Summary

Introduction 

Every business should strive to push their strategic frontier further by optimizing the processes that support their operations. In 2017, Frederick Durmot, Director of Food Safety at Walmart prepared to share his findings about using blockchain to track shipments of pork and mango to the food safety department and supply chain. He faced challenges with implementing blockchain on a larger scale and was attempting to garner support for rolling out the technology to more purchasing channels. This paper will examine his initiative, analyze the problem he is facing, and suggest a path forward. 

Brief Financial History 

Walmart was founded in 1962 and added a complete supermarket to some of their stores in 1988. By 2016 it captured 25% of the grocery market share in the United States. With consistently increasing sales from 2006 to 2017, Walmart’s net sales reached $500 billion in 2017. Due to its size and impact on the global supply chain Walmart took concern with environmental wellbeing. This started in 2005 and in 2017 they launched project Gigaton aimed at reducing greenhouse gas emissions created from their supply chain by 1 billion metric tons. Its goal was to reach that number by 2030. However, with the support of their suppliers, they reached that number by 2013. 

Overview of Blockchain 

Walmart continuously invested in technology to improve the efficiency of its operations. Tracking its environmental impact coincided with the markets desire for supply chain transparency. This is where blockchain technology could be augmented to its existing enterprise resource planning (ERP) tools. Walmart began a partnership with IBM to better understand its supply chain through IBM’s blockchain offering. IBM’s offering is an end-to-end encrypted database that enables operational agility, identifying cost savings, risk management, and identifying new opportunities2. When applied to a supply chain there are additional specific benefits. The first is accurate trackability of products from manufacturers to stores that’s hundreds of times faster to retrieve when compared to traditional methods. The information is in real-time and allows operations to efficiently track the quality of goods coming into Walmart supermarkets. Durmot experienced this when he asked his team to trace the origin of sliced mangos. The team came back with an answer after seven days while a blockchain query provided the answer in just 2.2 seconds. Even with this incredible upside he had the immense hurdle of encouraging widespread adoption. Blockchain infrastructure was expensive to create and required the participation of both sides to work accurately. Training and oversight would be needed to ensure the correct data was being assigned to products, data that could be damaging to Walmart’s reputation if it revealed unsavory business practices. 

Recommendation 

Percy Bysshe Shelley said it best with “Nothing wilts faster than laurels that have been rested upon”. For Walmart to become complacent in its goals would mean the company losing its strategic edge as a giant supplier of low cast products and food. Durmot should encourage the use of blockchain technology to fix the high fragmentation, complexity, and analog nature of Walmart’s existing global food system. Instead of trying to implement it between every supplier all at once, he should focus on a second study containing a mix of large suppliers and suppliers who lack the infrastructure to support the new system. This way he can take advantage of continuous learnings to exponentially increase partner adoption. 

Supercharge the ERP 

While Walmart’s existing ERP captured some data that was eventually illuminated through a time-consuming search, it wasn’t as optimized as it could be. ERP systems do provide the backbone to operations and help data flow seamlessly between departments of an organization. Blockchain could supercharge the efficiency of the information and maintain data integrity. Data is prone to change but by creating a blockERP as proposed by Blockchain Based Enhanced ERP Transaction Integrity Architecture and PoET Consensus data becomes redundant a less prone to post acceptance manipulation. Durmot should suggest this structure because data would be distributed to the Blockchain network only after both manufacturer and seller agree on it. The move to a cloud-based and decentralized ERP like this only enhances data security and interoperability between companies9. 

Implementing cooperative systems like this is not without its challenges. Many areas are without the infrastructure to support this kind of reporting. This includes the access to internet, services, and competent employees to interact with the new technology. Durmot should suggest investing in this technology for their partners in cooperation with IBM. By doing so, their partners will be encouraged to utilize the new technology knowing Walmart is invested in their success. 

Recalls 

There were two events in this case from the early 2000s to 2016 when Durmot started his blockchain pilot. They highlight the need for insight into food quality and contamination. These events included E. coli outbreaks, the fear of superbugs contaminating food, and melamine, a fertilizer chemical, found in baby formula. Because of this, the US government implemented the Food Safety Modernization act in 2011 but still saw a 10% increase in meat recalls between 2013 and 2017. The melamine incident came from a Chinese manufacturer, the same country of origin that Durmot piloted the blockchain pork tracking. China is the world’s leading pork manufacturer and recalls for their products are bound to happen. Durmot should position the cost of partner investment to be offset by the eventual savings of recall management. Instead of recalling a massive amount of product to make sure the consumer market is safe. Blockchain can store substantial amounts of information, which can assist enterprises to increase their decision-making efficiency, optimize their decision-making process, and improve the flexibility of their supply chain6. Walmart can pinpoint which products would be affected by contaminants. Knowing exactly which products to pull from their supply chain saves money and provides consumers’ confidence the products on the shelves are safe. 

Shield Against Corruption 

Another important aspect around food safety that Durmot should leverage for support is protecting product information against corruption. With Walmart’s current analog system, it’s easy for a manufacturer to lie about contamination or poor ingredients in the goods they ship. Blockchain technology is co-owned and monitored through a joint venture between the producer and seller. It can even be monitored by a third party. This relationship means that once information is confirmed and assigned to a product it cannot be changed or manipulated later to ensure the sale of a product. Instead of combating corruption through detection alone, blockchain encourages good behavior of avoiding corrupt practices, that is, makes it attractive for the parties to do the right thing, from the customs point of view.  This means Walmart should partner with international governments by giving them insight to the blockchain data to reduce the time it takes for goods to move between borders. More watchful eyes not only reduce shipping time in this instance but also discourages less than optimal manufacturing practices. 

Conclusion 

Durmot should continue to encourage his colleagues and leaders to invest in blockchain. By working with IBM at the forefront of this technology Walmart can optimize the system for themselves while creating public goodwill by providing transparency into their product origins. The implementation cost of setting up the infrastructure and the potential for highlighting unsavory practices is mitigated by long-term cost savings. By leaning into this new strategy instead of competing with the way of working Durmot move Walmart into a new supply chain era. 

Citations 

1. Walmart. (n.d.). Project Gigaton. Retrieved March 17, 2024, from https://www.walmartsustainabilityhub.com/project-gigaton 
2. IBM. (n.d.). Blockchain. Retrieved from https://www.ibm.com/blockchain 
3. Chen, Si, et al. “Processes, Benefits, and Challenges for Adoption of Blockchain Technologies in Food Supply Chains: A Thematic Analysis.” Information Systems and eBusiness Management 19.3 (2021): 909-35. ProQuest. Web. 17 Mar. 2024. 
4. Bossert, O., Nocker, F., Schrey, C., & Soganci, M. (2023). The ERP platform play: Cheaper, faster, better. McKinsey & Company. 
5. Sarker, S., Henningsson, S., Jensen, T., & Hedman, J. (2021). Use of Blockchain as a Resource for Combating Corruption in Global Shipping: An Interpretive Case Study. Journal of Management Information Systems, 38(2), 338–373. https://doi.org/10.1080/07421222.2021.1912919 
6. Wu, L., Chen, J., Dai, X., Chen, X., & Zhang, J. (2023). Food manufacturer willingness to employ blockchain technology system under the social Co-governance framework: China’s situation. Current Research in Food Science, 7. https://doi.org/10.1016/j.crfs.2023.100619 
7. Aslam, Tehreem, et al. “Blockchain Based Enhanced ERP Transaction Integrity Architecture and PoET Consensus.” Computers, Materials, & Continua 70.1 (2022): 1089-109. ProQuest. Web. 16 Mar. 2024. 
8. Statista. (n.d.). Net pork production worldwide by country. Retrieved [date you accessed the website], from https://www.statista.com/statistics/273232/net-pork-production-worldwide-by-country/ 
9. Awad, N., Pareek, A., Shah, Z., & Schott, K. (n.d.). An ERP strategy for a postpandemic world. Boston Consulting Group.