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Supply Chain Best Practices: Traceability

Posted by Charlotte Lee | April 24, 2018

Sustainability and traceability go hand-in-hand. When the lifecycle of a good can be tracked from source to point-of-sale, businesses and their customers have both the tools and the incentive to act responsibly. We’re taking a look at what it means to have a traceable supply chain, and what businesses can do to move the needle on their own traceability initiatives.

 

What Is Traceability?

Traceability embodies a broad set of initiatives ranging from quality assurance to human rights. In the supply chain space, it refers to the process of identifying and tracking a product or material's path from raw material to finished good. This involves consolidating, organizing, and analyzing data on not only where a good is at a given point in time, but also the conditions under which it is produced and the materials it contains. The following sections focus on how this insight adds value, specifically from a sustainability perspective.

When implemented properly, traceability creates end-to-end transparency that keeps businesses and their first-, second-, and third-tier vendors—and those beyond—accountable and in line with ethical business practices. It also promotes a cross-functional understanding of how decisions affect the supply chain both upstream and downstream, enabling businesses to augment performance by identifying sources of inefficiency.

 

Why Does Traceability Matter?

Traceability provides insight into the components of products, parts, and materials, and the transformation they undergo as they move up the value chain. Within the context of sustainability, this information allows organizations and their customers to verify that sustainability claims about products are backed by ethical practices. This type of visibility puts products in a global context and also helps to maintain quality control, fair labor practices, and overall regulatory compliance.

traceability_chocoCoffee and chocolate are two of the most sought-after "fair trade" consumer goods

The ability to trace the lifecycle of a good is of particular importance in tightly-regulated sectors like the agro-food industry, where the mislabelling of products and the risk of recall pose a constant threat to brand reputation. It is likewise highly relevant in the apparel industry, where labor rights abuses continue to make headlines.

But the significance of supply chain traceability has moved beyond the scope of corporate social responsibility now that consumers are beginning to express interest in where and how their products are sourced. As a result, aside from the obvious ethical benefits of committing to sustainable practices, there are practical gains to be reaped as well—external accountability can drive consumer demand. This begins with transparency measures such as publishing the names, addresses, and other information about suppliers within the supply chain and connecting them to form a comprehensive map.

Unfortunately, increasing consumer demand for sustainable products has given rise to a "greenwashing" phenomenon in which companies leverage the optics of sustainability as a marketing tactic, without actually following through in practice. This can be partially attributed to the fact that attaining traceability is much easier said than done, as many obstacles stand in the way.

 

Obstacles to Traceability

    • Information Silos — Supply chains have traditionally been structured in a manner that is counterproductive to realizing traceability; in other words, user groups tend to only have access to information on the products with which they come into direct contact, and not any other material flows.
    • Temporality — Especially in the food industry, time constraints compound the challenge of tracking products. Perishability is in constant tension with the time lag it takes to discover and respond to issues.
    • Extended Networks — Aggregating data that is spread across vast, multi-tiered networks that exposes them to different kinds of risks such as fraud, code of conduct violations, and variability.
    • Internal Opposition — Successful traceability programs require internal commitment and resources, which are often scarce and difficult to acquire given the long-term nature of the investment. Demands for a short-term ROI tend to be a common argument against pursuing traceability initiatives.

How to Implement Traceability

    1. Engage stakeholders: Traceability initiatives require communication and cooperation between a range of different parties, including but not limited to internal leadership, vendors, partners, governments, and NGOs that share an interest in the sustainability of a given product or commodity. Stakeholder engagement is likewise important because it enables the standardization of expectations, processes, and systems along the way.
    2. Conduct research: Conduct a deep dive to identify key commodities and gain an understanding of relevant sustainability issues and risks associated with them. Depending on the context, it may turn out that traceability is not an appropriate strategy to pursue for your business.
    3. Develop the business case: Distill the information obtained in the previous step to convince senior leadership that traceability is a worthwhile pursuit within the context of overarching business goals.
    4. Choose the right model: Identifying a traceability model that aligns with the particular nuances and needs of your business/industry is a crucial step in determining the future success of the initiative. It is likely that there is already an existing traceability program your organization can join.
    5. Take action: Begin deploying the tools you will use to execute your traceability initiative. Stakeholder engagement should continue to happen regularly through this step and beyond, as it is important to align on an internal policy and ensure that commitment to traceability remains strong throughout your extended network.

The Future of Traceability

A look at the activities of some of the biggest names in business offers insight into where traceability is headed. For example, blockchain, the distributed ledger technology, is a notable development that has yet to realize its full potential, but is currently being pursued by major companies such as Unilever, JD.com, and Maersk to increase transparency within their operations.

As innovation runs its course and traceability-enabling technologies become more advanced, traceable supply chains will become less of a trend and more of an industry norm. And regardless of the form it takes, as traceability grows in impact, credibility, and cost-effectiveness, more and more companies will undertake their own initiatives (or join existing ones) as a fundamental part of their supply chain management strategy.

 

CASE STUDIES

Tesco Horsemeat Scandal

The Tesco Horse Meat scandal of 2013 illustrated the potentially catastrophic costs of a lack of transparency, as the incident alienated millions of consumers and led the UK grocery chain to temporarily drop £300m in market value. Although Tesco withdrew about 10 million beef burgers from stores and dropped the supplier responsible for the failure, the incident sent reverberations across the industry and ignited a renewed effort to combat fraud in the food chain.

IPE Green Supply Chain Map

The IPE Green Supply Chain map is a tool that features the suppliers of major multinational apparel companies including Esprit, Gap, Inditex, New Balance, PUMA, and Target. The map displays real-time and historical data on air pollution, soil contamination, and wastewater for more than 15,0000 major industrial facilities. When used correctly, the mapping tool can reduce the time and expense associated with factory audits, which often struggle to identify hidden problems.

Cargill Traceable Turkeys

Cargill's traceable turkey initiative demonstrated the value of traceability in a world in which supply chain transparency is increasingly influencing sales. In the 2017 holiday season, the agricultural conglomerate leveraged blockchain in a campaign that allowed customers to trace the path taken by their Honeysuckle White turkey from a family farm straight to their table. The traceable turkey initiative catered to consumers' desire for transparency and personalization when it comes to the brands they buy.



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