In my previous blogs, Supply Chain Volatility – The problem of today and tomorrow and Resilient Supply Chain – the way forward for risk free execution, I discussed on the problem of availability of material as a result of the Covid19 pandemic or other such disruptive scenarios and how to bring in resiliency in the supply chain organization to resolve and protect against such scenarios in the future. We talked about the various risk factors that need to be considered and the action plan for each of the risk elements. But the question that comes up is how we identify the pain points and risk areas for a particular organization. To understand that we need to evaluate the steps of product movement from the origin to the end customer. This is what Traceability is all about. It tracks through all steps of the product development, manufacturing, processing & distribution.
Now the question that comes to our mind is why traceability is important and how can we achieve it. It helps organizations to find the source or root-cause of a defect or problem in a product and then subsequently acted for resolution and remediation. This means that if we have a return from the customer or a quality check failure in any of our internal processes, we would be able to track back on the delivery and manufacturing cycle of the product thus identifying the root cause of the problem, resolve it and identify if there are more products that needs attention. We sometimes hear of product recalls and that happens due to traceability where the organization identifies a batch or group of products where there was an anomaly or defect which would or may create issues or challenges with the customer and in fact is a compromise of quality which neither the customer nor the organization would be happy about. So, the need of traceability. And looking forward, there are three main reasons for adopting it:
A. Consumers would like to know whereabouts of their products
B. Regulators across numerous jurisdictions
C. Advancements in quality & availability of technology solutions
With all these reasons in place, many organizations manage traceability through its processes with technology, operations, and worker enablement while others go in for a traceability program to achieve it. Traceability can be of multiple types: Chain traceability where procurement to manufacturing to sales & distribution both forward and backward are tracked and Internal traceability where movement of material in an area is tracked. It is not that it is either Chain or Internal. It can be both depending on the requirements for the product and the organization. Chain traceability helps to identify and note the source of raw materials and if any defect helps to track back for correction or remediation. It also tracks manufacturing of the parts, their storage into inventory and logistics for customer shipments. Whereas Internal traceability collects, tracks, and manages the production processes to ensure quality, efficiency, and timely delivery.
Companies used to deploy different methods to achieve different types of traceability in their supply chain with the use of barcodes, RFID and blockchain. Detailed recording of all steps of the flow of materials and finished goods are maintained with storage, supplier, and transportation information. This helps in finding the origin of the raw material and track their moves. But what is the data that is needed? It needs master data in terms of supplier, customer, and product data. It also needs transaction data in terms of delivery, manufacturing, or any trade transactions. As in whole, there are various types of traceability technology tools –
A. Product Identification using bar codes – Implementation of bar codes for tracking production history with finished goods
B. Radio Frequency Identification Devices (RFID) – Tracks movement of products within closed systems without human intervention
C. Traceability Software – Collection & management of data to improve product quality, security & safety.
D. E-Kanban – Scheduling system to support production line and lower risk of mistakes
E. Blockchain – Tracking of material through every step of the product lifecycle is mapped.
There are many more which are used as a part of these processes. Traceability also helps enable certain industry standards as ISO9001:2015, one of the standards where origin of materials, manufacturing history and distribution locations are tracked and GS1, another standard used for barcodes and the corresponding issue company prefixes.
With all these tools and standards, organizations need to have a clear plan of how they would like to go-ahead with the processes to achieve traceability. As without that traceability to the last mile is nearly impossible as there will be a lack of visibility in manufacturing and procurement operations, supplier collaboration and stakeholder support. Based on a study, I felt that if we follow a few structured step-by-step processes, we would be able to achieve it:
i. Identify key products or commodities
ii. Identify risks and challenges
iii. Create a business case for traceability
iv. Map risks to traceability solutions or actions
v. Involve key personnel for practice and process enrichment
vi. Engage with external stakeholder and align them
vii. Identify new gaps, risks and follow the steps from iv to vi.
Now the next question that arises is what these traceability solutions are, how do we identify the best for us and how does it help in improving the traceability in the supply chain. In that regard, we look at certain pointers that would help in the selection process:
a. Clearly identify the traceability requirements for the organization
b. Review company’s existing resources
c. Estimate addition cost of investment with an ROI for each of them
d. Data sharing and assessing complementary tools with supply chain partners to identify the best fit
e. Alignment with trading partners and other entities
f. Data collection both internally and externally is the 1st important step in this process
There are also various traceability models that come in play based on the type of traceability the organizations would like to achieve.
a. Product Segregation: There is a clear demarcation of certified products and non-certified products at each step of the supply chain process. There are separate traceability levels set for the two groups. In some cases, the segregation of certified and non-certified is done but there is no segregation in terms of suppliers or manufacturers which is called Bulk Commodity. In other cases, in addition to segregation of certified and non-certified, there is also a segregation of supplier and manufacturer material which is called Identity Preservation. It is not dependent on the decision of the organization on which process to follow but mainly on the product and the failure steps that can occur.
b. Mass Balance: In this model, the focus is on the quantities of the raw material and here there is no segregation in terms of certified or non-certified material. This model is mainly used for determining the mass fraction of the main component of a high purity organic material.
c. Book and Claim: In this model, traceability at every step of the supply chain process is not managed and depends on the connection between volumes produced at the start of the supply chain process and the amount purchased at the end of the process i.e. it enables procurement and sales of commodities without segregation and tracing throughout the supply chain.
Depending on the type or level of traceability that the company wants to achieve, it can adopt any one of these models. It can also follow the method of collaboration where they have an independent, multi-stakeholder group who focusses on a defined or growing list of issues and coordinate and communicate with various actors in the whole cycle. There are other models that are used specific for certain industries i.e. Genealogy – used by Agri, mining where the source of raw materials have an impact on the product quality, Backward traceability – used by food and pharma organizations, where product safety and quality are critical and many more. They also look at traceability enablers as Data & technology, Partnerships, Operating model, and finally Standards & Certification costs by which they achieve safer information transfer, externally verified outcomes, data-driven trade-off evaluation, reduced transaction costs which goes into a repeated mode to achieve the desirable.
We discussed on what traceability is all about, what tools are available in the market, how do we plan to achieve traceability and what the models/solutions available for it. The next question that comes to our minds, why do we need it and how does it benefit us.
a. Documentation and Record Keeping. This helps in tracking in case of any major mishaps or breakdowns or failures
b. Enables process improvements with both manufacturers and suppliers ensuring safety measures and compliance regulations are taken care of
c. Increase brand satisfaction and loyalty through faster, organized and coordinated product recalls
d. Improve in controls for quality, process challenges or mistakes, late or defective deliveries, shortages, and other liabilities in terms of either supplier or customer
With these benefits in place, companies go on the path of traceability, but the steps may be multi-folds. Some organizations implement it by process while others do it by department. This is all dependent on the expectation of the customer for the products, compliance or sustainability needs of the industry or geography and tracking that the organization needs in either its manufacturing plants, suppliers, or contract manufacturers. So where is your organization in the traceability journey?
Please feel free to share your feedback / questions in the comments section or via email.