Can Blockchain Fix Chipotle’s Supply Chain Woes?

By Ken Cottrill, Co-Founder and Research Principal ​​​

​Restaurant chain Chipotle is making the wrong kind of news again, with reports that the company temporarily closed a restaurant in Virginia after 13 customers became ill with symptoms that are consistent with food poisoning.
 
Can blockchain technology address the food safety issues that have eroded Chipotle’s brand and reflect wider industry concerns?
 
A new research brief from Chain Business Insights LLC titled Blockchain and the Future of Food: Driving Efficiency, Transparency and Trust in Food Supply Chains suggests that the answer is yes – with some important caveats.
 
Wider problems
 
Chipotle has been trying to recover from food poisoning scandals since 2015. It has instituted more stringent food safety procedures after a detailed examination of its supply chain. This latest setback is a reminder that despite the company’s best efforts, its supply chain is still vulnerable to product spoilage. Shares dropped 4% immediately after the incident in Virginia.

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​But Chipotle’s struggles are by no means unique. As the Chain Business Insights research brief explains, the food service supply chain is extremely complicated. Food manufacturers, brokers, distributors and third-party logistics providers are some of the entities that have a hand in delivering the dishes that restaurant customers consume. Along the way, silo-related information gaps and a lack of trust create opportunities for the kinds of disruptions that have Chipotle on the rack.
 
Another real-life example of a food poisoning outbreak in the research brief illustrates how supply chain complexity makes it difficult to combat the industry’s safety challenges.
 
In June 2016, an outbreak of food poisoning occurred across nine U.S. states involving 32 patients. The outbreak strain of bacteria was isolated from imported Anaheim pepper. An investigation by the Centers for Disease Control and Prevention (CDC) revealed that fresh hot peppers were the likely source of infection, but a single pepper type or source farm could not be isolated. Even though the CDC was armed with advanced detection techniques such as genetic testing, it could not pinpoint where the infection entered the supply chain. The complexity of the pepper supply chain was one factor. There are numerous growers and the product is consolidated before it gets to retail outlets. Consumers could only provide limited information because they were unsure what an Anaheim pepper looks like. Moreover, peppers are an ingredient for prepared dishes, and the epidemiologic investigation had to rely on a review of restaurant-specific recipes to help track where the peppers were used.
 
Help on the way
 
Blockchain technology appears to be tailor-made for solving many of these issues. It provides a tamper-proof, up-to-date database of transactions that is available to all verified users. Such a database is a powerful tool for tracking chain of custody right down to the item level.
 
Work is underway to develop such applications. The Chain Business Insights brief details a number of these projects. Vendors are developing blockchain applications in key areas such as supply chain traceability and trade facilitation, and much of this work is likely to come to fruition over the next year.
 
However, as the brief explains, the widespread adoption of blockchain in the food industry is further away for assorted reasons.
 
One is the challenge of integrating blockchain into the industry’s myriad information systems. A lack of communications standards doesn’t help either.
 
Still, these hurdles are surmountable. The research brief concludes that given the immense potential for blockchain-based applications in the food supply chain, “it’s not a question of whether they will be implemented – but when.”
 
Hopefully, this message offers encouragement for scandal-prone food service companies such as Chipotle.