Reference no: EM133484279

Case Study: Blockchain

This case looks at blockchain application illustrating the Canadian beef industry. As you read through the case, think about its focus: product traceability and documentation throughout the supply chain.

The Canadian Beef Industry

Riley Hudson has been a Beef farmer for over 25 years. Riley is a member of, and sits on the executive board of, the Canadian Cattlemen's Association. Riley runs one of over 59,000 Canadian farms and ranches with beef cattle. The average beef cow herd size in Canada is 69. Riley currently has 62 cattle in the operation. Farms with between 47 and 122 cows represent 23% of beef farmers in Canada. They are all considered to be medium size producers. As such, Riley cannot afford any losses or disruptions to the business operation. Even the smallest delay or interruption to the operation could result in significant cost ramifications for the business.

Beef Production and Exports

In 2018 Canada produced 3.08 billion pounds of beef. This equates to 2018 cash receipts of $9.07 billion dollars. Of that, $2.75 billion or 30 percent, was generated from beef exports. Most of the cattle from Canadian producers are exported to the United States. This market accounts for 74% of all Canadian beef exports. Canadian beef is also exported off shore. China represents a growing market for Canadian beef. In 2019 exports of beef to China exceeded $60 million. Demand for Canadian beef exports to China was projected to grow substantially over the next several years. This export growth, and the overall projected growth of the industry, was indeed good news for Riley and Canadian beef producers.

Enterprise Management Systems

As a commercial Canadian beef producer Riley was required to provide documentation relating to each and every cow in the operation. This ongoing documentation was a requirement of the Canadian Meat Council. All information relating to each and every cow needed to be entered and tracked in a central data base. Statistics relating to date of birth, type and quantity of feed consumed, medical history, vaccinations and even growth rate in kilos was required. The system used for this is the Canadian Livestock Tracking System (CLTS). This enterprise management system provides critically important information on the input and transformation components of the business. It was the output side of the business where visibility and traceability was lacking. There were checks and documentation requirements as cattle were shipped. However, the potential for illness, injury and livestock loss in transit was great.

Technology and Traceability

Riley Hudson realized that the lack of current, real time information and documentation once cattle were shipped from a farm or ranch was placing the Canadian beef industry in jeopardy. Primarily it was the export market that had beef producers, the Canadian Meat Council and the Canadian Cattlemen's Association concerned. Their concern proved to be tangible. In 2019 China put a halt to all Canadian beef imports. Chinese inspectors discovered the falsification of veterinary health certificates and also the detected, in a batch of Canadian pork products, residue from a feed additive that is restricted in China. Upon this discovery China placed a ban on all Canadian imports of pork and beef. Would the U.S. follow suit and also ban the import of Canadian beef? As a sitting member of the Canadian Cattlemen's Association Riley was called to an emergency meeting. The meeting also included members of the Canadian Meat Council. Their focus was on how to provide authentic, seamless, real time traceability and visibility throughout the Canadian cattle industry and subsequent supply chain.

Blockchain Technology

Everyone at the meeting was in agreement. Implementation of a more robust and transparent technology was required throughout the industry. The general consensus around the room was to explore the implementation and use of blockchain technology in the beef industry.

A blockchain expert, Jordan Easton was contacted. One week later the meeting attendees all reconvened to find out what Jordan had to say about blockchain.

What they discovered was that blockchain was basically a digital trail or distributed ledger used to track and document operational, (cattle farming and production) activity. How it works is data points (activities) along the supply chain or beef farming and production process are documented and collected. Each time information is added to this system, it is encrypted and becomes a new "block" of data added to the "chain" of records. Encryption is in the form of a hash which turns the original data into a series of numbers and letters. An undisputable trail of operational data is formed. Each partner involved in a blockchain has a copy of this database.

Information from vaccinations to physical location to specific characteristics of individual cattle can be entered. Types of feed used, when and where it was purchased can be traced. A blockchain history for each animal, each farmer/rancher and each distribution system is created. As beef is exported the blockchain continues to expand to include blocks relating to specific transportation routes, time and distance travelled and carriers. The blocks continue to build until the product reaches the end of the supply chain, wherever that might be.

Jordan added; other intended benefits to this type of technology was to create efficiencies for the producers so they can spend less time on paperwork and more time on ranching and raising animals. Another major goal is to share data to support claims about beef raised through the Canadian beef industry. Export market customers will be able to access the blockchain to validate all aspects of the beef that is entering their country.

The meeting attendees immediately recognized how this technology could enhance traceability and reliability of data throughout the beef industry. If there's a recall or food safety issue, product can be rapidly traced to its point of origin and each data block location. All in attendance were convinced that blockchain technology was the way of the future for the Canadian beef industry. It would help ensure that export markets had confidence in Canadian beef both now and in the future.

Questions:

1. In your own words, describe how ERP systems and blockchain tools relate to each other? How are they different?

2. What type of centralized database or financial institution should be used by the Cattlemen association to help facilitate their conversion to blockchain?