Can digital innovation help us create a better food supply chain?

We have a problem with our global food system.

An estimated 700 million people now face hunger and extreme poverty around the world, according to the World Bank. The availability and quality of our food is being hit by political conflicts, health crises and devastating natural disasters such as wildfires, droughts and floods.

Farming and shipping of foods is also becoming more energy-intensive, at a time when energy costs are soaring. According to the International Energy Agency, up to 50% of the variable costs of cropping in advanced economies come from direct and non-direct energy costs.

In addition, a significant proportion of that food is wasted. The United Nations estimates that waste accounts for one-third of the total global food output, and 38% of the system’s total energy usage.

We need to be more mindful of how we produce, and how we consume. Could measures such as digital traceability help relieve some of the pressure?

Blockchain and sustainability

Dr Haiyan Lu is a lecturer in Operations and Supply Chain Management at Newcastle University Business School. Her main interests lie in how sustainable supply chain management can benefit the food sector.

More recently, she has been investigating how digitalisation – and the introduction of innovations such as Blockchain technology – can help the industry operate more efficiently, imaginatively and sustainably.

In a paper published in 2024, Dr Lu’s team aimed to provide companies with more information about how various investments into digital traceability affect sustainability performance. This research was particularly focused on how these investments impacted on the three pillars of Sustainability Oriented Innovation (SOI), namely product innovation, process innovation and organisational innovation.

“Traceability is a big issue when it comes to food sustainability,” says Dr Lu. “When we have a food scandal, it’s usually because the food is not what it’s supposed to be, or something has gone wrong in the process.

“Is the customer really eating what’s on the package? We don’t really know. The purpose of technology such as Blockchain is to increase the visibility and traceability along the chain. For example, if we buy beef mince, how much can we find out about what it is and where it’s been by tracing its journey?”

The Blockchain system locks and encrypts a range of information about a product or process, promising a more reliable and open record for consumers and other stakeholders.

When applied to the food industry, a Blockchain system may work like this: if you buy an orange from Brazil, you will be able to see information from a range of suppliers. First, you might see something from its origin, including location, the weather and temperature, and the types of farming and pesticides used. Perhaps it then moves to a regional distributor, who inputs another code showing timings, environment, packaging, and so on. This would continue until it was sold to the supermarket or trader, giving companies and consumers a lot of important data that could be used to monitor – or improve – food quality.

“Obviously, the scope for digital traceability is broader than Blockchain,” Dr Lu adds. “Blockchain is the technology, but how do we implement it? We might need to look at machine learning, AI and big data analysis. It’s a broad scope, covering a lot of analytical techniques and what we call ‘Industry 4.0’.

“We might have the sensor on the farm, but how do we analyse and make use of the data to get the results we want?”

Making the case for sustainable, digital investment

On the surface, this sounds promising. However, supply chains consist of many different producers and distributors, each with their own cultures, experience and financial pressures.

For example, a farmer may have very valuable experience in producing crops, but may have a very limited budget to implement wholesale changes. They may also need to blend more modern approaches with their existing expertise, which may take time.

A supply chain does not work without the involvement of people at all stages. Which is why Dr Lu believes this change needs a forward-thinking strategic approach. In short, companies need to know what they need to invest – and where – to get the best return. Not just from an economic perspective, but also a sustainable one.

“If we want to make this dramatic shift toward more digital traceability, it will take a few years of investment,” she says. “So companies need to think ahead, and consider the percentage of profit they want to invest over the next three to five years at least. They also need to consider what they want to achieve, where they want to be, and what sort of investment makes the biggest impact.

“A small business at the end of the chain, for example, can determine whether they want to invest first in product innovation or process innovation, and benchmark better based on their capability and resource.”

Traceability and product innovation

In their 2024 paper, Dr Lu’s team gathered information from surveys sent to companies in the food sector. The data from these responses was supplemented by interviews with industrial managers and academic experts, and a subsequent workshop involving managers from the industry.

China was chosen as the subject of the study, due to its 2016 pilot initiative in which the government funded the implementation of digital systems in four provinces. By the end of 2019, the team had collated usable responses from 127 firms in Shanghai, 98 in Shandong, 74 in Ningxia, and 60 from Fujian.

These responses indicated that digital traceability “positively impacts” all three pillars of SOI. However, the impact was most pronounced when it came to product innovation. The paper noted that “the implementation of digital traceability provides as much information as possible about product updates, which can bring many new ideas to product development”.

The paper also reported that “food firms actively involved in digital traceability can reap environmental benefits if they value and implement process innovations”. It warned that companies who do not adopt more innovative practices in cleaner production, eco-efficiency and logistics “may struggle to create economic benefits and may lose their social reputations”.

While all three pillars benefit from more innovative and strategic digital traceability, Dr Lu says that the impact of investing in product and process innovation results in “more tangible” benefits, particularly for smaller, more financially constrained companies.

“If you’re a company that wants to invest in sustainability and digital traceability, it can result in significant improvements if you focus on product and process innovation initially. These may be more straightforward investments, such as adding new features for a product or reducing waste.

“Organisational innovation is valuable, but can also be more complicated.”

The paper also revealed that investing in digital traceability can have a positive impact on supply chain learning into process and product innovation. Unexpectedly, this was not the case when it came to organisational innovation. Respondents indicated that this investment resulted in no positive effect in this area.

However, the actions companies take will ultimately depend on where they are and what they want to achieve. The report suggested that investing in product innovation is “fundamentally important to improve food chain sustainability” and that digitalisation can “enhance product innovation”, empowering companies to “consider product life cycle and the green ecosystem in product design and material usage”.

Companies are also urged to “restructure their operational processes to improve operations and logistics efficiency and optimise the use of resources”, and encourage upstream and downstream supply chain partners to do the same.

There is even an opportunity for “proactive companies” to invest in making systematic transformation for sustainability practice, including “organisational and inter-firm arrangements to redefine, reconceptualise and restructure”.

Giving companies the ability to act strategically

Dr Lu hopes that her ongoing work will give companies the insights they need to plan out strategic and impactful improvements over time, which will then result in more efficient and innovative food supply globally. She is continuing to work with companies in the UK, China and Chile to explore the operational and institutional factors that contribute to issues such as food waste and food safety.

“We’re keen to understand how to use the tech, of course, but also how to integrate the data, and create a more autonomous system that records and analyses information and predicts patterns.

“We’re looking at sustainability-oriented innovation. The main purpose of innovation is usually to increase economic benefits. The concept of SOI is to shift the focus of economic focus to make fundamental changes that better facilitate sustainability goals with environmental and social improvements.

“We appreciate that achieving sustainability is of complexity and that requires a high level of integration among governments, third-party institutions, and food chain companies. It will be a long and impactful journey, yet proactive entities are making visible changes incrementally.”

 

Dr Haiyan Lu, Lecturer in Operations and Supply Chain Management at Newcastle University Business School