Arkansas Inc. Podcast - Blockchain and the Food Industry: a Conversation with Walmart and IBM

Blockchain technology is many things: powerful, innovative, disruptive, and multifaceted. However, for many, blockchain remains an unknown and unproven technology. In this episode of the Arkansas Inc. Podcast, host Jeff Moore speaks with Frank Yiannas, Vice-President of Food Safety at Walmart, Marie Weak, General Manager of Blockchain at IBM, and Jason Kelly, General Manager of Blockchain Services at IBM about the basics of blockchain, its many facets and how it will directly affect both the business and consumer experience of food as we know it.
 

Transcript

Introduction, What is Blockchain?

Jeff Moore:  Welcome to the Arkansas Inc. Podcast, where we discuss the latest topics and trends in economic development with subject matter experts and influencers from across the nation and around the world.

I'm your host Jeff Moore, Executive Vice-President of Marketing and Communications for the Arkansas Economic Development Commission. Today we're going to be talking to three business leaders about how blockchain technology is being used to improve food distribution, safety and transparency, and I am very excited to welcome our guests, all of whom are on the leading edge of blockchain. Today we have Frank Yiannas, Vice-President of Food Safety at Walmart, Marie Weak, General Manager of Blockchain at IBM, and Jason Kelly, General Manager of Blockchain Services at IBM.

Jeff Moore: Blockchain is one of those words we're hearing more and more of these days in both media and in business and yet, it's still a mysterious term to most of us, and it's been elevated in our collective vocabulary in recent years with all this attention around bitcoin, and we understand that bitcoin and blockchain are two different things, but I'd like to start from the beginning and make sure our listeners have a baseline understanding. So, I'll start with a simple question for you Marie. What exactly is blockchain?

Marie Weak: Well, as you said, it is the underpinning technology to bitcoin and other cryptocurrencies, but at the end of the day, our interest in it has been around its properties, which is essentially it's really just a shared database so that people can share information in a secure way because it's encrypted and in a distributed way, so there isn't a single point of failure and [we] can use it for the specific sharing of information against the smart contract and have everybody be able to see and agree and have some trust and transparency in what they're sharing, and because blockchain technologies have this one unique property around immutability, that means that you don't ever just erase it and replace, you append things. You have this wonderful opportunity to trace the provenance of goods and that, in particular, when it comes to the food supply chain or parts provenance or other trade use cases is a really interesting attribute that we have been exploiting in some of the work we're doing here.

IBM and Blockchain

Jeff Moore: That's great. So, with an understanding of blockchain, Jason, why did IBM decide to make blockchain part of its focus and its service offering?

Jason Kelly: Well, I'd be remiss, Jeff, if I didn't say it starts with our core values here at IBM, one of those being innovation that matters for us and our clients in the world, and I start with that because innovation for innovation's sake, and often this is where we go with new technologies, is hype and it's just out there. It's a sandwich looking for a picnic, and in this case, we know, based on what we just heard from Marie, the definition of blockchain is we see something different because there's innovation here that matters for our clients, because they look for the opportunity to have trusted transactions and that is based on data. As Marie mentioned, it's data, the properties now that we have with this new capability, you have the opportunity to have trusted data that's shared and distributed capability that says it's trusted. There's no single point of failure and it's the truth.

Jason Kelly: So, the fact that we can bring to our clients this capable innovation that gives them two things that's been illusive from the very beginning since data has been defined as the ultimate value in any type of transaction and in business as a whole. They couldn't have shared access because that data was often siloed, and that data, once they got to it, they weren't certain that it was true and so, now, with that trust and transparency, in an environment where those transactions bring value, so that now matters, such as with Food Trust, this is why we wanted to make sure we help lead this with industry first and with industry leaders such as Walmart.

The Future of Food

Jeff Moore: And just the word blockchain has a trendy sound to it, and I know often times, we become caught up in this desire to gravitate toward the next shiny object. I know Frank, you've written and I've read in certain places where you've referred to chasing technology and at often times, it's easy to chase after the technology. But in your words, I think where more technology should follow the business case and that should be based on a business case. So, Frank, in your leading the initiative to integrate blockchain into Walmart's food distribution system, I just wanted to dive in a bit to that and ask what lead Walmart to consider blockchain in the first place?

Frank Yiannas: That's a great set up Jeff, and I appreciate that because I really like to emphasize that with no uncertain terms, Walmart is not chasing blockchain technology or that new shiny coin, but we are always interested in trying to solve business challenges, and for us, as a pretty large retailer operating in dozens of countries around the world with hundreds of millions of customers every week, tens of thousands of food suppliers, a couple million associates, this issue of providing a more transparent and safer food system is something that we've always been working on, and this concept of food traceability, really knowing with certainty how foods get produced and how they flow from farm to stores is really important. So, we've worked on this for years. We've gotten pretty good at it, but we're always striving for continuous improvement. When we learned about this issue of blockchain technology and how it digitizes information differently, that we started imagining what if we used this view and emerging technology or digital protocol called blockchain to try to further strengthen and enhance food traceability that we started to become believers in it?

Frank Yiannas: And the reason being is while the food system today is fairly safe, when you think about consumers coming into an establishment and seeing tens of thousands of different foods available, fresh, seasonal, from all over the world and being able to buy them for a fraction of their hard earned dollar, but unfortunately, it does present some risk and occasionally there are foodborne outbreaks and food scares, and businesses in the U.S. and elsewhere, when we have to trace back a potential food scare to source, it's often very challenging. As you've seen this year with the romaine incident and that wasn't a one off, we've seen this in prior years as well and so, that's why we're interested in actually doing some proof of concept or tests to see could blockchain facilitate that and provide trace back in a more precise and confident manner and what we've learned over the past 18 months is that the answer is definitely yes.

A Simple Test

Jeff Moore: There's an amazing video out there. So, let me just preface this by saying I'm a big fan of the mango. So, I'm just going to come right out and say that.

Frank Yiannas: You respect the mango.

Jeff Moore: I respect the mango. I buy dried mangoes from Walmart; I buy fresh mangoes. I'm a mango fanatic, but the story and the YouTube video describes how you placed a pack of mangoes on the table in your staff meeting and you made a challenge for your folks. Tell me a little bit about that.

Frank Yiannas: We're interested in this blockchain technology. The reality is and I often emphasize this because I know there's going to be listeners today that are blockchain skeptics, and I can assure you that I was probably a bigger skeptic than anybody listening because I've been chasing this holy grail of food traceability for 30 years. That's how long I've been in the profession, and we can never do it with these centralized, siloed data systems and so, once we agreed with IBM that we would do these proof of concepts, I wanted a baseline. So, I took a package of sliced mangoes sold in a Walmart store, literally brought them in, unannounced to my team during one of my staff meetings. I placed it on the table, and I said, "The trace back study starts right now," and I looked at my watch and noted the date and time, and I said, "Tell me from the exact farms from which these mangoes came in this sliced mango package," and it took them…how long do you think it took them? It took them six days, 18 hours and 26 minutes to trace that back to source, and that's because the food system is pretty complicated.

Frank Yiannas: Mangoes get grown on small farms in Central and South America, from there they go to a packing house, from the packing house they have to get across the U.S. Customs border. Once in the United States, they go through another processor that washes the slices in the packaging, and then they get sent to our distribution centers and then eventually to our stores. So, there's many layers involved in how that food travels. It provides great benefits. You and I get the fresh mangoes almost year round. It's challenging, and the way you do trace back today Jeff, it's largely been on paper. It's called the one step up, one step back model food traceability, based on regulations, and to complicate that, most of those records, believe it or not, at the dawn of the 21st century are still kept on paper and so, you can see it will take a while to piece it back to source, and that's why in some of these health scares, it takes health officials weeks, literally, to actually trace back to source, if they can trace back to source at all. So, it took us almost seven days.

Frank Yiannas: We then started to work with IBM, our suppliers and their suppliers capturing information on the blockchain, and when we concluded over 30 days of capturing records, we had the courage, believe it or not, to do a live demo in front of a lot of media outlets at our Walmart's shareholders meeting, and we were able to scan a package of sliced mangoes and trace back to source, the farm specifically, with precision and accuracy in 2.2 seconds. That's seven days to 2.2 seconds, and that's what we refer to as food traceability at the speed of thought. Now, that matters because in the event that there's a food scare, being able to identify something like that quickly could prevent other illnesses, and in the event, you do what most prudent retailers do, like Walmart, where you just pull everything until the dust settles in, you know that's potentially seven days of unaffected product being wasted and destroying the livelihoods unnecessarily of farmers that are not implicated. In business, speed matters and accuracy matters.

Jeff Moore: You've been listening to the Arkansas Inc. Podcast. We're going to take a short break, then we'll be right back with Frank Yiannas, Marie Weak and Jason Kelly.

What’s Next?

Jeff Moore: Marie, you were one of the first to kind of move blockchain along from just digital currency ledgers to integrate secure platforms for these companies who are trying to streamline business workflows. So, most of us were familiar with terms like bitcoin and blockchain's application in this volatile world of cryptocurrency or what have you, but while we wait to see what happens there, why does blockchain make sense for the food industry in general? Obviously, it makes good sense for Walmart, and we've heard from Frank there. What's the potential to positively impact business and consumers?

Marie Weak: Well, I think that Frank did mention some of those attributes. Having traceability to the source is really important for a lot of different reasons, and the more insights you get along that journey, the more you can add value as well. So, as one interesting example, more organic food was sold in the United States than was actually produced, which means some of the folks out there who are paying extra to buy organic food are actually not getting organic food. What if you could have a mobile app that scans the source of your produce to determine that this really is organic or that it is sustainable? How do you extend the trust that we are building through this technology directly to the end consumer so they know where they're supporting local farms, whether they know if they're getting organic or sustainably grown produce? You know, those are value attributes that a lot of people really care about right now, but from a business perspective, there are even more benefits. 30% of food around the world is wasted, and that waste occurs all the way through the supply chain. The shelf life of fresh produce is altered dramatically based on how it is transported and how it is stored.

Marie Weak: So, you know, a freshly picked package of strawberries by shelf life, expiration would be 14 days. If they're really kept in a temperature controlled environment with a cold chain processing all the way through, that shelf life can actually be enhanced, but you also have the opportunity for better inventory management so that the oldest, picked produce is actually shipped out of a distribution center more directly. The inventory management ties back to the sourcing, and the supply chain through to purchasing gets reflected. All of those things that Frank mentioned, one up and one down, is the traditional model when you have an EDI, an electronic data interchange system today, which integrates a lot of supply chains, but it doesn't give everyone visibility so that we can spot these inconsistencies where dwell time is occurring in a distribution center, where temperature control needs to be enhanced in order to improve food quality and shelf life. How do you actually handle replenishment in a much more consistent way based on consumption? Those are all things that we now have visibility through all of the participants, not just the retailer and their purchasing team. So, folks can start optimizing through shared collaboration around that value chain to reduce the total waste, to improve the safety and quality of that food, and also to get it where it needs to go.

Jeff Moore: It's sort of this discussion, this continuous discussion, around traceability events. You and Frank have both alluded to Marie, and to you Jason, my question would be obviously, enterprise level businesses benefit from this, but how do smaller businesses within the supply chain benefit from this sort of technology?

Jason Kelly: Jeff, it's a great question, and I think calling out the smaller businesses calls out then even more so the importance of this trust. Any event, as Frank mentioned, you think about the food and food is always assumed guilty until proven innocent. So, with those smaller businesses, the impacts that we talk about, some 90 billion that we see globally for foodborne illnesses, as Marie mentioned, the third of the waste in U.S. alone, 30 billion dollars there. Fraudulent foods, another 15 billion. Those are huge numbers and you start to think about the small margins and the small businesses, it means it impacts them even more, and so, with the opportunity, having a capability such as this that's digital, that's a low burden on them to sign up if they have internet, they can be part of a blockchain capability, and they, too, can benefit in this ability to have transparency and what they have on their shelves and how they are impacted with any type of event that's been mentioned here. So, it's very important to them. The smaller the better in a sense, and more impact.

Jeff Moore: And Frank, as a follow up, is it important that all get on board to make it work in your case with Walmart?

Frank Yiannas: Yeah. Well, we rolled out an initiative just last week, Jeff, where we asked all of our fresh, leafy green suppliers to get on board on the blockchain solution within the next year with end to end traceability, and that will be a business requirement if suppliers want to do business with Walmart for now if they're fresh, leafy green suppliers, but if I take a step back and even took off my Walmart hat, it's desirable for as many actors and actresses in the food system to get on, but even if they don't get on, it will add value, shared value, because you think about these food scares and even if not all romaine growers are on but there's enough to be able to go back and pinpoint to source, that would be beneficial and so, there's value by getting the portion of the food system on the blockchain ecosystem, but the goal would be to try to get as many or all players on it.

Entrepreneurship in the Food Industry

Jeff Moore: There's a lot of talk around these parts and especially up where Frank is in Northwest Arkansas around supply chain and within the entrepreneurial ecosystem in Northwest Arkansas, which is kind of a thriving part of the business culture there. Recently, Start-up Junkie initiated an accelerator around supply chain and so, there seems to be some entrepreneurial activity, some start-up activity, within this disruptive form of technology. So, Marie, my question to you would be the larger economic effect on the food industry and especially how this opens the door to more entrepreneurs and start-ups to impact this technology and contribute to this technology.

Marie Weak: Well, we actually see that kind of across the board that once these core networks like the Food Trust Solution that we're working with Walmart and many other providers now, it becomes a platform for sharing data, and that naturally becomes an opportunity to leverage that data for some of those other value propositions that we talked about whether it's cold chain with internet of things sensing; whether it's inventory management; whether it's invoice factoring; whether it's trade finance. How you can connect all of these and provide more insights, more sustainability and more trust in the food supply chain, that's something that we see across the board.

Marie Weak: We're actually working with the University of Arkansas on making sure that the skills are available to help address blockchain in these new supply chain use cases, and we're supporting accelerators, not only through our IBM Academic Initiative for blockchain, which provides free access for education to people around the world, but to target those to key areas, whether it's on manufacturing, whether it's in financial services, whether it's in healthcare, to help take advantage of that because, what we see here is a rising tide raises all boats using this technology to help advance the capabilities in the food industry, helps everyone from the growers and the farmers all the way through the consumer, and we want to make that an open ecosystem where everyone can leverage the API's that we've provided on food trust and come with their own ideas and their own ways of extending that value.

Jeff Moore: And obviously for Arkansas, with so much of the state represented with the food industry of course, you know Walmart and Tyson, even JB Hunt from a logistics standpoint, all were present at the design thinking workshop back in June, and I think there will be trends within the development of the technology. Jason, do you see any particular trends coming to the fore at this point in terms of disruptive technologies within blockchain?

Jason Kelly: I think, Jeff, when you ask the question with regards to disruptive technologies, it in of itself is disruptive for the reasons I mentioned earlier with regards to having that shared access as well as access to data once you find it's credible, it's real. I think what's different, what's disruptive is what we've called out here with regards to development of ecosystems that are moving at a rate and pace to come together and collaborate faster than we've seen in any other type of technology. HTTP IP took 30 years to become mainstream. Blockchain is taking a third of that time, and we look at just the state of Arkansas, with our Senior State Exec Mariels Winhoffer, her leadership along with the governor, Governor Hutchinson, to have an entire state say, "We are going to sponsor blockchain for Arkansas." I don't remember anyone saying we are going to be Texas for the internet or you name the state, right? But this is blockchain for Arkansas, where you now have a private and public sector coming together in the ecosystem. You have the education. As you just mentioned with Marie, you have entrepreneurs all coming together around a capability, not so much the bright, shiny technology but the capability that the technology's bringing.

Jason Kelly: That, Jeff, is what's disruptive.

Blockchain and the User Experience

Jeff Moore: That's really exciting. The last question I think I have would be for Frank. So, Frank, when I'm shopping at Walmart in five years, how will blockchain change my experience?

Frank Yiannas: That's a great question because I firmly believe this is a transformational moment for the food system, and that in the future, I didn't grow up in this type of scenario, but in the future, when you go into a store, the food system will be more digital, more transparent, safer, smarter and more sustainable. What that means is if you want to know something about your food, you'll be able to scan, let's say a QR code and get more detail than what's on the package. If you want to know exactly where that product came from, you can know that with certainty. If you have questions about legitimacy of claims on package, you can verify them through a little bit of research. The food should be presumably fresher because, as you heard, a digital food system allows you to run even better supply chains and you can move from a first in, first out to a first expired first out. So, any day or time you take out a distribution, that's time you're giving back to the customer in way of fresher product. If there's a safety scare that you hear about on the news, you can scan the product and know whether it's involved in a recall or not or maybe even be notified.

Frank Yiannas: The changes that are going to happen in the next five years are nothing short of an amazing and transformational as the food system becomes more digital. It will be better for people, our customers no question, and it will be better for the planet.

Jeff Moore: Well, this is obviously an exciting time for the state of Arkansas, the nation and globally as this technology merges, and we're grateful for you guys and your time and sharing with us your experiences working together and then just individually and how you've worked within implementation of blockchain in your particular industries and so, again, today we've been talking to three leaders about blockchain technology, and more importantly, the ways that blockchain is improving food distribution safety and transparency. We've been speaking with Frank Yiannas, Vice-President of Food Safety at Walmart, with Marie Weak, General Manager of Blockchain at IBM and Jason Kelly, General Manager of Blockchain Services at IBM. It's great to talk to you guys again and so grateful for your time.

Marie Weak: Thanks very much.

Frank Yiannas: Enjoyed it, thanks Jeff.

Jeff Moore: This has been the Arkansas Ink Podcast. I'm your host Jeff Moore. To learn more, visit our website at Arkansasebc.com. Thank you for listening.