Instrumented Interconnecteds Intelligent
September, 28th 2009

A Point of view by Guy Blissett, IBM: Major stresses are appearing across the global food value chain, as longstanding issues such as population growth, contaminations and recalls, counterproductive farm subsidies and trade policies, and food waste—are exacerbated by newer issues like climate change and drought, high energy prices, plateauing crop yields, consumption changes, globalization and diversion of crops for biofuels. As a result, we are seeing significant price volatility, shortages, government interventions and a growing realization that the current model is not sustainable. Agriculture is already the largest human use of water, comprising an estimated 69% of total, and yet based on existing trends we will likely need to double the food supply by 2050. Clearly, a smarter approach to managing our food value chain is needed. And while technology alone cannot solve the crisis, its application to create a value chain that is increasingly instrumented, interconnected and intelligent is essential.

Most experts believe that enough food is currently produced to feed the world’s population. Indeed, from the multinational agribusiness to the family farmer, food is being produced in unprecedented quantities around the globe. However, much of the food produced is never actually consumed; Indeed as much as 50 percent may be lost or wasted between the farm and the fork. Food spoils in the field and is damaged in processing or transit. Vast amounts are also discarded due to spoilage or exceeding shelf life. A further portion is contaminated and must be removed from the supply chain, and still more is wasted by consumers and purveyors who for various reasons prepare more food than is needed.

In addition to this waste, tremendous inefficiencies remain in the supply chain as CP manufacturers, suppliers and retailers fail to collaborate effectively on sales, production, shipment and marketing forecasts – generating out of stocks, over stocks, and excessive handling and shipping activities. Out of stocks alone are estimated to cost the average consumer products company 2.5 percent of sales. Collectively these problems mean that already approximately one billion people, 15% of the population, go hungry each day and 5.6 million people die of starvation every year, according to UN estimates. At the same time, too much food is consumed by too few, already more than one in three Americans over the age of 20 are obese, and per capita consumption of water and energy intensive proteins continues to rise with incomes.

The world will continue to change rapidly as more people eat more food and specifically more water and energy intensive foods like meat and dairy, and crave fuel for their cars, collectively placing unprecedented pressures on natural resources and the systems we
use to manage them. The UN secretary general has estimated that it will require $15 billion to $20 billion a year in new investments and innovations in agriculture and technology to address these challenges. While technology alone cannot solve this unfolding crisis, its application to create a smart food value chain that is increasingly instrumented, interconnected and intelligent is essential.

Why will a smarter food value chain be instrumented? Because it will use sensing and tracing technologies, such as radio frequency identification (RFID) and barcodes, to enhance visibility as meat, fish, dairy and produce moves from the farm to the fork, lowering waste and spoilage and reducing costs. Sensors can also enable more efficient production methods by reducing irrigation, pesticide and fertilizer requirements, boosting yields and monitoring moisture, temperature and airflow during storage to minimize spoilage.

A smarter global food value chain will also be interconnected: creating visibility and connectivity across all the disparate ranches, farms, feedlots, storage bins, manufacturing and processing plants, warehouses, and retail stores that together form the global food value chain. This connectivity is increasingly important as food today is rarely consumed where it is grown or raised, frequently exported to low cost markets for processing or packaging, then re-exported as a finished product for consumption. For example, cod caught off the coasts of Norway may be shipped to China for processing into filets, only to be shipped back to Norway for sale to consumers. This inflates logistics costs and increases waste due to spoilage, damage or contamination.

Finally, a smarter food value chain will be intelligent: capturing, leveraging and sharing standardized data and integrated information to generate insights on optimizing the value chain. Smart technology can improve the complex process that is the production, distribution, storage, selling, consumption and disposal of food. Elements include improved planning and coordination, efficient storage and dynamic routing, optimization for cost, carbon and other attributes and improved traceability. The result will be more, safer, higher quality food delivered when and where it is needed, and with little waste and an extended shelf life.

The ultimate driver for many of these requirements is the smarter consumer, who expects more detailed and verifiable information about the source and contents of the food they buy. The companies that recognize and leverage this dynamic can form deeper, lasting connections with consumers. Indeed many of the anticipated 700 million emerging middle-class consumers will take their initial brand loyalties with them as their incomes grow.

A smarter food value chain will meet the world’s growing demands, and sustain that growth for generations. IBM and its business partners are committed to developing and deploying innovative technologies that collectively deliver an intelligent, instrumented and interconnected food value chain.

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