The Radish Farmer’s Story
I wrote this story in the summer of 2019 as we were cooking up the ideas that became the Baseline Protocol. I like writing the “product review from the near future” before the beginning of a project. It’s a good way to explore what could be good and what might be mad about an idea. Here it is, and as always, the following story is fiction…until it isn’t:
Small-time to Big-time in No-time: Radish34 Takes the Up-Front and Recurring Costs Out of Flexible Supply Chain Integration
A Novel Way of Using the Ethereum Blockchain Mainnet Makes Supplier Reputation Transferrable, and Lets Buyers, Suppliers and Insurers Have Confidence in Data Consistency Without Sacrificing Security, Control, or Compartmentalization.
I’m a Radish Farmer. My family has been supplying Walmart for a while. Now Trader Joes is opening up to us, and we’re keen to join their supplier base. Adding buyers used to be a hassle. Then we upgraded to private blockchain technology that Walmart gave us, and it was still a hassle. But today, it’s a snap. Here’s the story.
Not that many years ago, everything about how we managed our internal operations and external relationships was on paper or PDFs, and we had a lot of value leakage where someone would either deliberately or accidentally enter information that wasn’t consistent from one agreement to another, from one company’s records to another. We’d quote one price and invoice a different price, or they would mix up our shipment and refuse to pay. Lots of wasted time waiting for disputes to clear so we could get cash in the bank. (There were some scary times when we had to pay for seeds or equipment or fuel, and we’d have to borrow to cover it, just because we hadn’t been paid what we were owed.)
Paper or static electronic documents also meant someone (sometimes us) would fail to follow agreements, leading to even more confusion, disputes, and regulatory violations (and the constant fear of an audit). Screwing that stuff up is pretty easy to do. When was the last time you went back to the fine print to check whether you were doing something right? Did you even read it in the first place?
The Private POC Era
A few years ago, we thought the answer had come. Walmart used this thing they called the Food Safety Network. They said it was cool, because it was running on some newfangled database called a private blockchain. We really didn’t understand it, but we had to use it, because…well…it was Walmart. Honestly, from our perspective, it wasn’t a lot different from Walmart’s old supplier portal on the web. My son called that website a “SaaS” solution, whatever that is, and this new thing he called a “BaaS” solution. He understands this stuff, I guess. It cost a lot to send him for his Agricultural Sciences Masters degree at Arizona State, so at least I’m glad he didn’t spend all his time there drinking.
At any rate, we got a couple benefits from the Food Safety Network. First, we got a lot of publicity for using it. I even wound up on stage in Vegas at some big IBM event with their CEO. I waved to the crowd. The CEO said something about “innovation…blah blah blah”, and afterward my wife made me go see Cirque du Soleil. It wasn’t bad, actually.
The other thing we got out of it was the push to modernize our inventory management practices. I mean, we should have done that in the 1980s or ‘90s — digitized our pickers, storage and loading systems. But thanks to that “blockchain” buzzword and Walmart’s demand that we use it, we finally got the lead out and spent the money to turn everything into data (from the seeds we were putting in the ground to the soil conditions and even weather records). My son was very proud of our new modernized farm. I was less happy about how much it cost. But hey…that’ll be his problem soon enough. I’ve already paid off my Florida retirement condo in the Villages.
Not So Private After All: Trouble in the Private Supply Chain Silo
But that’s when the trouble started. My son comes in one day with this sheepish look on his face. I know that look, so I say, “Ok, what happened?” And he tells me that he just heard that our biggest competitor had got their hands on the data we were collecting, including our shipment times, prices, volumes…even the special blend of seeds we were using. Apparently they got some of this straight off that “blockchain” thing Walmart made us use, and the rest they figured out by doing something called machine learning off the data we were all sharing in the name of food safety. (My competitor’s son got his PhD, so…apparently that’s where they teach you about stuff like artificial intelligence. My son must have missed that class.)
But this confused me. I mean, Walmart told us this was a “private blockchain.” My son now says that apparently this meant that it was private to the companies in the network, but in order for Walmart to get the benefits of knowing everything going on in their supply chain, they needed everyone’s data in this “private” database. But because our competitor also was part of the network, they had what’s called a “full peer”, meaning they had all the data from the network and were able to figure out a lot about our operation just by reading their own copy of the database…even though some of our information was “encrypted.”
We stopped putting our information into the Food Safety Network after that…just the bare minimum to not get dropped by Walmart. And over time, most other growers did too. Even our competitor pulled out, which makes sense: they figured if they could use the data to game us, someone else could use it to game them.
But at least we had made the investment in digital record keeping. And even though we now keep that data solely in our own system (on what my son calls “the Cloud”), it has made us a modern farm.
Safe Without Silos: The Modern Radish34 Supply Chain Standard
Then something interesting happened. Walmart came back a few years later and announced a new program. This one even I understood.
Here’s how it works.
First, nobody puts their internal data on anybody else’s database or even any shared “ledger.” Walmart said that right up front:
“Walmart cares about consistency and continuity. We want to have confidence that everyone is on the same page. But we don’t need you to expose your private information in order to do that anymore.”
Remember I mentioned Walmart used to have a supplier portal on the web? Well, what they did was update that. They set up a simple page that listed what information they needed to be sure was consistent with our information — at what points in time, at which steps in the process — in order to have confidence that:
- There will be no disputes about the difference between the price and delivery terms in our agreement, what the delivery receipts say, what we put in our invoice, and what they wind up paying us as a result (or when they pay us, which is a big thing for us to make sure never goes wrong…cash is king);
- They can find out where every item of produce has been and where any items that may have been contaminated by diseased produce anywhere along the journey from farm to shelf has gone, so they can quickly eliminate health threats globally;
- They can query our system for things like our ability to respond to a new radish order and know that our answer is correct and authentic without them having direct access to our actual internal systems. (In other words, short of us lying all the time to our own system, they know we aren’t tampering with our original data to lie to them.)
The Walmart supplier portal presented two things:
- The contracts we have with Walmart were turned into data and computer instructions, like, “If a shipment is late by an hour, Walmart gets 1% off <price> on that produce, calculated by the <pallet>.” My son had to walk me through signing all these “smart agreements” on the computer. Now, something called Docusign lets me sign these from my iPhone. It’s pretty easy…just a few clicks.
- The information that the contracts produced went through a special version of what my son called an “API.” He said something about how it would let our system and Walmart’s system (along with other partners, like the insurance company and the FDA) be sure that if the price in our system read $1 per bunch, that’s what Walmart was seeing, too…even though the actual price is never revealed or stored outside our own systems. Apparently this was some kind of crypto-magic that — as long as it works — I’m ok letting my son worry about. Bottom line, I like that my competitor would now have to physically hack my system to find out anything about our farm.
The webpage let my son and his computer buddy from school connect our inventory management system to this “consistency API” in a few hours. They said it was a piece of cake.
Building Reputation Without Exposing Relationships
All this made sense to me. I stayed in control of my own information, but we had fewer disputes and make-goods with Walmart. Awesome. But what really sold me on giving Walmart another go on their latest automation scheme was this:
We earned points for every event where we lived up to an agreement without an incident.
If we said the radishes would be at Walmart’s distribution center on day x, and it showed up on time, we got points. If we handled a return properly according to an agreement, we earned reputation. And because getting good rates to insure the supply chain is all about the operational integrity of the partners, those reputation points help reduce insurance costs. Walmart also gives us kickbacks for high-reputation. All that has resulted in increased profitability by 2% in the last year. Sounds small, but it’s huge for a farm.
I was happy enough with all this, but then I discovered the real, hidden value of how this new system worked. It turns out that apparently the new “Radish34” system that Walmart adopted uses a different kind of blockchain, a public utility called a mainnet. It is always-on and maintained by anyone that wants to help secure it. This makes it special, because tampering with it is next to impossible. And like the Internet, I don’t need to set up a new network for every new partnership or working-group. Walmart doesn’t run it. The FDA doesn’t run it. It just runs. My son says this is good, because it also means that we don’t have to open up “ports” to lots of different systems…just the mainnet.
If we had been earning reputation with Walmart on their old network, we’d have to start over if we wanted to build reputation with anyone else. But because our reputation points accrue automatically on this public record, they can be used with any partner that wants to honor them. And they are more likely to do so for two reasons: 1) the points are verifiably authentic and cannot be tampered with or “double-spent”; and 2) there is no way for one partner to discover anything about other partners by looking at the points. That’s a neat trick. And it means that we are getting “senior supplier” terms from the new market without having to disclose anything about our relationship with Walmart. That is beyond huge.
The Benefits of Having All Partnerships on the Same Global Network
The reputation thing was the first obvious benefit, but then it got better. My son came in, amazed, saying that it took him less than an hour to set up the new relationship with Trader Joes. Then he whipped out a tablet and had me poke a couple highlighted spots on a new master agreement, and we were now “integrated” on favorable terms with Trader Joes. Wow.
My son explained: Radish34 is a standard that tells private inventory and ERP systems how to use this mainnet thing to keep specific data and business rules consistent with other private systems without exposing the actual data or code to each other or even to the blockchain itself…which is a good thing, because this mainnet blockchain is a public resource — not something you want to use to store private information. Instead, Radish34 uses the mainnet as a kind of check, a traffic cop. If I change my price and it’s within the master agreement rules we signed in Docusign, then a signal will go to the buyer’s system to update their system according to those same rules. The code of these rules run on our own private systems just like in the old days, but the mainnet helps make sure the rules run true to the original master agreement. But if I change the price in a way that we didn’t agree on, then some code inside something called a Nightfall shield contract on the mainnet runs a comparison and notifies everyone who needs to know that the price is no longer consistent and gives us clues as to where the discrepancy happened, so we can fix it.
All this means that when we got the invitation to work with Trader Joe’s, we didn’t have to set up another physical network with them…which is exactly what we would have had to do if we had stuck with the original Food Safety network (apparently Trader Joes has zero interest in joining any network that is so obviously dominated by Walmart, so it’s good that we aren’t stuck inside one network). Because the traffic cop smart contract we use to stay consistent with Walmart is running on the public mainnet, we can do two things:
- Reuse our master agreement templates, which it turns out are largely the same, except Trader Joes uses a different EDI code for something that we had to add to the new agreement…just a few lines right in Docusign;
- Allow Trader Joes to use the same query that confirms whether we are able to handle a new order of radishes as the one Walmart uses without us having to manually juggle the two and without either of them knowing about each other. This is pure magic to me. Somehow, Radish34 helps ensure that if Walmart buys up all our radishes, Trader Joes doesn’t try to order radishes we don’t have…but it does this without leaking any information that would lead to an embarrassing conversation with either of them about our relationship with the other. Again…magic…useful, awesome magic.
Things I Don’t Love About Radish34
Let’s face it. My farm — even today — isn’t like even 40% of most farms. We have computers, and we use them. My son understands stuff like the “Cloud,” and we have a successful operation that can handle the demands of major wholesalers and markets. I don’t know what it’s going to take to get the remaining 60% of the world on stuff like this, and because so many people I still deal with aren’t on any kind of data system (or aren’t on a Radish34-compliant system) I still have to resort to old-school paper on a regular basis.
If only I could get some compensation for signing up other farms.