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Should your company make supply chain traceability a priority?

The ability to identify and track materials and products throughout the supply chain can help your company improve performance and forge better partnerships.

Supply chain traceability, which is closely associated with the concept of sustainability, has become progressively...

more important over the decades. Globalized supply chains most often mean a lack of visibility into remote operations, raw material sources, and the people and places that produce goods. At the same time, our global village, connected media and mobile citizens want -- and are getting -- a better view of just what goes on in societies, governments and within businesses. Traceability aims to identify and track products and components from raw materials to finished goods.

For many industries, supply chain traceability is not just a "good practice," it is international law, which is especially true for highly regulated industries. For example, pharmaceuticals and food are regulated by FDA, USDA and EU mandates and aerospace by the FAA and European Aviation Safety Agency. In addition, specific legislation regulates the use of protected raw materials, which falls under the Lacey Act; the use of conflict minerals by Dodd-Frank section 1502; and the manufacturing and distribution of children's products, which is regulated by detailed safety rules. It's important to remember that in the United Sates, these regulations had broad bipartisan support. They won't be going away.

Though business leaders sometimes whine about the number of regulations, it's important to remember that governments and industry groups are creating these safeguards in response to societal pressure. In other words, everyday consumers -- not government bureaucrats -- are the ones pressuring for these regulations. Consumers just want to know where things came from and make sure the products and food they purchase are safe.

So, certainly from a legal perspective, it is a priority. Since Dodd-Frank and FDA regulatory updates over the last few years, executives are not getting a pass on poor data management and controls in the business. In fact, they could serve jail time; although, so far, we have not seen much of that.

There are other aspects to consider that can make supply chain traceability a priority. We have all seen the impact to the reputation of companies when they introduce tainted or poor quality products into the market. For large companies, that mistake can cost millions or even billions in lost sales, recalls and other administration costs, as well as the cost of replacing products. As one example, it cost Toyota billions to recover from faulty products. For small companies, such issues can often mean the death of the company, as is often seen in the food industry.

Having traceability provides the ability to investigate through the chain; find the source of problems; and, most importantly, determine how and where to remediate the problem.

But beyond that traceability, data can serve an optimizing function for the business. Information about the multi-tier supply chain can help companies plan better, as well as address performance issues such as lead times, transportation costs and inventory management.

In conclusion, though regulation is often not a high motivator, using supply chain traceability information to inform other business processes, improve collaboration with trading partners, and increase corporate and brand reputation through supply chain transparency all sound like top priorities for most any business.

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This was last published in March 2016

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