Blockchain Made Simple

Meet Kathy, a category manager at a leading food manufacturer responsible for all aspects of the product portfolios she manages, from production to marketing. Throughout the day, she’s faced with many complex questions about the products she manages, including: 

• How can I track my product through supply chain, from raw materials, through distribution channels, and to the end consumer? 
• How can I ensure the efficacy of my raw materials?
• Am I securely managing financial transactions related to my products? Are they accurate? On time? 
• How can I drive innovation for product personalization without sacrificing quality? 
• If I suddenly need to oversee a product recall, can I do it efficiently?
• How effective is my digital advertising?  

In the past, answering these questions was time-consuming and required assembling multiple data inputs to reach a conclusion. But with the advent and rapid expansion of blockchain in recent years, the business insights Kathy requires can be at the tip of her fingers, thus allowing her to achieve operational efficiencies, create added value for her company and enhance the customer experience.  

What is blockchain?
Technically speaking, blockchain is a digital, distributed ledger of transactions, recorded and replicated in real time across a network of computers or nodes. Every transaction is cryptographically validated through a mechanism executed by the nodes before being permanently added as a “block” at the end of the “chain.” There is no need for a central authority to approve the transaction. (If you’re looking for a more in-depth primer, Deloitte’s “Blockchain: A technical primer,” is a good start.) 

If you’re like most people and are still wondering how blockchain really works in a consumer goods company, it might look something like the outline below. 

Common applications
Blockchain has the potential to usher in a new era of transparency for consumer goods companies and consumers alike, especially regarding the tracking and monitoring of products and the flow of information, services, and money. There are numerous use-cases in which blockchain can play a role. A Deloitte analysis suggests that, for manufacturers (and category managers like Kathy), blockchain has the potential to:

• Monitor the processes of ordering, selling, tracking and paying for goods.
• Track product delivery through the supply chain to consumers.
• Store and analyze relevant product and supply chain data to achieve better inventory management.
• Confirm financial transactions based on smart contracts, thereby helping to eliminate fraud.
• Simplify financial transactions, speed up payment processes and reduce intermediary costs and risks associated with business-to-business payment, making the process easier, faster and more trustworthy.
• Identify products that are unsafe or have defective parts, thus leading to efficient, targeted product recalls.
• Ensure product safety by tracking genuine products and segregating counterfeits.
• Develop innovative, customized applications and tools that are fast, secure and reliable.

The future 
With global blockchain revenues expected to grow from approximately $2.34 billion in 2017 to $13.9 billion by 2022, according to Research and Markets, there’s great potential for applications in the consumer goods industry. Recent Deloitte research in the U.K. indicates that consumer goods companies are interested but have reservations.

While approximately 42% of industry executives plan to invest at least $5 million in the coming year, the rate of implementation remains slow, with most companies still trying to understand the specific use-cases that will deliver increased efficiencies, cost savings and other concrete benefits. 

Industry executives can look to recent real-world applications of blockchain to demonstrate its potential value. For example, it could be used to trace the source of food contamination in an outbreak, making a targeted recall possible rather than pulling all product off the shelves. (There are additional practical applications for traceability, visibility and recall, as well as for accessing product information.)  

Ultimately, blockchain can make the challenges faced by category managers like Kathy, and other industry executives, significantly more manageable than in the past, allowing them to focus on other strategic issues.   

About the Author
Barb Renner is vice chairman and Deloitte’s U.S. consumer products leader. She works with consumer and industrial product clients in areas including regulation, supply chain, technology and processes, and other industry issues and opportunities.