Why is traceability so important?

Why is traceability so important?

Globalisation has encouraged the setup of long and decentralised supply chain networks, spanning across the entire world. Such complexity, especially in the case of food supply chains, makes it challenging and costly to track every step of a product’s journey from farm to fork, it also makes it extremely necessary if companies aim at effectively managing their supply chain risks.

Supply chain management faces several common risks that can undermine the stability of supply chains and make them more vulnerable to disruptions and financial losses. These risks are classified into four types: economic, environmental, political, and ethical. Some critical examples include volatile market environments, geopolitical instability, manufacturing risks, storing and shipment risks, financial risks such as supplier insolvencies, legal risks, quality risks, transit delays, theft, natural disasters, weather-related issues, and cyber-attacks.

Disruptions in supply chains can also be exacerbated by factors inherent to the supply chain itself, like single sources, excessive capacity use, and inadequate contingency planning.

What should companies do?

In such situations, firms need to develop a high level of supply chain resilience to endure and, if necessary, quickly restore the normal state of their operations. Business professionals and academics increasingly acknowledge supply chain resilience as a fundamental tool to avert disruptions and reduce supply chain weakness.

Supply chain resilience involves the arrangement of the production systems, supply chain activities, and processes. It is considered a key component of supply chain risk management, which is the process of detecting, analysing, and managing the risks associated with the global information and ICT structure. As well as any threats to the integrity, trustworthiness, and genuineness of goods and services along the supply chain. Supply chain risk management is a critical aspect of modern business operations.

In this context, a practical approach involves recognising and evaluating known and unknown risks, establishing a risk management framework, and implementing risk mitigation strategies, such as diversifying suppliers, fostering strong supplier relationships, monitoring supplier performance, and investing in technologies to increase supply chain visibility and resilience.

That’s exactly where traceability comes into play. An effective traceability system should facilitate faster and more accurate data collection the retention and reuse of data. Providing companies with the necessary tools and insights on supply chain operations to manage and potentially avert risks successfully.

Traceability Advantages

Traceability offers a wide range of benefits to companies deciding to implement it. It is not only an effective way to support product information documentation, but it is also increasingly pivotal in supporting compliance with the existing regulations. In addition, it enhances brand reputation and increases consumer trust in the company’s products.

When traceability is applied in the food industry, recurring benefits are connected to the ability to drastically improve food safety and quality, enhance transparency, and reduce food waste, food loss and the costs of food recalls, since it allows the early detection of hazards and quality issues, as well as the effective management of product recalls. This is especially critical considering that food safety crises may put public health at risk, leading to economic losses for the supply chain stakeholders, harm to business reputation, and loss of consumer confidence.

In recent years, traceability systems have gained increasing traction for sustainable products across many industries to collect data on production and ensure environmentally friendly practices. Supply chain experts emphasise the strong correlation between food traceability systems and sustainability goals. For instance, some evidence is provided by the concept of Traceability for Sustainability (TfS), illustrating how traceability can support global supply chains in achieving their sustainability objectives. Conversely, others consider sustainability as one of the main food traceability drivers.

Traceability Limits, Challenges & Pitfalls

If traceability sounds like a silver bullet in the hands of supply chain managers, we must clarify that it is beneficial only if effectively implemented. Instead, if it suffers from information loss, it can eventually lead to several issues and economic downturns around the world.

In the agri-food sector, information loss occurs as a consequence of inefficiencies in material and information flows due to the vulnerabilities related to either the internal traceability systems of individual supply chain operators and/or external traceability systems between the critical traceability points (CTPs).

Internally, information can be lost when product details are not consistently recorded or linked at critical traceability points, which happens for instance in cases where the operators fail to record lot or batch identification and transformation, the system is based on inefficient recording methods, standardised data lists do not exist, or human error occurs.

Although many business operators benefit from effective internal traceability systems, a lack of efficacy in external traceability systems with their commercial partners may persist. This is due to the unawareness of appropriate techniques and standards, resulting in compatibility issues among the various internal systems. To improve efficiency, one should analyse existing traceability systems to understand the potential information loss modes or events and their causes and make targeted reengineering actions.

In the food industry, a major traceability challenge is the so-called batch dispersion problem, particularly affecting processed foods, which account for more than half of the products sold globally. Such problems arise when production batches of raw materials from various suppliers, differing in prices and qualities, are blended to generate batches of final products. This increases not only the likelihood of food contamination, which may result in a recall of products from the market, but it also complicates product tracking.

While traceability systems can mitigate risks when quality issues surface, they may not resolve the problems entirely, especially in cases of batch mixing. In this case, the traceability systems limit the risks but do not reduce the quantity of recalled products. Therefore, efficient management of food safety risks necessitates complementary strategies in production and distribution planning alongside traceability execution.

Finally, efforts in the implementation of effective traceability systems are sometimes met by different obstacles. For example, many companies fail to recognising the importance of data availability and data quality. This is particularly true for small and medium-sized enterprises (SMEs), which are often hindered by lack of trust, absence of standardisation, incompatible data exchange interfaces, or technological barriers and underestimate the importance of digital technologies for their business.

SMEs often face challenges due to their weaker negotiating positions compared to larger partners, and therefore, they must develop niche strategies to encourage the larger partners to cooperate. However, fostering strong relationships and trust with external partners remains crucial for facilitating digital information sharing and enhancing data transparency.