TB0540

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William E. Youngdahl
B. Tom Hunsaker

Coda Coffee and Bext360 Supply Chain:

Machine Vision, AI, IoT, and Blockchain

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Teaching Note
Synopsis
This case study focuses on the application of machine vision, AI, and blockchain to coffee supply chains. Specifically,
the case focuses on a partnership between Coda Coffee and Bext360, a tech startup.

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Coda Coffee founders Tim and Tommy Thwaites focused on working directly with coffee farmers and
cooperatives to influence sustainable growing practices. They preferred their internal Farm2Cup certification
over Fair Trade since Fair Trade did not ensure the product quality that the brothers needed from their suppliers.
In 2013, Coda pursued and received B Corp status. To achieve B Corporation Certification, a business had to
meet the highest standards of verified social and environmental performance, public transparency, and legal
accountability to balance profit and purpose. At the end of the same year, Roast Magazine announced that it had
selected Coda Coffee as its Macro Roaster Roaster of the Year.
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Dan Jones, founder of Bext360, was introduced to Tommy Thwaites though their significant others who
attended a book club, described by Dan as a “good excuse to drink wine.” Passionate discussions between Dan
Jones and Tommy Thwaites quickly evolved into a partnership to provide proof of concept for Bext360’s rapidly
developing solution to achieve transparency and sustainability in coffee supply chains.

In 2017, Coda and Bext360 partnered to put a bextmachine in place at Great Lakes Coffee, a Kampala,
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Uganda-based green coffee milling and export company. Smallholder farmers deposited coffee cherries (raw beans)
into the bextmachine, near the wash stations, for analysis. Every single cherry that fell though the machine in a
waterfall fashion was shot by two cameras. The AI component analyzed the color and brightness and performed
a defect analysis. From this analysis, a potential cupping score could be determined. All data were sent to the
cloud and captured in immutable blockchain records.

Teaching Objectives
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1. To understand the value of Fair Trade and internal certifications aimed at achieving transparent and ethical
supply chains.
2. To examine, through a specific example, how Industry 4.0 technologies (machine vision, AI, blockchain, and
IoT) can be applied to increase supply chain transparency and speed payment to financially underprivileged
suppliers.
3. To debate and better understand the value of a software as a service (SaaS) solution such as that provided by
Bext360 to different stakeholders along the supply chain.
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Copyright © 2018 Thunderbird School of Global Management, a unit of the Arizona State University Knowledge Enterprise. All
rights reserved. This teaching note was prepared by Professors William E. Youngdahl and B. Tom Hunsaker for the sole purpose
of aiding instructors in the classroom use of the case “Coda Coffee and Bext360 Supply Chain: Machine Vision, AI, IoT, and
Blockchain.” It should not be used in any way that would prejudice future use of this case.

This Teaching Note is authorized for use only by Asim Khwaja, Karachi School for Business and Leadership (KSBL) until Sep 2022. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860.
 Assignment Questions

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1. What are the benefits and limitations of Fairtrade certification to business owners like Tommy and Tim

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Thwaites?
2. How does Bext360’s SaaS solution ensure transparency? What are the key strengths and limitations?
3. How can Coda sell the value of their partnership with Bext360 to their wholesale and retail customers?

Teaching Approach

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When teaching this case, we like to get students into the mindsets of the founders of Coda Coffee. To achieve
this, we spend some time up front building the foundation for everything else. Tommy and Tim Thwaites are
crazy about coffee. Coffee quality means everything to them. The following video shows Tim telling the story
about founding the company. It helps to humanize the case.
“How to Start a Coffee Company”
https://www.youtube.com/watch?v=rQ4wDaNJS2w

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After showing the video, we like to ask, “So, what do these guys really care about the most?” Some students
will focus on ethical business, but what they really care about the most is coffee quality. They want to run an
ethical business and extend those ethics all the way to the farmers who supply their coffee, but it all starts with the
desire to source and supply the best coffee possible. This point becomes important when discussing their reasons
for not preferring Fair Trade over their own internal certification, Farm2Cup. Next, we move into discussion
framed by the assignment questions.
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1. What are the benefits and limitations of Fair Trade certification to business owners like Tommy and Tim
Thwaites?

During this part of the discussion, it’s important to establish that Fair Trade Certification neither guarantees
quality nor ethics. The Thwaites brothers were keen on the greater transparency that blockchain could provide.
The Bext360 solution provided the means to check quality at the source and pay farmers immediately. The
brothers were also excited about the ability to use historical quality data to begin predicting the best sources
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of quality coffee based on elevation, geography, weather, and other factors.

Benefits Limitations
• Fair Trade is a familiar label and signal to customers • Fair Trade certification has a minimum floor for quality
that they are buying “ethical” coffee. that may not meet discriminating owners’ standards.
• Fair Trade certification increases the likelihood of • While Fair Trade certification involves periodic
sustainable coffee supply. auditing, it does not guarantee an ethical supply chain.
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2. How does Bext360’s SaaS solution ensure transparency? What are the key strengths and limitations?

In addressing this question, it is important, as an instructor, to have some basic understanding of machine
vision, AI, and blockchain.

Blockchain. Blockchain is a distributed (peer-to-peer) database approach that uses “blocks” to maintain
a continuously expanding list of ordered records. Invented by an unknown person, or people, using the
pseudonym Satoshi Nakamoto (pseudonym used by the actual unknown person or people behind the initial
project) in 2008, the technology originally served as the public transaction ledger for cryptocurrency bitcoin.
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By design, blockchain was an “open, distributed ledger that could record transactions between two parties
efficiently and in a verifiable and permanent way.”1 The technology provided a viable response to the digital
trust challenge because it was transparent, time-stamped, decentralized, and perpetual.

Blockchain has been successfully applied to supply chains to increase transparency. For example, Walmart
used blockchain to provide supply chain transparency when sourcing pork from China. Individual blocks
in the chain record the origin of each piece of meat, how the meat was processed, where and how long it
1
Iansiti, Marco, & Lakhani, Karim R. (2017). “The Truth About Blockchain.” Harvard Business Review.
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Permissions@hbsp.harvard.edu or 617.783.7860.
 was stored, and the sell-by date. Unilever, Nestlé, Tyson, and Dole also used blockchain to achieve similar

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transparencies in their supply chains. Blockchain provided consensus since all entities on the chain had the

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same version of the blocks that served a ledger. Additionally, records on the blockchain could not be secretly
manipulated or erased. The shared immutable records within the blockchain ensured transparency and could
even trigger real-time payments to suppliers if needed.2

Machine Vision and Artificial Intelligence. Visual perception is a critical part of many human tasks, such
as determining the quality of a coffee bean. This is especially true when outcomes depend on many subtle

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variables. Unfortunately, humans have limited computational capacity for evaluating and comparing
variables when performing many detailed tasks at once. The promise of combining machine vision and
artificial intelligence (AI) was to combine the human-quality visual perception of machine vision with the
computational capacity of AI.3

a. How does Bext360’s SaaS solution ensure transparency?

The key to transparency is in the immutable records, or ledger, created by the blocks within the blockchain.

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The machine vision and AI within the bextmachine feed the initial data to the blockchain. Farmers get
paid immediately with a blockchain record of the payment. This outstanding video shows the entire
Bext360 process:

How AI Could Revolutionize Coffee | Freethink Coded

https://www.youtube.com/watch?v=sP14yyQaz3s

b. What are the key strengths and limitations?

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Key Strengths Limitations
• The system creates an immutable set of records/ledger. • Marker technology is still needed
• The SaaS solution provides license owner with the ability to set permissions to prove that the product sourced
for data viewing and data entry along the supply chain. is the product received (no
• Underprivileged suppliers receive immediate payment. switching).
• Customers can trust that the supply chain is ethical since they can have • The value proposition for the end
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access to key information to prove key elements of ethical behavior. consumers is not always clear.
• The approach helps business owners exceed the minimum quality standards
enforced through Fair Trade certification.

3. How can Coda sell the value of their partnership with Bext360 to their wholesale and retail customers?

This part of the discussion presents an opportunity to delve into conscious consumerism. Conscious
consumers look to purchase products that are not only healthy but also contribute to public good with
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minimum environmental impact. Increasingly, customers want to know where a product was sourced, how
it was made, and who made it. And a growing segment of the population is willing to pay more for this
level of transparency.

By focusing the discussion separately on retail and wholesale customers, it becomes clear that the main
value for wholesale customers is coffee quality, whereas retail customers are likely to want both quality with
a growing percent willing to pay more for sustainable products.

In 2015, Nielsen polled 30,000 consumers in 60 countries. Across the board, consumers were willing to pay
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extra for sustainability. While 66 percent of all polled consumers were willing to pay more for sustainable
goods, 73 percent of Millennials were willing to pay extra for sustainability.

2
Marr, Bernard. “A Very Brief History of Blockchain Technology Everyone Should Read.” Forbes Magazine, 20 Mar.
2018; www.forbes.com/sites/bernardmarr/2018/02/16/a-very-brief-history-of-blockchain-technology-everyone-should-
read/#44a11d657bc4.
3
Rogers, Bob. “Machine Vision + AI = Solving Some of the Toughest Societal and Business Challenges.” IT Peer Network,
30 Jan. 2018; itpeernetwork.intel.com/machine-vision-ai-solving-business-challenges/.

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This Teaching Note is authorized for use only by Asim Khwaja, Karachi School for Business and Leadership (KSBL) until Sep 2022. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860.
 Examples of selling the value are provided in the following table for both retail and wholesale customers.

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Retail Customers Wholesale Customers
Quality Quality
• Promote cupping scores on menus/displays for • Promote cupping scores when selling B2B.
discriminating customers. Sustainability
Sustainability • Provide business customers with small cards that
• Add QR codes to coffee cups to allow customers to scan include QR codes that they can give to their more

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and see the point of origin and confirm that farmers had discriminating customers. This would provide the
been paid a premium, stated in percent above average, for retail solution to wholesale customers,
their coffee cherries. • Provide business customers with web-ready
• Promote coffee quality and sustainability on Coda Coffee’s promotion content for coffee quality and
web page. sustainability.

What Happened?

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This case was published in its final form shortly after interviewing the founders of Coda Coffee and Bext360. At
the time of publication, both companies appeared to be on very positive growth trajectories. Company websites
will be the best sources for identifying what happened since the case was published in late 2018:

Coda Coffee: https://www.codacoffee.com/

Bext360: https://www.Bext360.com/
Bext360 newsfeed: https://www.Bext360.com/newsfeed/
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No
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This Teaching Note is authorized for use only by Asim Khwaja, Karachi School for Business and Leadership (KSBL) until Sep 2022. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860.