Blockchain in the Milk Industry

A Blockchain is a database shared among different parties in a supply chain; it cannot be tampered with, and once data is written onto the Blockchain it cannot be erased. Hence, it provides a single shared ledger for all parties in a supply chain. Blockchain is an emerging technology that mainly solves for 3 problems in supply chains - a. Traceability: Determining the origin and authenticity of a product. b. Coordination: Coordinating between different departments (accounting, finance, dispatch, logistics) and reconciliation of documents. c. Contracts: Automation of payments, invoicing, and audits. 

When it comes to the milk supply chain, the problems that Blockchain as a technology can solve are: 


  1. Determining the authenticity and the origin of the milk: In this case, Blockchain can be used to track every aspect of the milk supply chain from Cow health, origin of fodder, transport, technical analysis to determine if the milk has been adulterated or not. Now the Blockchain alone does not do this tracking, but it provides the tamper-proof database onto which data can be stored. Hence the end customer, whether it’s a b2b or b2c customer, can see the entire history of the product that they are buying. 


  1. Quality control: All quality measurements on milk can be made at every aspect of the supply chain, and these can be recorded onto the blockchain platform. When this is recorded, the data can be seen by the end customer to ensure that they are receiving unadulterated milk.


  1. Easy product recall: In the case of a damaged milk product, tracing back to the origin of the milk product, the time and place of creation of that milk product can be done in minutes rather than days if Blockchain is used, since the Blockchain has inbuilt, real time auditability on it’s distributed ledger using a concept called “Smart Contracts”.


  1. Increased brand value: By showing customers product authenticity, product quality, and the story behind each product, this information greatly increases the value of the product for the customer. 


  1. Drop in supply chain costs: The traceability solution brings about efficiency in the supply chain by decreasing the time and effort required to manage inventory, reconcile payments, goods receivables, invoices, and make contract management a smooth process with vendors, suppliers, and retailers.


  1. Token Incentive mechanisms: Enable incentives in terms of cashbacks to be given to all members of the supply chain to add data to the Blockchain system to enable full product traceability and authenticity. Tokens can also be used to give retailer-brand specific loyalty points to users to decrease customer acquisition costs and increase customer retention2.


  1. Supply chain financing: Show real time data to banks to speed up the process of supply chain financing through sharing real time information on invoices, Goods Receivables, Inventory.

  2. E-commerce: With the impact of Covid on all retail sales and physical retail stores, most b2b and b2c sales are starting to move online. Establish a trusted marketplace for milk and milk products through blockchain smart contracts to automate incentivization of various parties, enable end customers to receive quick and small ticket loans from banks based on their transaction history.

    In terms of costs, our research showed that implementing a traceability resulted in a reduction of 50% in admin costs, and empowered companies to charge a premium of anywhere between 26% to 60% for their products, depending on the type of product. Higher the frequency of consumption of the product, lower is the premium that can be charged for the product. The costs however of implementing the traceability solution adds up to anywhere between 1-7% of the actual products value for the company. Hence, the arbitrage available for companies to benefit from traceability is an average of 30-40%, plus the 50% reduction in admin costs within the supply chain. Assuming a part of this arbitrage is passed downstream to other participants, retailers can see a cost/benefit of 30%. If Shine can provide a solution with just a 5% increase in cost, with benefits of 30% of costs, and a reduction in the firm’s admin costs by 50%, then it is a scalable and highly profitable business model.

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