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November 17, 2022

Supply Chain Traceability: The Benefits and How it Works

From labor shortages causing transportation slowdowns to the blockage in the Suez Canal to COVID-19 and European war supply chain disruptions, the international supply chain has recently seen its fair share of difficulties.

As a result, supply chain traceability has emerged as a top concept to help protect and prevent these large-scale disruptions. Industry experts are predicting that companies that invest in supply chain traceability in the next few years will see significant increases in their ability to spend less, produce less waste, protect their supply chains, and better meet customer demand.

Supply chain traceability can feel like a huge lift, but it’s a necessary step for companies to take if they want to protect the future of their business. By getting a handle on their supply chains, and tracking materials/ingredients from source to shelf, companies access the data necessary to smartly shape their business objectives and priorities.

So, what exactly is supply chain traceability? How does it work? And what benefits are there for your business?

What is Supply Chain Traceability?

Anyone who has ever ordered a package online probably understands the concept of product traceability, at least partially. Once a product is shipped, at each step of the process, a barcode is scanned so that your package’s location is continuously updated. The tracking number you receive lets you follow your package as it moves from the warehouse to the distribution center until finally the package is placed on your doorstep.

Essentially, supply chain traceability is the ability to trace all elements of a supply chain from start to finish. Unlike the example of shipping a package, supply chain traceability doesn’t simply begin at the warehouse. Complete traceability means tracking where raw materials originate and following their entire journey through production to the end of the product’s life. One example is a coffee brand knowing the farmers growing their coffee beans, and the journey from source to shelf.

How Supply Chain Traceability Works

If supply chain traceability seems like a big undertaking as a brand, you’re not wrong. Because supply chains are made up of various contributors – people, manufacturers, and companies – end-to-end supply chain traceability requires efficiency, digitization, and cooperation across the supply chain. But the technology of today makes supply chain traceability much more efficient and possible than in years past. With emerging digital technologies, such as the blockchain-based traceability solutions created by BanQu, companies can track products and goods throughout their entire supply chains.

Supply chain traceability gives companies data about the origin of raw materials and products, sourcing and labor practices of suppliers, conversion practices, and movement from source to shelf. Using this data, companies can make decisions about how to source materials in a more efficient and sustainable way.

Advantages of Traceability

While supply chain traceability takes an investment of money, effort, and collaboration, the advantages far outweigh the work, particularly for brands hoping to build resiliency and protect their growth and bottom line. Some of the top advantages of traceability include:

  • Efficiency

Traceability reduces human errors, such as inventory miscounts, which in turn leads to more efficient business practices. Using more precise data, companies can make better decisions based on the ever-changing wants of customers. Plus, traceability gives a company more reliable data and insights to drive better business and sustainability measures.

  • Sustainability

One of the major shifts in the global economy today is the move toward sustainability. Traceability is a major way in which companies will be able to meet sustainability goals. Supply chain traceability makes every step of a supply chain visible, no matter how complex, and provides provenance and sustainability certification information.

  • Resilience

The international supply chain can be – as we’ve all seen – highly volatile. Supply chain traceability increases the resilience of your supply chain, giving you more power to weather supply disruptions.

  • Competitiveness

When supply chain traceability is implemented well, you’re able to get the right products to your customers faster. In a world of growing impatience and Amazon-quick services, ensuring your products are in stock and arrive as promised boosts customer satisfaction and your competitive edge.

Product recalls are a headache to manage and end up costing you money. However, with traceability systems in place, managing recalls is much easier. You can pinpoint which lot numbers or batches are problematic as well as inform customers much more quickly of any issues.

  • Compliance

Complying with federal regulations is often one of the biggest motivators for setting up a traceability system, particularly as regulations only increase. Traceability helps you remain compliant, protect your product, and thus avoid fines, litigation, or costly border seizures.

Real-life Examples of the Importance of Traceability

  • The blockage of the Suez Canal is perhaps one of the more memorable supply disruptions of the past couple of years. In March 2021, the containership Ever Given ran aground and blocked the Suez Canal for a total of six days. Because the blockage happened in a location where only one navigation lane exists, the entire canal was blocked. This led to a backlog of containerships and many delayed shipments, which held up billions of dollars in trade. However, the companies using product traceability knew which ships their products were on. These companies were able to remain agile and avoid the worst of the disruption by quickly rerouting shipments.
  • Fast food restaurant giant Subway has implemented product traceability on a wide scale across its supply chain, to great results. By using GS1 barcodes, which are scanned throughout the supply chain, Subway has been able to trace its vast supply chain. In fact, 98% of the products are currently tracked, with data shared from 94% of suppliers. Subway has found that supply chain traceability makes operations run more efficiently. Both invoicing and inventory management are easier while mispacks and discrepancies are reduced.
  • The pharmaceutical industry has seen an increase in counterfeit drugs, which puts people’s health and lives at stake. In order to prevent the accidental sale of counterfeits, the U.S. Drug Quality and Security Act was signed into law in 2013. This law established regulations on tracking and tracing prescription drugs throughout pharmaceutical supply chains.

Traceability Data

Traceability is crucial for companies because of the data it can provide to drive better business. Typically, in supply chain traceability, three kinds of data are collected:

  • Master data

Master data is essentially information about customers and suppliers. It provides context for business transactions and is permanent — or at least consistent — data. Master data may include company name, contact details, and address. Having this master data enables you to know the major actors throughout your supply chain so you can have greater end-to-end visibility and connection.

In the — hopefully rare — event you ever need to change a supplier due to compliance issues, add in a new supplier, or adjust your sourcing, having visibility into this master data throughout your supply chain will make the process much easier.

  • Transaction data

Transaction data comes from trade transactions, such as the transfer of ownership recorded in an invoice or the transfer of custody recorded with proof of delivery.

Transaction data is an important piece to getting a true handle on your supply chain in that you can ensure processes are running as efficiently as possible, and all contributors are being paid fairly.

  • Visibility event data

Visibility event data records business process steps and typically answers the questions, “What? When? Where? Why?” Examples of visibility event data may include producing, shipping, or receiving.

Visibility event data powers you to have an extra granular view of the happens throughout your supply chain, from material transformations to geolocations, to ingredient quality, and beyond.

While each type of data is important on its own, all three work best together to help you achieve true traceability that drives better business through risk mitigation and supply chain resiliency.

Traceability Standards

No single set of traceability standards exists (yet), but there are organizations with traceability standards you can begin to implement to get a head start on your traceability efforts and begin reaping the many benefits as soon as possible. The following two standards are the most used today.

GS1: The first set of traceability standards comes from GS1. GS1 outlines a set of systems to put in place in order to achieve supply chain traceability. GS1’s standards use barcodes, data carriers, eCom, and EPCIS to create end-to-end traceability. All products must be marked with a batch/lot number. Critical events that must be tracked include creation, transportation, transformation, and depletion.

International Organization for Standardization (ISO): The other traceability standards worth mentioning come from ISO. To be certified for supply chain traceability, ISO 9001:2015 sets out certain conditions that must be followed. Per ISO 9001:2015, the following must be tracked:

  • Origins of materials and parts
  • Processing history
  • Location after distribution/delivery

ISO 9001:2015 is the standard that will apply to most companies. However, there are ISO standards that are industry specific, such as ISO 13485:2016 which pertains to medical devices, and ISO 22000 for food safety.

Tips for Achieving Supply Chain Traceability

Because of the global nature of most supply chains, supply chain traceability may feel overwhelming to tackle. But enacting your own traceability system doesn’t have to happen all at once. In fact, according to Bain & Company, the first step you should take is to choose a pilot program and focus on applications based on clear business objectives. At the same time, you’ll want to consider how to scale your pilot from the get-go. Companies with no plan for scaling their traceability systems struggle to move beyond the pilot. So, start small (but start somewhere) and plan to expand.

Investing in the right traceability solution will also make a huge difference in sustainably building out your traceability and keeping everything digitized, real-time, and in one place. For example, BanQu uses blockchain technology to help you implement a traceable supply chain. With solutions like BanQu, you can capture insights throughout your entire supply chain — all the way down to the source — to optimize your efficiency and compliance, and power you to drive better business and sustainability decisions.

If you’d like to learn more about how BanQu can help you achieve supply chain traceability, schedule a chat with us here!

BanQu creates blockchain solutions for some of the modern world's biggest challenges, such as supply chain transparency and identity platforms for impoverished populations. We believe that with blockchain's bright future, world poverty can become a thing of the past.

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