Blockchain, NFTs and the future of the perishables supply chain

By Alex Swart

Is there a use case for NFTs in our global supply chain, or are they a passing fad with limited applicability outside the digital art world?

As the global perishable food market grew to approximately USD 152.24 billion by the end of 2022, and continues to grow at a compound annual growth rate of 9.5% per annum, perishable supply chain leaders are expected to accommodate these remarkable growth rates in almost every capacity. With this incredible expansion across the industry, there are a host of issues that are ever-present for technology companies, logistics providers and operators in their respective fields. The food industry is known for being notoriously slow to adopt new technological solutions and usually opts for simple implementations that do not disrupt daily operations. In turn, it will be interesting to see which emerging technologies this industry chooses to adopt in the future.

With commodity traceability, freshness and quality inspections, freight forwarding, shipping and logistics important to supply chain managers, questions in the industry continue to arise. How are we going to reduce food waste when nearly 40% of America’s food supply goes to waste each year? Can consumers be more informed about their products and trace their food back to its point of origin in the event of a foodborne illness outbreak? How do we continue to reduce shipping and lead times across distribution channels? Or even, what steps can we take to mitigate the effects of a supply chain disruption like the Suez Canal in 2021?

Clearly, there is a lot to consider as operators are forced to choose between a number of technology providers catering to this industry. As such, buyers, suppliers, growers and shippers must understand what technology is built to last and can positively impact their business practices, and what is a passing fad or a solution that may be half-baked and confused by industry jargon or hype .

Market research estimates that the global perishable food market will reach $218.89 billion by the end of 2026. That doesn’t even take into account growth rates across non-perishable, hard goods or CPG industries. How can supply chains build resilience through new technologies to account for these changes?

Some of the more tech-savvy retailers, suppliers and operators have already adopted AI-based tools to facilitate end-to-end visibility into their network and aid in more informed real-time decision-making. The implementation of AI machine learning models combined with data visualization tools can be used to predict when and where a difference in a supply chain might occur, how to optimize shipping routes, or even how to better match trading partners, among other use cases. A recent study by McKinsey shows how many AI-driven implications exist across verticals such as marketing, sales, procurement, planning, logistics and distribution, and even manufacturing.

Market research estimates that the global perishable food market will reach $218.89 billion by the end of 2026. That doesn’t even take into account growth rates across non-perishable, hard goods or CPG industries.

Another future-oriented technology that many operators and leaders in the industry have considered is blockchain. In basic terms, a blockchain is a digital database or ledger that is distributed between nodes on a peer-to-peer powered network, also known as a distributed ledger. This decentralized network creates a ledger that is ideal for recording transactions from multiple sources in a way that is both certifiable and immutable once it is on chain. Most people probably understand blockchain as the underlying technology on which cryptocurrencies such as Bitcoin and Ethereum are built.

Just a few years ago, blockchain was a buzzword in the supply chain industry, as many technology vendors touted underdeveloped solutions, trying to establish a kind of first mover advantage as the architect of blockchain tools. Now that much of the initial hype has died down, the industry is actually starting to see some of the practical applications of blockchain in supply chains. Technological players such as IBM, Microsoft and SAP, as well as innovative startups, have already begun to incorporate these features into new blockchain products. Financial and inventory-based transactions between retailers, suppliers and distributors can be recorded on the chain, which has huge implications for increasing transparency and visibility for all parties. Shipment execution errors can be logged in real-time so that retrospective analysis can be performed and necessary operational changes can be made going forward. In addition, traceability of goods via RFID tags and scanners can help shoppers trace foodborne illnesses back to their points of origin, down to the exact pallet.

While the initial adoption of blockchain technologies across various industries was slow and fragmented, the recent rise of technological solutions incorporating blockchain has been promising. By 2029, the blockchain industry is estimated to be worth $163.83 billion, with a staggering CAGR of 56.3%.

There are obviously countless uses for blockchain within the supply chain space, so the question then becomes, “Well, what about NFTs?” When most people hear NFT, they probably think of a JPEG of a monkey they’ve seen on Twitter, or some other piece of digital art that enthusiasts claim are investments. These are just early and well-known use cases of NFTs. The acronym NFT stands for non-fungible token, which is a unique digital identifier that cannot be replicated, exchanged or changed as it is recorded on the blockchain. It’s easy to think of an NFT as a kind of digital receipt used to confirm authenticity and ownership.

While much of the current use of NFTs is still popular in the digital art and asset world, many tech-forward industries have already adopted NFT use cases. The gaming industry uses NFT technology to facilitate the transfer and ownership of in-game collectibles. The healthcare system has adopted NFT use to help with the maintenance of patient records. Even the IP and patent landscape is being changed by NFTs by indicating which trademarks can be attributed to a given entity, all backed by a smart contract or receipt stored on the blockchain.

While the initial adoption of blockchain technologies across various industries was slow and fragmented, the recent rise of technological solutions incorporating blockchain has been promising. By 2029, the blockchain industry is estimated to be worth $163.83 billion, with a staggering CAGR of 56.3%.

The question then naturally becomes: “Are there realistic NFT applications for the perishables supply chain?” Jason Varni, senior director of solutions at iTradeNetwork, a global leader in supply chain technology, certainly thinks so – but only to the extent that they align with existing blockchain solutions. “Due to the time sensitivity of business and logistical transactions in the perishable supply chain, and the need for trust, blockchain-enabled smart contracts help businesses automate their workflows,” says Varni. “Building on the immutable record of a blockchain maintains a reliable digital record of that process and can later be reliably audited,” he adds. This is also where he and I agreed that the natural utility of NFTs could occur eventually.

Although the public hype surrounding NFTs has subsided, NFT adoption may see an increase across industries in tandem with blockchain adoption. To prepare for this change, there are a number of steps companies can take to increase NFT adoption.

So how far are we from implementing NFT technology in our supply chains? Timing is really hard to measure as the space is often reluctant to adopt solutions like this that have not been thoroughly tested, given all that is at stake in supply chain optimization. People’s livelihoods and even lives can be at risk with technological overhaul in this industry. But of the companies embracing forward-looking technology, Jason had this to add: “More and more business processes are being supported by smart contracts and companies adopting the technology can see real value including reduced liabilities, faster time to payment and reliable traceability.” With mainstream acceptance of these promising solutions, greater NFT support may be closer than we think.

Alex Swart (’23) is an MBA candidate at Columbia Business School. Alex is interested in disruptive and innovative technologies and their practical applications across verticals such as supply chain management. He previously worked at iTradeNetwork, a technology leader in the perishables supply chain industry, and at Coupa Software, a B2B SaaS platform for managing business expenses.