On January 4, 2011, President Barack Obama signed into law H.R. 2751, the "FDA Food Safety Modernization Act," which modernizes the food safety system to better prevent food-borne illness and allows businesses to respond more efficiently and effectively to outbreaks. This is perhaps the most significant development in recent history of the role that U.S. government and regulation will play in traceability in the brand-oriented value chain space. It will be interesting to see how the details of the Act are i
Product recalls in consumer packaged goods can have a tremendous negative impact on a company. Finding ways to reduce exposure and limit the scope of a recall is a priority. At the same time, many governing bodies impose regulations on manufacturers of consumer goods to ensure safety and quality levels. These two factors contribute to a company's interest in traceability. For brand-oriented value chains (BOVC), the generally accepted definition of traceability is the process and/or systems that provide the ability to identify all relevant data (and their relationship) for the materials used during production and distribution of finished products. The focal point for manufacturers of brand-oriented goods is using traceability to detect possible product-related problems more quickly and then mitigate the effects of those problems through more targeted responses.
Many of the BOVC companies we have interviewed on this topic shared that traceability is a multi-faceted approach that combines people, processes, systems, and technology to solve these business problems. It needs to begin during the design phase of a product, and extend through manufacturing to delivery of the finished goods to the customer. At each step in each phase, there need to be processes in place to capture and share the appropriate data, passing it along through to the next phase, and aggregating it at the end to create a complete picture of the final product. These processes can be manual, automated, or a combination of both. When traceability is being practiced correctly within a company, at any point in the business chain, the company has the ability to track upstream or downstream the critical information linked to the particular product.
Making the business case for traceability may be more straightforward for BOVC manufacturers than in other industries. When product recalls and food safety concerns erupt in this segment, the potential harm to the business is significant. The impact it can have on brand image alone is alarming. BOVC companies want to mitigate their risk in this area as much as possible, and traceability is viewed as a primary way to do so. Yet, traceability is both a business process and a set of application tools, so ensuring that the right process is in place is critical prior to investing in IT tools. It is also critical to ensure that the business 'trusts' the data. Investing 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.
A more complete treatment of traceability in brand-oriented value chains can be found in a recently published research report available on the IDC Manufacturing Insights website (Best Practices: Supply Chain Traceability in Brand-Oriented Value Chains, Doc #MI226852, February 2011), including an overview of the role of GS1, a few key vendors in the space, and a detailed discussion of both the challenges and opportunities for manufacturers thinking about improving their traceability capabilities and/or investing in IT tools.