Coffee is one of the widely consumed beverages in the world. The supply of coffee is being gradually increasing day by day. As we can see from the 2017 statistics Brazil is considered the top coffee producing country all over the world. In that year, Brazil has produced somewhere around 55 million 60 kilogram bags of coffee followed by Vietnam as the second highest production country, with about 28.5 million 60 kilogram bags of coffee.
The journey of raw coffee beans from the farmer’s hand to the consumer is very lengthy. It’s a chain which starts with a farmer and end with a consumer. Between this start and end point, there are many who connect the two end of the chain they are called middlemen. They are responsible for communicating between the farmer and the end user to complete the coffee supply chain. In the current scenario of the traditional coffee supply chain, the involvement of middlemen is affecting the pocket of the farmers. The farmer only receives on an average of 10% of the whole profit in the coffee production. This a very unfair for the farmer pocket and this leads the farmers to survive a miserable lifestyle.
Apart from farmers, it’s also not a win-win situation for an end coffee consumer. The time span between the farmer first picks a coffee cherry, to the time the consumer has his first sip of coffee is called lead time. And, the lead time of the traditional coffee supply chain is about 6 month. With time the taste and quality of coffee get worse and the quality lost through age can never be recovered, no matter how lavish the coffee machine is. In a funny way, we can say that using six-month-old coffee beans in an expensive coffee machine is like using a water diluted petrol in Harley Davidson.
Effect of Blockchain technology at various points in the supply chain
The current coffee supply chain is not only disorganized but also it’s unfair. To overcome the issue the current system is facing here comes the need for a technology that will make the process streamlined and profitable for the end user of the chain while maintaining the performance of the system.
The blockchain is an immutable, decentralized ledger technology used to record the transaction on digital assets between two parties at very less time as compared to other transactions systems. Integration of blockchain technology in the supply chain is not only going to resolve the issue it’s facing from the current system but will also be going to enhance the overall performance of the system. We can take blockchain as an online marketplace which directly connects the two end of the chain, helping them to transact via the trustless medium.
Here are few ways Blockchain Technology is improving the lives of people involved in the Coffee supply chain:
- Payment: Right now the supply chain industry has to deal with many intermediaries bodies and centralized choke points. To complete a single transaction the third parties charges a good percentage of the total amount. The rate of increase in a cup of coffee is reciprocal to the number of middlemen involved in a supply chain. Blockchain will remove the third parties involved for the transaction, it carries the transaction using cryptocurrency and record every transaction over Blockchain.
- Contracts: In traditional supply chain the coffee trade still relies on the fax or emails attachments to send, receive and update the coffee contracts around the world. This leads to a slow and error-prone situation. Blockchain introduces smart contract applications it’s quite similar in use like a traditional contract but it’s in digital form and it can be represented as a small program stored in Blockchain. The main idea behind using a smart contract is removing the dependency of third parties and introducing the distributed public ledger between the two parties. The data is encrypted on a distributed ledger, making it impossible to lose the information stored on the blocks.
- Logistics: In the current scenario the logistic companies have to manage a lot of papers work to track the import exports of goods. The exporters and shipping companies suffer from the same inefficiencies in payment and paperwork. Blockchain will resolve both the payment delay and data transmission security issue. Via blockchain, the payments will be cheaper and faster and the paperwork will be streamlined and verifies sooner. Thus improving the quality while decreasing the overall cost.
By integrating blockchain in the coffee supply chain the overall time and cost for a cup of coffee can be reduced. This technology will be a game changer for both ends of this coffee supply. Blockchain will ensure, an error-free, fast and effective process by taking the data security into account.
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