blockchain technology survey in 2021 [42], in which supply chain activities have a market share of 10.7%. With the growth of awareness about the opportunities of blockchain technology, the supply chain market is projected to witness innovative and advanced transformation, which enables all participants to obtain access to everything they need on one platform. In 2017, the value of the global blockchain supply chain market was estimated at 93.16 million USD and was forecasted to grow to 9852.91 million USD by 2025. CAGR is expected to grow to 80.2% in the same period [43]. Blockchain applications in SCM practice are gaining momentum, and there are several good practice cases: (i) IBM and Maersk started blockchain joint solution TradeLens for exchanging information and recording effectively transactions [44]; (ii) Kuehne+Nagel started blockchain portal VGM for finishing verified gross weight statements [45]; (iii) Agility created a blockchain solution for tracking and managing container transports [46] (iv) Transport Alliance, the leading body for applying blockchain technology in transport, has now more than 60 members with more than 300 blockchain application [47]. These examples show that if blockchain technology is successful in the SCM, it will need to gain industry adoption [48]. One of the exemplars of blockchain technology is facilitating origin tracking, leading to deploy blockchain technology in food supply chain management. This can be achieved by several advantages of blockchain-technology use—transparency, security, and customer satisfaction.

2. Deployment of the Blockchain in the Food Supply Chain Management (FSCM)

Different researches concluded that problems in the food supply chain, including information asymmetry, poor FSCM, inefficient traceability in the food supply chain, and information fraud, can be solved by using blockchain technology [49]. Current technology still did not find the solution for solving these issues. Such is the self-interest of involved participants and asymmetric information distribution [50]. Supply chain traceability and transparency are accessible to companies and end-users in the supply chain. Enhanced transparency can improve competitive advantage through cost reduction and performance [51]. Blockchain technology represents an encouraging solution for improving the company’s FSCM. Traceability is usually associated with the security and quality of products, especially in the food supply chain [52][53][54]. Blockchain technology can be very beneficial for enhancing the supply and security of food since it guarantees transparency to the final customer along the whole food supply chain [55][56][57][58]. It can be used for cost reduction compared with traditional systems [59]. Additionally, the delays in warehousing and transport in FSCM can be reduced [60], and RFID can increase the value with its identification possibilities [61].
All current focuses [62][63] on implementing blockchain technology in FSCM relate to ensuring food safety and providing a system to manage risks and privacy issues. They found challenges in implementing blockchain technology in the supply chain regarding privacy protection. Since more and more data are stored on the blockchain, a rising concern from the organization and individuals is a potential privacy leakage [64], which should be addressed.
A blockchain-technology-based supply chain traceability system with RFID was proposed for identifying, tracking, and monitoring the entire supply chain through a transparent and traceable platform available for all system members [65]. A similar system based on blockchain was proposed to ensure food products’ provenance and guarantee their traceability [66]. This system used the Ethereum platform to create an agri-food supply chain, using smart contracts to ensure the authenticity of Sardinian products. Another [67] examined storing the relevant data potential of the blockchain technology for food identification. This research emphasized the characteristics of blockchain technology for food-traceability objectives [68], which include quality assurance, proper SCM, and non-compliant product identification. Blockchain technology and smart contracts are excellent tools for supply-chain risk management and improving the system’s resistance to confronting cybercrime [16]. Another research investigated scalability and proposed ProductChain, a generic food-supply-chain framework [69]. 
Below the documents and goods’ physical-flow documents, there is a digital flow that consists of different digital technologies (i.e., RFID, sensors, digital signatures, QR codes and so on). The whole process is connected through the Internet. Every activity completed in the food supply chain that uses stated digital technologies is documented in the blockchain. The blockchain serves as an unchangeable way of storing information acknowledged by all parties involved in the transaction. The information obtained during every transaction is proven by food-supply-chain business partners and establishes a consensus between all parties. After the validation of each block is finished, the block is added to the transaction chain as a permanent part of the whole process.
In practice, several surveys have shown the potential of blockchain application in FSCM. The potential of blockchain technology used in the food and agriculture market global market value should grow from $32.2 million in 2017 to $1.4 billion by 2028. Between 2018 and 2028, blockchain in the agriculture and food market in Europe is projected to grow 42.85% annually, by 40.42% in North America, by 7.85% in Asia-Pacific, and by 48.33% in the rest of the world [70]. After testing blockchain technology in FSCM, 12 of the worldwide biggest companies started their projects to redesign how food is traced around the world by using blockchain technology [39][71]. Walmart, Nestle, and IBM are among those companies. The new US Food Safety Modernization Act requires companies to increase traceability possibilities to “one back, one up”. The current way of handling this process is challenging and takes time. With integrated blockchain technology, the information needed would be found in minutes, not days or weeks. Some of the other current tests of blockchain technology in FSCM include Walmart and Hyperleadger Fabric for tracing the origins of mangos and pork [72]; IBM Trustchain tracks tomatoes from farm to table [73]; and SAP and Bumble Bee Food are documenting Indonesian tuna-fish products with the help of blockchain [74]. Although the previous examples focus on product traceability, companies want to influence third parties to provide more information and value to the ecosystem (i.e., food safety issues, food fraud, and food waste) [71].
The abovementioned examples reveal the increased attention of food manufacturers to the reliable products’ documentation blockchain. Besides the food manufacturing companies, examples show that large IT companies have also shown interest in blockchain technology for FSCM. Previous food scandals influenced food producers to generate a competitive advantage by securing trustworthy origin proof [75]. That leads to the point that implementing blockchain in FSCM can increase the confidence of consumers [72]. Thus, leaders in the industry should look at blockchain technology in FSCM as a prospect, and it should be included in the digitalization strategy presently influencing the whole food industry [56].

3. Blockchain Model of Food Supply Chain Management (FSCM)

According to the World Economic Forum, blockchain is a shared, programmable, cryptographically secure, and therefore trusted ledger that no single user controls and can be inspected by anyone [76]. The food supply chain (FSC) encompasses many participants, including producers (farmers), processors, manufacturers, certifying agencies, government agencies, intermediaries, government agencies, logistics, distributors, retailers, and customers. Any of these members of the FSC generate and disseminate information and record the product or transaction that they create. The implementation of blockchain technology is disrupting the ways of managing and operating such a comprehensive system such as FSC. Through the blockchain-based recordkeeping model, all participants of the FSC may access all products and transactions. It provides a secure environment where the data cannot be modified once entered and verified [77]. Thus, the information regarding manufacturing processes, the origin of raw materials, implemented standards, and delivery terms are available and can be verified by the shareholders of the FSC. The blockchain works as a shared book of records in which any participant can access the product’s provenance. For example, all participants in the supply chain of cheese can view the production and logistics processes the final product has been passing from the farm to the consumer plate. Blockchain technology enables the untrusted parties to reach a consensus on a common digital history. A typical digital history is important because digital assets and transactions can be easily faked [78]. Blockchain-based FSC creates traceable and irrevocable records of all transactions in real-time, providing ultimate visibility to all members along the supply chain. The blockchain-based model of FSC can be analyzed in three layers (Figure 2):
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Figure 2. Three-layer model of blockchain-based FSC (source: contributors).
  • Business model layer;
  • Platform layer;
  • Application layer.
The business model layer summarizes the main elements of the FSC ecosystem. It represents participants, goods, supply-side lead time, customer order time, inventory management, and stock-out [79]. Participants consist of all stakeholders involved in producing, enabling, supporting, inspecting, and making reliable the flow of the goods to the table. Food is a specific type of good that often gets worse in value and quality over time. The variety of food products is broad, ranging from those with a very short supply chain to those that have to pass through several processing steps before eating. The lead time is an essential part of the FSC business model layer, which varies significantly on the food type. Governing the lead time can diminish the uncertainty in the supply and demand of food products. A crucial element for reaching higher efficiency and irrevocability of the business model layer is to locate the responsibility of any participant of the FSC. In such a complex environment, it is challenging to determine who has processed what type of data and where and when the transaction and processes are happening. Thus, the application of blockchain technology can contribute to the management and governance of FSC as a comprehensive system to be shifted to an upper level.
The platform layer provides a technological framework consisting of the blockchain platform. Since the blockchain is a shared, distributed, and immutable transaction ledger [80], the platform layer represents the blockchain transaction mechanism, leading to the transaction transformation. Any transaction forms a block as it appears. A transaction block contains context information such as the source, date, and time, ensuring transparency, traceability, and immutability. All the nodes or computers distributed around the blockchain network verify any block. Each node maintains a copy of any block, resulting in a unique history that is impossible to be modified. The blocks are linked in a string of chains, wherein any block is linked to another block by a hash of data of the previous block. So, the hash conveys the information from the previous block, proving that information or documents have not been altered over time and that the documents have owned someone in a certain period [81][82]. For example, suppose that there is a dispute about the amount of ordered and delivered goods in a transaction. In that case, dispute resolution could be reached by validating the original document in the previous block with the next block’s hash. Any transaction feature ranging from documents, photos, signatures, time, or location data is hashed and written to the blockchain [76].
The application layer provides additional functionalities not available at the platform layer. The most practical applications used in the FSC are smart contracts and IoT. Smart contracts provide additional value to the blockchain-based FSC. They are computer programs holding the terms of a contractual arrangement and implementing the agreement, while ensuring trust, transparency, and understanding between parties [81]. Smart contracts are embedded in the blockchain, and they ensure the automation of many transactions without the involvement of any intermediary. They are intentionally helpful in solving the inter-parties’ lack of trust activities, such as logistic activities and financial transactions in the FSC. The IoT consists of embedded sensors and communication capabilities to a physical object, providing an opportunity for monitoring, communicating, and tracking the condition or status of the food. The stock’s conditions and locations could be directly registered on the blockchain [83]. These transactions could be sent and recorded automatically on the blockchain. For example, once the stock packages are loaded, the smart devices register the transaction on the ledger, communicating the information to the buyer to fulfill the financial obligation or customs clearance activities. In the other case, the smart devices can evaluate the sanitary condition of the food by communicating with the sanitary officials to inspect.
The multitier nature of the FSC, engaging various stakeholders, is challenging for improvement of the chain governance regarding the unfair trading practices, trustiness, cooperation, and transparency. The proposed model for blockchain-based FSC represents a valuable general framework for adopting blockchain technology for any food.

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Jovanka Damoska Sekuloska
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