Traceability: Beyond Compliance
Supply chain traceability is about tracking a product both forward and backward – knowing where it has come from, what’s in it, how it originated, where it’s going, and where it ends up. Gartner’s definition of traceability is as follows; [Traceability] is a set of processes and protocols, and can be used as a risk management tool for a company's business stakeholders, consumers, and external authorities. It is the ability to verify the tracking history, supply chain status, or specific location of a product across different time horizons up to and including real time. Traceability can apply to raw material components, semi-finished products and finished goods, as well as supply chain transactional data and events.
Managing traceability across the supply chain involves the association of a flow of information with the physical flow of traceable items. It requires buy-in from all participants, each performing a different role in the supply chain, but understanding the business benefits and the steps to enable traceability.
A good use case is in the pharmaceutical industry; traceability helps ensure pharmaceutical customers get what they pay for, including the safety of the product. Traceability helps stop counterfeit medicines by verifying the authenticity of the products’ ingredients, and cross-referencing them with information in a track-and-trace database. Regulations and laws vary by country, making end-to-end traceability and visibility even more essential. And the nature of the business, with outsourced production and ingredients, makes it extremely challenging. But the pharmaceutical industry is not the only industry challenged by traceability.
Quite often the drivers for traceability are government mandates. In some industries, particularly in retail, consumers are driving it at a fast pace. Today’s consumers are more demanding and want to know where their products have been sourced from, what goes in them, and who made them.
All that information needs to come from somewhere. Data from RFID tags and the Internet of Things can enable greater traceability. An example of an RFID use case for traceability is that of a Chinese pearl company that developed a method whereby a tiny RFID tag is bonded to a cultured pearl's nucleus, which is then implanted into an oyster to create a pearl with its own built-in unique identifier. This pearl can then be traced all the way back to when it was cultured, also giving authenticity to the gem.
When consumers ask brands about the origins of products, some brands use it as a differentiator. It’s their chance to stand out from the competition. For example: A chicken producer could say, ‘this organic chicken was reared on an organic poultry farm in Suffolk, UK, this chicken is called Polly.’ People care about where their food comes from. In retail, fashion, and footwear consumers essentially now want to know where and how a shirt is made and who are the people involved throughout the supply chain. Consumers connect with brands when they get a deeper understanding of the source of their clothing, from fiber through manufacturing and production. They are interested in the stories about the local textile artisans from across India or the women artisans of Bolivia, to the embroidery of nomadic tribes.
The biggest challenges for retailers, particularly in fashion, is the complexity of their supply chains. For some big global fashion brands, the number of materials in garments can be well over 2000 items, across many countries, so it's difficult to keep track of all that’s going on. Between the consumer and legislation, retailers aren’t equipped to deal with such pressures to manage deep complexity.
The best thing they can do is have a fully visible supply chain to manage this chaos. Visibility is the precursor of traceability. And visibility starts with the data. What data do you have and how can it be used? Sensors are now embedded throughout supply chains – in retail that can be in fabrics, cotton fields, store shelves, warehouses, vehicles, shipping containers etc. With all these sensors constantly gathering data everywhere, we get closer to managing traceability but also knowing more about anything that’s going on in our supply chains, anytime and anywhere. Then with the right systems in place people can share and collaborate around that data with anyone who needs to know in order to gain insights and act on those insights immediately. That’s when the value add business benefits start to take shape.
Traceability can deliver value across the entire supply chain network, starting at the source of raw materials all the way to the consumer, who is now a driving force behind it. Traceability can also align to environmental and ethical supply chain processes such as sustainability, corporate social responsibility (CSR), ethical sourcing and laws impacting labour rights and welfare. The definitions, scope and scale for traceability are very dynamic, reflecting current trends for more secure, ethical and responsible best practices across the supply chain.