Supply chains have grown
increasingly more complex, and they are very much global. Think about your iPhone for example. It's designed in California, but components are sourced from suppliers in 43 different countries,
across six continents. These parts go through their
own manufacturing processes, which involve a number of different transactions
and interactions. It's incredibly hard just
to understand the origin of where raw materials are coming from. Even in the 21st century, large parts of today's supply chains still rely on paper based records and as products are shipped worldwide, the paper trail continues to grow. If you want to ship a container from Mombasa to Rotterdam, you end up with a pile of paper
that is 25 centimeters high. So imagine how many documents and papers are being moved around. With paper comes inefficiencies and digital technologies
could help overcome them. One of them, blockchain,
is floated as a solution that could do that
securely and efficiently. It offers a way to trace
a product's journey from grain to bottle or
from thread to shirt. Brands are now starting
to realize its potential with consumers willing to pay
a premium for transparency. This is Walmart's second
blockchain project, Target is also pushing into this space. The $50 trillion supply chain industry is moving to blockchain. If you are drinking a cup
of coffee this morning or tonight you're gonna
grab a bottle of beer, there's a very good chance that there is a smallholder farmer
in Ecuador or Zambia that is growing that
coffee or that barley. These are some of the
poorest people in the world, and they're completely invisible
in the global supply chain. Almost everything we buy has passed through a supply chain. These vast networks are responsible for transforming raw
materials into products and getting them into customer's hands. Yet for most of us, they remain hidden. The upstream parts of supply
chains are the most obscure and hardest to untangle. This is where the production begins, usually with a person that
gathers the raw ingredient, a miner, a fishermen or a farmer. There is no way you can trace
it back to a mama farmer and ensure that the mother got paid. Typically what happens - if
I am that smallholder farmer and I sell my coffee, cacao,
barley to the buying center - is, I might get a paper receipt, I might not get a paper receipt. Because it is all cash, I'm
never able to build a history that allows me to improve my
crop because nobody trusts me. From the brand's perspective, if you really want your supply chain to be traceable and transparent, you do need to know who the farmer is and blockchain can do that. Bitcoin started as an open source project in 2009. Blockchain was first used to power Bitcoin and it's often mentioned in the
context of cryptocurrencies. There is this proposition that the technology behind Bitcoin is gonna take off exponentially. It's important to keep in mind that blockchain is not Bitcoin. Bitcoin is an application
of blockchain technology. Just like the email is an
application of the internet. The term blockchain is used to refer to distributed ledger technology. Blockchain is a decentralized digital registry where every participant in the network holds an exact copy of it. In the case of the supply chain, it can keep track of
price or who owns what, but it can also include information about weight, geolocation, and quality among many other details. Companies using digital
databases can do the same, but blockchain is more
resistant to tampering because of the sheer number
of copies of the data. Every time there's additional input, a new time-stamped block of
data is created, encrypted, and linked chronologically in a chain. A copy of this block is then distributed to all the devices across the
network and can be accessed via an app, a QR code,
or even a text message. The decentralized nature of blockchain allows companies to reduce
their risks of data loss, corruption, data fraud. As essentially there isn't
an intermediary body, like a government or a
bank or a third party, that manages this data. Given that everybody has
the same information, it creates this general
level of trust amongst them that the information is true, it's validated and it's trustworthy. In the supply chain, blockchain acts like a digital
twin of a physical product, most often anchoring to its QR code, a barcode or an RFID tag, things that some industries
were already using to track their assets. So what happens is when data is tracked through the sensors and tags, it's automatically sent to a blockchain. This adds a level of
operational efficiency to supply chain operations, which saves a lot of costs for businesses. For a while now, businesses have been trying to use various digital technologies to optimize their supply chains, but blockchain offers an
added level of security. With standard technologies, if you digitize a trade document, you can very easily copy it. Bill of Lading is actually a document that shows that you're
the owner of the goods. So it's a very, very important document in international trade. And there have been attempts
to digitize Bills of Lading for decades now but the
adoption rate remains very low. There were some massive
fraud scandals in Asia because an electronic Bill of Lading was used twice for financing. With blockchain, you have
the guarantee that there is, what is called, no double spending. That this Bill of Lading cannot be used twice for financing because it proves the authenticity
of the trade document. So for all of these reasons, blockchain has generated a lot of interest for supply chain management
and international trade. It's really hard to say whether blockchain has moved beyond the hype completely. You know, right now the sort
of stage of the projects that we're seeing are
mainly at pilot stages. But what I will say is
that I think blockchain is being recognized as a really important technology for supply chains. Blockchain is being used by
a number of big companies, big retailers, big shipping companies. The fashion industry is using blockchain, especially luxury brands
or really fashion brands who want to make sure that the products that are being sold are not counterfeit. And now I scan, click. And the magic happens. Authenticated. Often when the adoption
of blockchain is led by a large company, like a
retailer or a distributor, they have an incentive to
really encourage small suppliers within their supply chain
to also get on the bandwagon and adopt blockchain technology as well. Increasingly blockchain providers are consortiums and large tech companies who are integrating blockchain
into their existing tools for supply chain management, but there's also a
large number of startups offering custom solutions. One of them is BanQu. It has over two million farmers and informal waste pickers
across 51 countries registered on its blockchain platform. Where we operate, like
Zambia, Uganda, Sudan, the farmers have a cell
phone that works via SMS, not a smartphone. We don't need an internet
connection for the mama farmer. As long as you have a SIM card that's connected, which is geolocated, it's just picking up the location from farmer to co-op to truck driver, truck driver to a weighbridge, weighbridge to the final destination. One of BanQu's clients, an international brewer AB InBev, has just started tracking the barley that ends up in beer of
their Ecuadorian subsidiary. Their buying centers
are in remote locations in the highlands where farmers
like Milta Andrango live. This area has the highest
poverty levels in the country and the company hopes
blockchain can change that. The brewer was already using
devices to measure the weight and moisture of barley to
determine its quality and price. BanQu doesn't need any
additional technology, it just taps into these devices. The app on the buyer's
smartphone gathers this data via Bluetooth and only a low
grade internet connection is needed to send it to the cloud where it gets added to blockchain. The smallholder farmer, mama
farmer or father farmer, when they come to sell their harvest, they get an SMS message
on their SMS phones that confirms what was the quality, what was the quantity
and what was the price. That digital receipt on their
SMS phone starts building that transparency. You're not getting rid of middleman. You need middlemen. But you can reduce
corruption dramatically. BanQu doesn't use the cryptocurrency feature of blockchain and it doesn't handle payments. It just provides farmers
with a secure code that allows them to cash
out, save money for later or transfer the sum to their
bank account if they have one. We primarily work in
the developing countries because that's where the
biggest disparity is, right? That's where the biggest abuse is. That's where the biggest
supply chains are, right? I mean, you know, Africa
feeds the world, right? And you know, Asia makes your garments. At the end of the day,
the smallholder farmer has never been given
the economic passport. This economic passport provides crucial evidence of sales needed by farmers to open up opportunities to borrow money at low interest rates. This can then be used to
expand their business. If you want to break the cycle of poverty, just believe and use this information because that's what
banks normally do, right? If you needed a loan, you walk
in with your work history, your light bill and your education, and that's all we're doing. Because all the data is on blockchain, the farmer owns it and if you don't trust me,
call the CEO of AB InBev and he has the same
copy of my transaction. Another widely adopted feature of blockchain is smart contracts. It's really a misnomer. Actually smart contracts are not smart. There's no AI component to them. And there are not necessarily
contracts in the legal sense. They are computer
programs that self-execute when certain conditions are met. For example, when a
truck crosses the border, payment is made or when the price reaches a certain level, then an indemnity is being paid. So the smart contracts
can actually be used to make any type of transaction. Using parameters that have been gathered, smart contracts can also help
to automatically determine a price, safeguarding
smallholder producers. This is actually validating
the quality of the crops. So when you put in a
parameter, the system says, "Hey, this is out of range" or "This is in range and
this is the fair price that you should get." So you can't game the system. We can see the origin of
where a product has come from, but we can also track its chain of custody throughout the supply chain and we can see how it's transformed to become the end product for the consumer and I think that's really impactful, not just from a perspective
of understanding costs and materials but actually there's the
environmental factors. Blockchain could help to track Scope 3 emissions which are the greenhouse gases produced along the supply chain. These account for about 90%
of a company's emissions. But despite its potential
to increase transparency and reduce corruption,
exploitation and emissions, blockchain is not a silver bullet. From a customer's perspective, just because we can trace
the provenance on blockchain doesn't mean we get the full story. We still know only as much as the company decides to disclose. Blockchain is only as
good as the information that is added to the blockchain. There's the famous sentence,
garbage in garbage out. And so having verification
systems outside of the blockchain to ensure that the data that
is entered onto the blockchain is of good quality is critical,
but this can be complex. It can be expensive. Even though blockchain is not the only way to prove
the origin or authenticity, there's increased interest by
brands in using a technology that can help to build consumer trust, something that's increasingly important. A study by IBM showed that over 70% of people who find
traceability very important are willing to pay a premium
to companies offering it. I think blockchain is being
driven mainly by consumers and consumer demand for transparency. That's one of the big driving factors of blockchain right now. And so unless there's that incentive to really provide proof that products within that supply chain
have been ethically sourced, sustainably produced, then
I don't think companies are really pushing to use blockchain. The existing systems that
they have can do the job. And while this shift in our supply chains may happen slowly, it could
ultimately be lower costs rather than increased transparency that will steer the
industries towards blockchain. And this could have an impact upstream. Farmers through this SMS message now have a different
experience when they're sitting with a bank, when they're
sitting with the seed company, because they're not looked at as a number with a piece of paper that crumbles. And the best example is, you know, you see this mama farmer who all her children are in school today. They have running water
in their house, right? All we have done is restored that mother's ability
to prove her existence. All we did was make the connection. She does all the work. We're just the tool.
