Around the time of the first industrial revolution Molly, of Molly’s Flour, stopped selling flour direct to the people in her village.
She wanted to sell to more people than would stop by the back of her farm kitchen, so she packaged her flour up, and sent it around the county in tins by train.
And just like that we saw the first industrial trust problem emerge.
Up until that point, everyone in the village knew Molly personally, so they could be confident her flour was good, pure and untainted.
Now it was going Yorkshire-wide, in tins with an engraving of a windmill and sitting on a shelf in a Manchester grocery store. But would the grocers tamper with it and mix it with cheaper substitutes like sawdust and talcum powder? Such actions bedevilled Victorian products and tinctures.
Molly would visit the stores, talk to the storekeepers and check they were good people so she could trust them not to tamper with her flour. After all, it was her name on the tins.
As Molly’s brand grew its label became more and more of an asset, and the need to protect it grew stronger.
Roll on 200 years to the year 2013 and a new problem emerged. It’s called the multiagency problem and it represents taking trust beyond the industrial level. It looks like this.
The largest U.K. supermarket sells millions of tonnes of burgers and lasagna ready meals every year. This creates a need for cheap minced beef. Meanwhile, the horse racing industry has lots of surplus meat in the form of horses that are bred and don’t make racing grade performance. They’re filled with antibiotics and steroids and they cost some money to dispose of.
By creating enough layers between different agents who don’t know each other very well, it’s possible to convert the dead racehorses into prime beef, or at least that’s what the labels were saying.
So millions of tonnes of horse meat gets reassigned as millions of tonnes of beef. It’s food fraud on an industrial scale.
The problem only comes to light when someone thinks to do some DNA testing and they discover that there’s 100% pure horsemeat in the supermarket’s lasagne.
Now you might imagine that it would be easier for the supermarket to guarantee against food fraud than Molly two hundred years earlier; after all there are so many more bits of paperwork that would need alteration in the modern story.
There are food standard agencies and European directives. There are certificates and inspectors doing unannounced factory visits. And yet none of these were able to protect the consumer, or other players higher up the chain.
Most of all you might imagine that the supermarket in question, Tesco, wouldn’t want to risk its brand for meat of dubious provenance. After all, the brand was worth billions globally.
And yet that wasn’t the case. Nor was it the case for almost every other supermarket chain caught up in the scandal.
While it’s true that Tesco did lose £300 million as a result of the scandal, this represented a relatively small hit compared to the total brand value.
A New Era Of Brandless Trust
It’s not difficult to see why we’re heading towards brandless trust.
If you think about a supply chain that’s obsessed with finding a more efficient way of doing things, you see why we have a system that’s always adding more agencies in between the beginning and the end points. And why there’s a decreasing visibility of what’s really going on.
Where Molly was a single agency brand, her modern counterparts would be adding agencies everywhere to make things work cheaper, better and faster.
If you can turn one link of the chain into two sub-links and bring an economy in here or there, you’ve ‘improved’ the system.
Sure, you’ve opened it up to a greater risk of fraud, but that will be someone else’s problem, higher up the chain.
What we’re witnessing isn’t an accident of occasional fraud, it’s an unavoidable consequence of our desire for cheaper, better and faster.
The consumer realised that Tesco wasn’t alone. Aldi, Findus, Sainsbury’s, Waitrose were all using the same supplier implicated in the scandal. But if they hadn’t been using that supplier, the other suppliers were implicated too. It was an industry-wide problem, so why pick on Tesco as the bad guys?
Not everyone was caught with horse meat on their shelves but none of them could really say they had dodged the scandal.
Maximum Efficiency, Minimum Visibility
It’s as though our modern ethos and logistics have brought us to a point of zero visibility.
But beyond the burger, lasagne and minced beef, the same forces are at work.
Last week it was discovered that there were 66 million bottles of wine fraudulently based on Rhone wine with 1.3 million bottles claiming to be the famous Chateau Neuf du Pape label. The £70 million scam has, not surprisingly, resulted in arrests.
What about when it comes to building products? There’s plenty of supply chain fraud issues, only more dangerous. For instance, concrete buildings that fall down when the steel reinforcement bars get concrete cancer, because someone switched the aggregate for a cheaper variety to make it.
But just as this problem reaches its high point, just as optimization has created near zero visibility in every chain we buy from, we have a technological solution emerging which is going to move the story on. And yes, it’s all about the blockchain.
What if you can’t check the DNA of some product? After all, a concrete slab doesn’t have DNA we can look at, so how could you check its credentials? And besides, DNA testing is expensive so you don’t always want to make it part of the process.
The idea behind blockchain is that you create a digital record that’s inseparably connected to the product you’ve got going through the chain.
That digital record is tied to the real world product and because it uses cryptography, it’s inviolable. Also known as DLT, or distributed ledger technology, it’s some of the technology that helps Bitcoin work.
Perhaps the easiest way to think about it is like a digital version of the packing notes that accompanies a consignment of goods, only more reliable.
Those packing notes used to be printed on paper, and those could be modified in a nefarious way. Someone today can still turn up at a warehouse with a fake set of documentation, a large truck and steal a ton of product. When the real truck turns up they have nothing to load up.
Even the computer records that generate the printed documents can be modified, which is how many forms of supply chain frauds happen today.
But with blockchain records, you can’t change anything without it showing up as changed or corrupted, and that is extremely useful. The sheer cryptographic strength of each record means that any attempt to change a record will result in a flag coming up as a hacking attempt.
So much for the packing notes being in order, but how do you link them to that particular consignment? What stops someone switching the produce with something else under the same packing note?
What can you do for deliveries of say, olive oil? How do you link a consignment of virgin pressed olive oil to packing documents declaring it to be from Italy and protect it from getting switched with a cheaper consignment from Greece, pretending to be from Italy?
This is a problem that’s been preoccupying Emma Weston at AgriDigital and the solution is elegant, and somewhat internet of things.
In the AgriDigital conception of a blockchain record, the lorry that has the correct Italian olive oil consignment has a GPS tracker which logs its journey and the vehicle identity.
As the oil is tipping out into the next stage, the lorry uploads the journey it took to get to the warehouse or depot.
“If someone were trying to switch it with the lorry that came from Greece, a different route would be uploaded into the system, and that generates a flag on the system. Because part of the smart contract requires the lorry to have come from Italy and not Greece according to its GPS tracker, a fault in the provenance would automatically stop the smart contract completing.”
“Of course you have to allow for lorries taking a different route sometimes, because of a motorway closure, but that requires some human intervention, and we’re authenticating the human part of the equation too,” says Weston.
AgriDigital sees a time when there is zero fraud in any agricultural supply chain. And you don’t need a brand to guarantee the quality, only a set of processes or places or that an internet of things device will vouch for. The system is testing at the moment.
In effect rather than Molly going around the country to check what’s going on, the blockchain way is to use the internet enabled devices to do the same thing, all the time writing their learnings on an immutable ledger.
For anyone who wants to know that their oil is Italian and their lasagne isn’t made with horse meat, the blockchain era can’t come soon enough.
Dr. Jemma Green is the Chair & Co-founder of PowerLedger.io and a researcher and speaker on the enterprise disruption caused by blockchain technology. Disclosure: I own Bitcoin and POWR.