Blockchain's new role: keeping your strawberries fresher and the supply chain profitable

The grocery industry is locked in a costly battle against time. Predicting consumer demand for highly perishable foods like strawberries and lettuce is a logistical nightmare, leading to massive food waste when retailers order too much and lost sales when they order too little.

New research in Management Science, co-authored by assistant professor Chenghuai Li at the Alberta School of Business, offers a powerful solution, arguing that two emerging technologies can turn chaotic supply chain uncertainty into clear operational decisions.

The value of knowing freshness

The central finding of the study is that transparency pays. The proposed solution combines two modern technologies:

• Internet of Things (IoT) Sensors: These are small, physical devices (like tiny thermometers or GPS trackers) embedded in transport containers. They collect and transmit real-time data about physical conditions, such as temperature, humidity and location, as the produce moves from the farm to the store.
  
  
• Blockchain Technology: This is a decentralized, digital ledger system — a type of database shared across a network of computers. Once data (like a temperature reading from an IoT sensor) is recorded on a blockchain, it is secured cryptographically in "blocks" and cannot be altered or deleted. This creates a tamper-proof and shared record of the product’s journey and freshness profile.

By coupling these two technologies, grocery retailers can gain real-time, tamper-proof data on the exact freshness of their supply before they place an order.

This blockchain-enabled freshness transparency allows the retailer to optimize their order quantity based on observed freshness, thereby resolving uncertainty and leading to major financial and environmental benefits. Using publicly available data, the researchers estimated that, for Walmart's strawberry business in the United States alone, adopting this technology could increase annual profit by approximately $60 million while eliminating 23 million pounds of food waste annually.

The value is highest for items, such as fresh produce and seafood, that are vulnerable to storage conditions because they have the greatest freshness uncertainty.

"As inflation puts pressure on grocery prices and food waste remains a global crisis, blockchain technology offers a game-changing solution," says Li. "By providing real-time transparency on freshness, retailers can make smarter purchasing decisions – but suppliers may need new incentives to stay on board."

The win-win smart contract

While the benefits for the retailer are substantial, the researchers noted a critical complication: increased transparency could actually decrease the expected profit of the supplier if the retailer orders less product to avoid spoilage.

To overcome this misalignment and encourage widespread adoption, the team designed a solution using smart contracts. These are programmed agreements automatically executed and enforced on the blockchain when a pre-specified condition (like a freshness threshold) is met. This threshold-type smart contract is designed to create a "win-win" proposition by ensuring that both the retailer and the supplier are financially better off than they were without the blockchain system.

"The use of smart contracts ensures fairness across the supply chain," explains Li. "Retailers get the freshest products and reduce waste in stores, suppliers get compensated fairly, and ultimately, consumers benefit from better quality."

A shift in food handling

The research provides a compelling blueprint for how technology can tackle one of the world's most enduring logistical and environmental challenges.

"This isn't just about technology – it's about changing the way we handle food," says Li. "If used in the right way, blockchain-powered transparency can make fresh produce supply chains more efficient, more sustainable and more profitable for everyone involved."

Read Li’s full article in Management Science at DOI:10.1287/mnsc.2021.02949

*This article was co-written using Gemini AI.

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