Durian and the Value Chain

While researching my latest book “Blockchain Hurricane: Origins, Applications and Future of Blockchain and Cryptocurrency” in summer 2019, I came across an article from Fintechnews Singapore that intrigued me. “Millions of Durians Will Be Tracked on the Blockchain for Thailand’s Largest Durian Exporter,” it said. Having eaten the legendary smelly fruit (once and once only) and seen it growing in remote Malay villages, it struck me that here was a supply chain with complexity and value which could be genuinely enhanced by the application of distributed ledger technology. I wanted to know more, and I hoped that the rollout would be successful. Two weeks ago, I spoke to Adrian Teo, COO of DiMuto in Singapore, and learned more about the success of their platform, which has been proven with durian and is now being used by clients to track other fruit crops world-wide.

Solving real world problems

Launched in March 2019, DiMuto’s platform addresses several genuine problems and offered a solution which had not previously been possible. Founder Gary Loh’s background in finance had led him into the world of agri-trading, and the specific challenges for fruit supply chains. The critical problem faced by suppliers was a significant loss of revenue in settling quality claims. Producers were losing 5-10% of revenue through disputes over fruit quality from further up the supply chain, depleting margins, reducing working capital, and stagnating growth. They needed a way to prove the condition of the goods they had shipped and trace the movement of their fruit through the supply chain.
At the same time, the world has seen a growing interest from consumers in the provenance of their food. Concerns over food safety and health, highlighted by the scandal of contaminated baby milk formula in China, and an awareness of climate change and sustainable farming practices, mean that reliable and verifiable information for the end consumer is increasingly important. Traceability of goods for supply chain management and traceability for consumer information can both be tackled with the same tool.

Listening to the users

Enter DiMuto. Their first proof of concept was released in October 2018 to their existing network, who recognised the effort to solve a real pain point and adopted the solution quickly. This proof of concept was developed on DiMuto’s in-house Multichain and used a series of smart contracts to manage the steps in the supply chain from the harvest consolidation point onwards. Thanks to the trust they had already established in the network, producers and wholesalers were able to give the developers clear and helpful feedback. The message was clear: they were solving the right problem, but the smart contract structure was too restrictive. Trust had been built in effectively but at the expense of flexibility.
DiMuto took this on board and stripped their approach right down to the basic needs of the user. They did not need to build smart contract into the process for error proofing, but rather needed to deliver proof of any errors. The smart contracts were mothballed, and the project moved onto the public blockchain for its full release in March 2019. The focus of the mature platform is maintaining trust in the transactions and achieving greater transparency.

Creating a digital durian

Development of the platform has benefited from the government’s push for “Smart Singapore”. Other projects under this umbrella have included recent fast response distribution of masks to citizens in a so-far effective bid to control the spread of COVID-19. DiMuto uses Singapore’s open source TradeTrust global trade portal for validation of the data packets which are recorded on their platform, and the transactional hash is recorded on the Ethereum blockchain.
DiMuto’s information flow and processes have been designed to fit with the existing working practices of the users, from consolidators on the ground through to the wholesalers and distributors further upstream. The first step is to create a digital asset – a Non-Fungible Token (NFT). Each harvested durian is tagged with a QR code and photographed. The QR code and images of the unique fruit are linked to a unique token, creating a digital twin which moves through the digital supply chain in tandem with the real fruit. There is also some content-aware coding in place around the photographic record to confirm the condition of each fruit at the outset. As durian are batched and safely packed in boxes of seven or eight fruit, the box is also tagged and given a unique identity and linked to the individual fruit it contains. This enables producers to prove to other actors in the supply chain when exactly a fruit or batch of fruit entered the supply chain and what condition it was in, allowing spurious claims for poor quality supply to be rebuffed and genuine claims to be laid at the correct door.
I asked Adrian Teo about the challenge of taking recording all the way downstream to individual trees; the economic viability of recording that initial mile is something that has to be addressed, but the consolidators who input the first records very close to the origin of the fruit and are keenly aware of the source of each individual durian. The use of NFTs to record the unique properties of a fruit also gives DiMuto the potential to expand the data points for each fruit. One of the most interesting is the idea of using audio tools to give each fruit a measure of ripeness, as this is a traditional method of determination.

Generating real value

Traceability and provenance are among the most significant things that can be achieved using blockchain and distributed ledgers, but there is often a feeling that this is “nice to have” rather than economically significant. DiMuto have taken on board the fact that “everyone wants traceability, but no-one wants to pay for it” and have turned their system into a value generator.
The reduction in quality disputes and lower claims against producers have not only improved margins, freeing up working capital and enabling growth, but have reduced the financial and insurance risk associated with perishable and fragile fruit. The data gleaned from digitised trade gives insights into the trade itself, and this is valuable risk data for underwriting. DiMuto have now partnered with a private equity fund to enable producers to access previously unavailable trade finance.

Going global

It’s brilliant to see a project delivering real value to the right people, and here blockchain has been used appropriately and specifically to plug a data gap and address very difficult pain points. Unsurprisingly, they are now dealing with more than durian fruit. Their platform is being used by the Port of Singapore and the Port of Rotterdam, key locations in the supply chain. It is recording the journey of Mexican avocados, Australian plums, citrus fruit and morning glory, and European tomatoes from farm to plate. It supports the people at the very start of the supply chain and gives the consumer confidence in the product. DiMuto are making a significant contribution to the digitalisation of the global food trade industry, and I look forward to seeing their reach grow worldwide.

Kate Baucherel