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 of the digital art world?

As the global perishable food market grew to roughly $152.24 billion by the end of 2022, and continues to grow at a compound annual growth rate of 9.5% per year, leaders in the perishables supply chain space are expected to accommodate these remarkable growth rates in nearly every capacity. With this incredible expansion across the industry, a bevy of issues loom ever present for technology companies, logistics providers, and operators in their respective fields. The perishables industry is known to be notoriously slow to adopt new tech solutions and typically opts for simple implementations that don’t interfere with daily operations. In turn, it will be interesting to see which nascent technologies this industry chooses to adopt moving forward.

With the traceability of goods, freshness and quality inspections, freight forwarding, shipping, and logistics all top of mind for supply chain leaders, questions in the industry continue to arise. How will we decrease food waste when nearly 40% of the US food supply is wasted every year? Could consumers become more informed about their produce, and trace back their food to the point of origin in the case 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 obstruction in 2021?

Clearly there is a lot to consider as operators are forced to choose from a multitude of technology providers that cater to this industry. As such, buyers, suppliers, growers, and shippers need to understand what technology is built to last and can positively impact their business practices, and what is a passing fad or a solution that could be half baked and clouded by industry jargon or hype.

Market research estimates the Global Perishable Food Market to reach $218.89 billion by the end of 2026. That’s not even taking into account growth rates across non-perishables, hard goods, or CPG industries. How can supply chains build resiliency via new technologies to account for these changes?

Some of the more technologically savvy retailers, suppliers, and operators have already been employing AI-based tools to facilitate a semblance of end-to-end visibility in their network and aid with more informed real-time decision making. The implementation of AI machine learning models coupled with data visualization tools can be used to predict when and where a disparity in a supply chain could occur, how to optimize shipping routes, or even how to better match trading partners, amongst other use cases. A recent study by McKinsey demonstrates just how many AI-driven implications exist across verticals like marketing, sales, procurement, planning, logistics and distribution, and even production.

Market research estimates the Global Perishable Food Market to reach $218.89 billion by the end of 2026. That’s not even taking into account growth rates across non-perishables, hard goods, or CPG industries.

Another future-looking technology that many operators and executives in the industry have been considering is that of blockchain. In basic terms, a blockchain is a digital database or ledger that is distributed amongst nodes on a peer-to-peer driven 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’s both certifiable and inalterable after it’s on-chain. Most people probably understand blockchain as the underlying technology upon which cryptocurrencies like Bitcoin and Ethereum are built.

Just a few years ago, blockchain was a buzzword in the supply chain industry as many tech providers slapped verbiage on underdeveloped solutions, attempting to establish some sort of first mover advantage as the go-to architect for blockchain tools. Now that much of the initial hype has waned, the industry is starting to actually see some of the practical applications of blockchain within supply chains. Tech incumbents like IBM, Microsoft, and SAP, as well as innovative startups have already started incorporating these capabilities into new blockchain products. Financial- and inventory-based transactions between retailers, suppliers, and distributors can be recorded on-chain, which has huge implications for increasing transparency and visibility for all parties. Shipping execution errors can be logged in real-time so retrospective analysis can be performed, and necessary operational changes can be made moving forward. In addition, the traceability of goods via RFID tags and scanners can help buyers trace back foodborne illnesses to the points of origin, down to the exact pallet.

While the initial adoption of blockchain technologies across various industries was slow and fragmented, the recent uptake for tech solutions that incorporate blockchain has been promising. By 2029 the blockchain industry is projected to be worth $163.83 billion, with a staggering CAGR of 56.3%.

Clearly there are myriad utilizations for blockchain within the supply chain space, so the question then becomes, “Well, what about NFTs?” When most people hear NFT they probably think about a JPEG of an ape they’ve seen on Twitter, or some other digital piece of 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 can’t be replicated, interchangeable, or alterable as it’s recorded on the blockchain. It’s easy to think about an NFT as a digital receipt of sorts that’s used to confirm authenticity and ownership.

While much of the current usage of NFTs is still popular within 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. Healthcare has adopted NFT use to aid with the maintenance of patient records. Even the IP and patent landscape is being altered by NFTs by indicating which trademarks are attributable 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 uptake for tech solutions that incorporate blockchain has been promising. By 2029 the blockchain industry is projected to be worth $163.83 billion, with a staggering CAGR of 56.3%.

Then the question naturally becomes, “Are there realistic NFT applications for the perishables supply chain?” Jason Varni, Senior Director of Solutions at iTradeNetwork, a global leader in the supply chain technology space, certainly thinks so – but insofar as they come in tandem with existing blockchain solutions. “Due to the time sensitivity of business and logistical transactions within the perishable supply chain, and the need for trust, blockchain enabled smart contracts help businesses automate their workflows,” says Varni. “Being built on the immutable record of a blockchain maintains a reliable digital record of that process and can later be audited in a reliable way,” he adds. This is also where he and I agreed that the natural utility of NFTs could occur eventually.

Though the public hype around NFTs has waned, NFT adoption could experience an uptick across industries in tandem with blockchain usage. To prepare for this change, there are a number of steps companies can take to increase NFT adoption.

So how far off are we from implementation of NFT technology within our supply chains? Timing is truly hard to gauge as the space is often reluctant to adopt solutions like this that have not been thoroughly tested, given everything that is at stake in supply chain optimization. People’s livelihoods and even lives can be at risk with technological overhaul within this industry. However, of the companies that do embrace future facing technologies, Jason had this to add: “More and more of the business processes are being supported by smart contracts and companies that adopt the technology can see real value including decreased liabilities, quicker time to payment and reliable traceability.” With mainstream acceptance of these promising solutions, greater scale NFT support could 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 like 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 business spend management.