BIXS: Tracking Cattle to Fight Disease
Albertan ranchers think they can contain mad cow disease outbreaks by sharing information throughout the cattle supply chain.
Mad cow is the beef industry’s worst nightmare. The fatal neurological disease, formally known as bovine spongiform encephalopathy (BSE), threatens more than just cows: It can be transferred to humans who eat contaminated meat in the form of Creutzfeldt-Jakov Disease, which is also fatal.[1] For that reason, any BSE outbreak has intense repercussions. When one cow in the Canadian province of Alberta was discovered to have the disease in 2003, over 40 countries banned the import of Canadian beef.[2][3] Government estimates pegged the cost of the outbreak at CAD $5.2 billion.[4][5]
BSE outbreaks lead to these serious repercussions in part because of difficulties tracking the disease’s spread. Without a system for tracking cattle throughout their life cycles in 2003, it was impossible to know which animals had come into contact, eaten the same feed, or otherwise interacted with an infected cow.[6] Given this uncertainty, importers of beef reacted with extreme caution to any outbreak.
Enter the Beef Information Exchange System (BIXS), a joint venture led by the Canadian Cattleman’s Association. The company is trying to solve cattle traceability issues with digital technology, developing an operational model that uses RFID tags and an online information database to track cattle throughout the supply chain.[7]
Similar projects have faced stiff headwinds in the past. The American federal government scrapped its National Animal Identification System (NAIS), designed to help authorities quickly identify and track livestock in the event of a disease outbreak, in 2010, after six years of work. Resistance from farmers and ranchers was simply too fierce: Cattle producers in particular objected to the the extra work in having to report their animals’ movements.[8]
BIXS seeks to avoid that trip by being more than a tracking system. Instead, it has created a database for sharing information among stakeholders throughout the supply chain, adding value at each step.
BIXS relies entirely on digital technology to deliver value. Its process begins when operators scan new animals into their systems via RFID ear tags, which new government regulations make mandatory.[9] Once the cattle are scanned, operators input information ranging from the feed and vaccines given to animals to the quality of their marbling at slaughter.[10]
Exhibit 1: Information Provided in the BIXS Database
Though operators must spend time inputting this information, they benefit from the information entered throughout the rest of the chain. For example, after slaughter ranchers can look up the cattle they sold to meat processors. These packers have entered data regarding each animal’s quality ratings and other characteristics into the BIXS database. Operators can use this data in conjunction with their own inputs to evaluate what actions produced the most valuable meat. At the other end of the supply chain, retailers can use BIXS to give their customers a new level of information on the origins of their beef.[11]
Exhibit 2: BIXS Information Flow Diagram
This system, company CEO Hubert Lau argues, will help each sector of the supply chain “circle up around the wagons” rather than working independently and often at cross purposes.[12] Meanwhile, information sharing creates a digital trail for every head of cattle, which authorities can use in response to future disease outbreaks.[13] The system has already notched one victory: Alberta saw one case of BSE in 2015, but Canada’s beef exports were not impacted.[14]
BXIS has been expanding steadily since 2014 and to date has registered 1.8 million births and 2.9 million carcass records.[15] But those numbers represent only a small fraction of the industry.
BIXS’s greatest challenge is signing up the stakeholders at the beginning of the supply chain: ranchers. The Canadian cattle industry is fractured and the average age of ranchers is north of 54. Thus BIXS faces the daunting task not only of signing up a large number of small ranchers one by one, but also of convincing ranchers resistant to technology to learn to use this new product.[16] Given that the BIXS value proposition throughout the supply chain relies on providing high-quality information, it cannot afford holes in its chain.
In order to solve this issue, BIXS must find ways of attracting customers to its technology that go beyond the draw of good information. It can start with ranchers by partnering with another centralized service that has broad reach in a far-flung community: banks. Most cattlemen finance their herd. Banks would benefit from granular information on herds; if they could track each head of cattle from birth to sale, they could also track the farmer’s ability to meet payment conditions. BIXS should work with banks to bring individual ranchers into the database as they sign new loans.
Only if BIXS is able to win over ranchers and make itself ubiquitous will it be able to live up to its promise to provide information throughout the supply chain and traceability to regulators. Until then, the company will be a promising digital technology without a firm business model.
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[1] Stephanie Strom and Hiroko Tabuchi, “A Break for Embattled Ranchers,” The New York Times 28 January 2013, accessed 14 November 2016 at http://www.nytimes.com/2013/01/29/business/global/japan-to-ease-restrictions-on-us-beef.html.
[2] “Timeline: Canada’s 2003 Mad Cow Disease Crisis,” The Canadian Press, 31 February 2015, accessed 15 November 2016 at http://globalnews.ca/news/1830438/timeline-canadas-2003-mad-cow-disease-crisis/.
[3] Canadian Cattleman’s Association, “Industry Stats,” accessed on 15 November 2016 at http://www.cattle.ca/resources/industry-stats/.
[4] “Mad Cow Disease in Canada: An Economic Overview,” Library of Parliament, 5 July 2005, accessed 15 November 2016 at http://www.lop.parl.gc.ca/Content/LOP/ResearchPublications/tips/tip116-e.htm.
[5] Nor is BSE a problem limited to Canada. Not until 2013 did Japan – formerly the biggest importer of American beef – fully resume imports after banning them following a 2003 outbreak in the state of Washington. Bans of American beef following that outbreak cost American ranchers and processors over USD $11 billion. (Christopher Doering, “Mad Cow Ban Cost U.S. $11 Billion in Beef Exports,” Reuters, 7 October 2008, accessed 15 November 2016 at http://www.reuters.com/article/us-madcow-beeftrade-exports-idUSTRE4969C120081007)
[6] “Bovine Spongiform Encephalopathy in a Dairy Cow – Washington State, 2003,” Centers for Disease Control and Prevention, 8 January 2004, accessed 15 November 2016 at https://www.cdc.gov/mmwr/preview/mmwrhtml/mm5253a2.htm.
[7] “Beef InfoXchange System 2.0,” Alberta Agriculture and Forestry Department, accessed 15 November 2016 at http://www1.agric.gov.ab.ca/$Department/deptdocs.nsf/all/aet15225/$FILE/bixs-2-overiew-ab-ag-workshops-2015.pdf
[8] William Neuman, “U.S.D.A. Plans to Drop Program to Trace Livestock,” The New York Times, 5 February 2010, accessed 15 November 2016 at http://www.nytimes.com/2010/02/05/business/05livestock.html?rref=collection%2Ftimestopic%2FMad%20Cow%20Disease%20(Bovine%20Spongiform%20Encephalopathy)&action=click&contentCollection=health®ion=stream&module=stream_unit&version=latest&contentPlacement=10&pgtype=collection
[9] Here, the fact that BXIS was formed in 2014 is crucial: The NAIS stumbled in trying to convince farmers to invest in RFID tags starting in 2004, but in the decade since the technology has achieved significant penetration.
[10] Interview with Hubert Lau, Executive VP of BIXSco, by the author, 12 November 2016.
[11] Some retailers are using BXIS to label the meat they sell with its origin ranch and location. Others are using BXIS to better audit their sustainability programs. McDonald’s Canada is one flagship customer that has signed on to BXIS in order to give consumers confidence in where their hamburgers originated.
[12] Interview with Lau.
[13] Lee Hart, “New Company Set Up to Deliver BIXS Livestock Data System,” Alberta Farmer, 8 December 2014, accessed 15 November 2016 at http://www.agcanada.com/daily/new-company-set-up-to-deliver-bixs-livestock-data-system.
[14] Sarah Begley, “Canada Has a Case of Mad Cow Disease,” Time, “13 February 2015, accessed 15 November 2016 at http://time.com/3708925/canada-mad-cow-disease/.
[15] Debbie Furber, “BIXS Can Track Carcass Data; Just the Cost Is Unknown,” Canadian Cattleman: The Beef Magazine, 1 November 2016, accessed 14 November 2016 at http://www.canadiancattlemen.ca/2016/11/01/bixs-can-track-beef-carcass-data-just-the-cost-is-unknown/.
[16] “Number of Farmers Is Shrinking, While Average Age is Climbing,” The Canadian Press 18 February 2014, accessed 15 November 2016 at http://globalnews.ca/news/1156570/number-of-farmers-is-shrinking-while-avg-age-is-climbing/
Do you think that the ranchers most likely to use this interface are the ones least likely to have operations considered high-risk for BSE? Since BSE is usually a result of eating contaminated food, I would think that the ranchers more likely to cut corners with the food supply of their herd are the ones that would avoid this database. In fact, without regulations requiring compliance, I wouldn’t expect the small operators to have an incentive to participate in the process. The large ranchers, on the other hand, have every incentive to be able to use this database to bring credibility to their operations.
Fascinating summary though, enjoyed reading it!
Interesting post. I like the idea of banks pushing this technology to ranchers. The banks can provide some incentive scheme for ranchers to opt in when they seek financing. BIXS will have to prove the value add to the supply chain to the banks and also show how the banks can capture that value. Not an impossible task, but a hurdle nonetheless.
BMW, you bring up what may be a valid point. However, I think that BSE is an example of one of many applications along the value chain. You would be surprised what kind of programs can be set up to incent small operations to comply with seemingly arduous regulation. For example, many organic and fair trade labels demand a high fixed and variable cost to participate in. Part marketing and part operations, these labels can come to carry considerable weight with consumers. Imagine a distinct label, contingent on BIXS certification throughout the cattle lifetime, placed upon a package of meat that signifies quality and safety to a consumer. If executed well, this can create considerable product differentiation and increase value of a product.
Building on the issue BMW has raised on regarding the most out-of-compliance farmers dodging the system that is designed to protect the industry from those exact practices, this type of platform immediately feels like a tragedy of the commons to me. Each individual rancher adds value to the entire system of other ranches by complying and adopting the technology; however, at the time of adoption, there is no benefit to the rancher him/herself to reward sign-up behavior. In theory, the best place this could go would be to invoke a nash equilibrium situation, where every actor is making the best possible decision for him/herself participating, as long as the behavior of all the other ranchers does not change.
To Denton’s suggestion, regulation would be both expensive and difficult to enforce. I could imagine a system where no beef could be brought to market or exchanged without a tag history of where it came from; however, I feel ranchers would be heavily incentivized to cheat such systems to meet cost and profitability constraints. BIXS strikes me as one of those great platform ideas that has an uphill battle to fight to drive value and reach ubiquity, I agree with Fris’ analysis above.