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Guest Blog: Growing Importance of Supply Chain Traceability

Supply Chain Traceability

On January 4, 2011, President Barack Obama signed into law H.R. 2751, the FDA Food Safety Modernization Act (FSMA), which puts legislation in place to help companies modernize the food safety system to better prevent foodborne illness and allows businesses to respond more efficiently and effectively to outbreaks. This is perhaps the most significant development in recent history in terms of the role that the U.S. government—and governmental regulation more broadly—will play in traceability in the manufacturing space.

Clearly not all segments of the manufacturing industry are equally impacted by food safety legislation, but for those who are, this new law may be a blessing in disguise. When product recalls and/or food safety concerns become an issue for a particular manufacturer, the potential harm to the business can be both costly and long lived. Whether it is the lost revenue due to business interruption and physical recall costs, or the more intangible costs from the erosion of employee morale and negatively affected brand image, the magnitude and duration of a product recall can be devastating to a business.

In recent years, many industry surveys and reports have painted a sobering picture of the state of product recall execution, including:

  • The lack of speed in identifying, and then notifying customers that there is a food safety issue.
  • Less than a third of food manufacturers can locate information about affected product lots within two hours.
  • Over 40% of consumers buy different brands today versus two years ago because of product quality or safety concerns
  • Improving product quality is a top priority for food and beverage manufacturers

Despite the potential impact to their business, many manufacturing companies for whom supply chain traceability is critically important are unsure of how and where to proceed. I think this is because traceability is both a business process and reliant on a set of application tools. This means that ensuring that the right process is in place is critical prior to investing in any kind of facilitating technology. Traceability is also inexorably intertwined with the upstream suppliers and downstream customers that characterize the extended supply chain. So it is not enough, for example, to have comprehensive intra-company traceability; companies must also have visibility into suppliers, their supplier’s vendors, freight carriers, and customers. This inter-company traceability, the provocatively coined “farm to fork,” is far more complex.

Yet, there are manufacturing companies that I have worked with who have strong capabilities in terms of supply chain traceability, and they share four common traits:

  1. Product quality, risk management, and supply chain visibility business processes are in place to ensure consistent and verifiable performance.
  2. Suppliers and third-party logistics providers are evaluated (both during the initial qualification process and during the business relationship) for their ability to provide visibility and clear source identification.
  3. Technology is employed to facilitate the business process and eliminate as much latency as possible.
  4. The business “trusts” the data. Contrarily, investing in people and capital in a modernized traceability system, but then reverting to old behaviors because business leadership does not trust the output, makes the investment in the capability pointless.

Having the right traceability processes and tools in place will not prevent the spread of food safety incidents. However, once traceability tools are in place, companies can react more quickly to a potential problem (protecting the consumer) and emerge from a product recall with limited cost exposure and brand damage.

The views and opinions expressed in this blog submission are the author’s and do not necessarily reflect the opinions of the C.H. Robinson Worldwide, its affiliated companies, or their respective employees. C.H. Robinson Worldwide is not responsible for the accuracy of any of the information supplied by the author.