In response to an increasingly challenging business climate, many of the world’s leading brands have invested in traceability solutions \u2013 tools that enable companies to track and trace their products through their supply chain all the way to the end customer.<\/p>\n
Traceability technology is advancing quickly and has changed a lot in just the last few years; QR codes are scanned hundreds of millions of times a day by billions of people, and RFID chips are appearing on more and more products, with both kinds of “tags” establishing important roles in traceability solutions.<\/p>\n<\/div>\n\n
Whether you’re struggling with specific traceability issues or just exploring this trend in supply chain management, we’re confident that this detailed guide based on recent traceability case studies<\/a> will provide actionable insight for your organization.<\/p>\n<\/div>\n\n Traceability refers to the capability to track and trace products in your supply chain from production or manufacturing to the end customer. Product traceability requires the generation and organization of supply chain data, and is used to increase supply chain visibility.<\/p>\n<\/div>\n\n The technologies for product traceability developed rapidly over the past decade along with the emergence of regulatory requirements for unit-level tracking of tobacco products (EU, 2014)<\/a>, pharmaceuticals (US, 2013<\/a>), and medical devices (EU, 2017<\/a>). Today, many industries have begun embracing traceability technologies for benefits beyond regulatory compliance. Modern traceability technology is benefitting businesses in the following ways:<\/p>\n<\/div>\n\n Highlighting the importance of traceability for sustainability, the European Union\u2019s Green New Deal<\/a> has defined Digital Product Passports<\/a>, including standards for tracing a product’s upstream inputs, as a cornerstone initiative to drive companies to be more sustainable, covering a broad range of industries and products.<\/p>\n<\/div>\n\n Traceability requires some combination of several of the following technologies and technical processes:<\/p>\n<\/div>\n\n Feel free to skip this section if you’re already an expert : )<\/p>\n<\/div>\n\n Supply chain traceability can be broken down into \u201cupstream\u201d and \u201cdownstream\u201d traceability. Upstream<\/strong> refers to the source and journey of your product inputs, ingredients, or raw materials, while downstream<\/strong> refers to tracing your product after production through the supply chain to the customer.<\/p>\n<\/div>\n\n Both \u201ctraceability\u201d and \u201ctrack and trace\u201d are often used interchangeably when referring to product or supply chain traceability. Traceability is becoming more popular today and can refer to both upstream and downstream use cases.<\/p>\n<\/div>\n\n Product traceability focuses on attaching a unique identifier or code to each individual product and maintaining a record of each product\u2019s journey through the supply chain. This usually requires scanning equipment and people to scan the product and it’s box, pallet, etc. at multiple points in the supply chain.<\/p>\n<\/div>\n\n Logistics traceability usually refers to tracking containers or other logistics assets using GPS sensors along their journey on trucks, ships, and planes.<\/p>\n<\/div>\n\n To achieve product traceability across multiple downstream distribution points and to the end-customer, it\u2019s usually more practical to independently gather product location data from QR code or RFID scans than to try to integrate with various logistics data systems.<\/p>\n<\/div>\n\n Traceability provides significant value to businesses with complex supply chains and distribution networks by detecting parallel imports, improving distributor inventory management, simplifying product recalls, helping with regulatory compliance, helping achieve sustainability goals, and communicating product origin to end-customers.<\/p>\n<\/div>\n\n We explore each of these benefits of traceability in more detail below.<\/p>\n<\/div>\n\n Brands use supply chain data to understand how products are reaching the market, how their distribution network is performing, and whether or not distributors are violating their contracts and selling to unauthorized markets.<\/p>\n<\/div>\n\n Case Study: R\u00e9my Cointreau & product traceability<\/a><\/p>\n<\/div>\n\n One key challenge for supply chain traceability programs is how to capture data in the \u201cmiddle\u201d of the supply chain when products are in the custody of the distributors or channel partners.<\/p>\n<\/div>\n\n In some industries, such as food and beverage and industrial goods, the brands have limited leverage over the distributor and thus limited or no ability to gather supply chain data from them.<\/p>\n<\/div>\n\n Reasons why it\u2019s difficult to get supply chain data from distributors include:<\/p>\n<\/div>\n\n Modern traceability systems address the above challenges for obtaining supply chain data from distributors in two ways:<\/p>\n<\/div>\n\n End-user data from connected packaging campaigns is a key benefit for brands. By incentivizing users to \u201cscan\u201d or engage with the packaging, more data can be gathered while offering end-users useful information.<\/p>\n<\/div>\n\n Traceability can enable better demand forecasting and distributor inventory management, with two categories of benefits:<\/p>\n<\/div>\n\n Traceability solutions can help identify products that have been recalled and trace them through their distribution path and further upstream to their manufacturing and production.<\/p>\n<\/div>\n\n Traditionally, tracing recalled or damaged goods have been done manually using text codes with batch, lot, and serial numbers printed on products. This approach lacks unit-level supply chain traceability data and a channel for customer engagement.<\/p>\n<\/div>\n\n In modern traceability solutions, unit-level tags on each product provide distribution and shipping information for each item, including the production data (batch, lot) and logistics or shipping data (box, crate, pallet) across points in the supply chain. Companies use this data to identify issues in their distribution that are impacting product quality and in turn their profit margins.<\/p>\n<\/div>\n\n Many industries are regulated such that products and their ingredients, raw materials, or other inputs must be traceable to the unit level. This can only be accomplished at a reasonable cost using serialization – the printing, labeling, or even laser marking of unique codes on products and packaging.<\/p>\n<\/div>\n\n Examples of regulatory requirements related to product serialization include:<\/p>\n<\/div>\n\n Case Study: Ferrara Candy & ingredient traceability with QR codes<\/a><\/p>\n<\/div>\n\n A new initiative in the EU called Digital Product Passports<\/a> would require industries including batteries, textiles, construction materials, electronic waste, plastics, chemicals, and automotive parts to have unique identifiers which can be used to score the environmental impact of their production. The first industries are planned to be regulated before 2024.<\/p>\n<\/div>\n\n Traceability enables emerging business models and practices where the product or product packaging is reused, repaired, refurbished or recycled. This is increasingly common in electronics and industrial goods, where a wide variety of products \u2014 from computer parts to automotive batteries to barrels of oil \u2014 now have recycled components or parts of their packaging reused or re-filled, saving costs and reducing their environmental or carbon footprint.<\/p>\n<\/div>\n\n Supply chain traceability systems are now being used to facilitate these emerging business models and to prevent counterfeit or unauthorized use of such parts, as well as parts from unauthorized channels entering the upstream supply chain.<\/p>\n<\/div>\n\n The newly proposed EU Digital Product Passports program<\/a> would create standards for such traceability and how to score the carbon footprint of products, and require certain industries to leverage such systems and provide this information to their customers.<\/p>\n<\/div>\n\n Upstream supply chain data which includes a product\u2019s raw materials and ingredients can be shared to consumers of that product. This is a common use case for consumer packaged goods (CPG), apparel, food, beverage, and coffee brands.<\/p>\n<\/div>\n\n Food brand Knorr uses upstream supply chain data<\/a> to provide information about the premium ingredients used in their soup products to customers.<\/p>\n<\/div>\n\n Case Study: Knorr & Brand Loyalty through connected packaging<\/a><\/p>\n<\/div>\n\n In general, companies with the following characteristics see the highest ROI for supply chain traceability solutions:<\/p>\n<\/div>\n\n Traceability data is organized into two categories – upstream traceability<\/strong> and downstream traceability<\/strong>. We’ll describe the data that can be obtained from each of these, followed by location and GPS data, below.<\/p>\n<\/div>\n\n As we’ve defined previously, upstream (production) traceability data refers to raw ingredients, materials, machine parts, or other inputs to a product. Common upstream data include:<\/p>\n<\/div>\n\n Typically, the inputs of a product from suppliers are stored in the producing company\u2019s ERP system(s). These are associated with product batch and lot data. In recent years there has been a push to also start tracing inputs from different suppliers farther upstream or earlier in the supply chain; this is typically to adhere to regulatory standards, monitor certifications for sustainability or human rights and other standards, and to calculate the CO2<\/sup> footprint along the entire lifecycle of a product.<\/p>\n<\/div>\n\n No standardized approach for tracing product inputs and ingredients has emerged to date, and different industries have begun trying different approaches. Cloud-based solutions for indirect vendor management, manual data collection, and even blockchains are\u00a0among the patchwork of solutions being used.<\/p>\n<\/div>\n\n Dedicated platforms collecting and providing upstream supply chain data for specific industries and materials include Circulor<\/a> for plastics and batteries and Farmer Connect<\/a> for agricultural products.<\/p>\n<\/div>\n\n All of these emerging upstream traceability solutions seek to directly link products, at the unit level, back to their upstream origin, inputs, and ingredients.<\/p>\n<\/div>\n\n Unlike upstream data, downstream traceability data comes from the point of production and onward in the supply chain. It’s generated by the producer or manufacturer of the product, distributors, and the customer through scanning the product packaging or product or part itself. Common downstream traceability data includes:<\/p>\n<\/div>\n\n Unit (product) & production data<\/strong><\/p>\n<\/div>\n\n Logistics & shipment data<\/strong><\/p>\n<\/div>\n\n Channel partner, distributor, dealer, wholesaler, point-of-sale<\/strong><\/p>\n<\/div>\n\n Customer and consumer engagement data<\/strong><\/p>\n<\/div>\n\n Technically passive and active location data is associated with the product or logistical and shipment data mentioned above, but it\u2019s important enough to call out on its own here. There are two categories of location data:<\/p>\n<\/div>\n\n Printed codes such as QR code or RFID\/ NFC tags, are placed on products or logistic units. When a device \u201cscans\u201d it at predetermined points in the supply chain, the location information is uploaded to a traceability system. Smartphones and tablets with mobile apps are increasingly being used for such scanning. Android-based handheld barcode scanning hardware with mobile apps connected to the brand’s traceability system are also used.<\/p>\n<\/div>\n\n The traceability system only shows the last hop that a product or logistic unit was scanned at. This approach balances between usefulness of data and acceptable costs for most product categories. Scan-based solutions include using QR codes printed at low cost and RFIDs which, though still relatively expensive compared to printed codes, have come down significantly in recent years and are appearing more and more in supply chains for this use case.<\/p>\n<\/div>\n\n The product or logistic unit beams out its location regularly, for example, every hour, through a cellular or satellite data link. This is usually accomplished by placing a small computer or chip on the product or the logistic unit (container, palette, crate). These devices do not require a device or person to \u201cscan\u201d them for the data to be generated, hence the term \u201cactive tracking\u201d.<\/p>\n<\/div>\n\n The units can cost up to and above US$100 and incur monthly global data fees. As such, they are more commonly used with high-value products, on higher-level logistic units, such as cargo containers, or on only a small portion of the supply chain under scrutiny. To make implementation cost effective, businesses can implement a unit-collection process after each trip.<\/p>\n<\/div>\n\n Now that we know the kind of data we can get from product traceability, we will explore the technologies used for traceability in the next section.<\/p>\n<\/div>\n\n Product traceability technology can be broken down into two categories:<\/p>\n<\/div>\n\n Unique identifiers or codes are the atomic unit of traceability. These codes or chips are printed on or applied directly on products or packaging.<\/p>\n<\/div>\n\n Different technologies have different strengths, capabilities, and costs. The below table shows a summary of the most common identifier technology used for product traceability throughout the supply chain.<\/p>\n<\/div>\n\n Table: Comparison of codes, tags, and chips for product traceability<\/strong><\/p>\n Text codes<\/strong><\/p>\n<\/div>\n\n\n\n\n\n\n\n\n\n\n\n\n \u00a01D Barcodes<\/strong><\/p>\n <\/p>\n<\/div>\n\n\n\n\n\n\n\n\n\n\n\n\n Data Matrix<\/strong><\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n\n\n\n\n\n\n\n\n\n\n\n\n\n Article outline\n <\/h2>\n\n\n
\n
\n What is traceability?\n <\/h2>\n\n\n
\n <\/picture>\n
\n
\n Overview of technologies needed for traceability\n <\/h4>\n\n\n
\n
\n Traceability technology example: QR codes and RFIDs applied to products and boxes are scanned downstream in the value chain\n <\/h4>\n\n\n
\n <\/picture>\n
\n Key concepts and terms in traceability\n <\/h3>\n\n\n
\n What is upstream vs. downstream traceability?\n <\/h4>\n\n\n
\n <\/picture>\n <\/figure>\n\n
\n What’s the difference between \u201ctrack and trace\u201d and \u201ctraceability\u201d?\n <\/h4>\n\n\n
\n What is product traceability vs. logistics traceability?\n <\/h4>\n\n\n
\n Benefits of supply chain traceability\n <\/h2>\n\n\n
\n Benefit #1: Detect parallel imports and product diversion; monitor distribution partners\n <\/h3>\n\n\n
\n <\/picture>\n
\n
\n
\n Benefit #2: Demand forecasting (supply and demand management), distributor inventory management, sales and operations planning (S&OP)\n <\/h3>\n\n\n
\n
\n Benefit #3: Trace recalls, returns, damaged goods and defects, and products with warranty claims\n <\/h3>\n\n\n
\n Benefit #4: Regulatory and trade restrictions compliance\n <\/h3>\n\n\n
\n
\n <\/picture>\n
\n Benefit #5: Circular economy, recycling, and carbon footprint tracking and reduction\n <\/h3>\n\n\n
\n Benefit #6: Communicate product origin, quality of products and their ingredient and inputs to end-users\n <\/h3>\n\n\n
\n <\/picture>\n
\n What companies benefit most from supply chain traceability?\n <\/h3>\n\n\n
\n
\n What kinds of traceability data can be obtained from supply chains?\n <\/h2>\n\n\n
\n Upstream traceability data: “What is in your product”\n <\/h3>\n\n\n
\n
\n <\/picture>\n
\n Downstream product traceability data: “Where your product has gone”\n <\/h3>\n\n\n
\n
\n
\n
\n
\n
\n Location & GPS tracking data\n <\/h3>\n\n\n
\n Passive or hop-based location tracking\n <\/h4>\n\n\n
\n
Real-time GPS or location tracking (a.k.a. active tracking)<\/strong><\/h4> \n <\/h4>\n\n\n
\n Key technologies and solutions needed for traceability\n <\/h2>\n\n\n
\n
\n What unique identifiers can be used on products for traceability? \n <\/h3>\n\n\n
\n <\/picture>\n <\/figure>\n\n<\/div>\n\n\n\n\n\n\n\n\n
\n \n
\n Cost<\/td>\n Low<\/td>\n <\/tr>\n \n Description<\/td>\n Printed, human-readable alphanumeric information.\n<\/td>\n <\/tr>\n \n Used for\t<\/td>\n Manually checking product information, compliance.\n<\/td>\n <\/tr>\n \n Pros<\/td>\n \u2013 Cheap to apply at scale.\n\u2013 Low barriers for printing.<\/td>\n <\/tr>\n \n Cons<\/td>\n Only useful for manual look up; provides no data unless scanned. Not scannable by end users.\n<\/td>\n <\/tr>\n <\/tbody>\n <\/table>\n<\/div>\n\n\n<\/div>\n\n\n<\/section>\n\n
\n\n\n <\/picture>\n <\/figure>\n\n<\/div>\n\n\n\n\n\n\n\n\n
\n \n
\n Cost<\/td>\n Low<\/td>\n <\/tr>\n \n Description<\/td>\n \t\u2013 Can store dozens of characters.\n\n<\/td>\n <\/tr>\n \n <\/td>\n \u2013 Many standards and sizes, including ones with global identifiers.\n\n<\/td>\n <\/tr>\n \n <\/td>\n \u2013 Can use GS1\/ GTIN or interoperable standards.<\/td>\n <\/tr>\n \n Used for\t<\/td>\n Product, box, crate, pallet, traceability.\n<\/td>\n <\/tr>\n \n Pros<\/td>\n \u2013 Many interoperable standards, such as GS1\/ GTIN<\/td>\n <\/tr>\n \n <\/td>\n \u2013 Scannable by a wide range of professional handheld scanning devices.<\/td>\n <\/tr>\n \n Cons<\/td>\n \u2013 Small distortions, dirt, or wear can destroy readability.<\/td>\n <\/tr>\n \n <\/td>\n \u2013 Often not recognizable between IT systems.<\/td>\n <\/tr>\n \n <\/td>\n \u2013 Can have a large footprint on packaging.<\/td>\n <\/tr>\n \n <\/td>\n \u2013 Need a specialized device or app to scan.<\/td>\n <\/tr>\n \n <\/td>\n \u2013 Not easily scannable by customers in-market.<\/td>\n <\/tr>\n \n <\/td>\n \u2013 Being sunset, replaced by QR codes.<\/td>\n <\/tr>\n <\/tbody>\n <\/table>\n<\/div>\n\n\n<\/div>\n\n\n<\/section>\n\n
\n\n\n <\/picture>\n <\/figure>\n\n<\/div>\n\n\n\n\n\n\n\n\n
\n \n