Traceability, in supply chain traceability, is the ability to identify, track and trace elements of a product or substance as it moves along the supply chain from raw goods to finished products. The concept applies to both the discrete manufacturing industry, which produces products such as automobiles, and to process manufacturing, which includes products such as chemicals. Sub-industries in each category and in different geographic areas may define the concept to fit their own needs, but at its simplest traceability enables a breadth and depth of visibility into what goes into produced goods and substances.

For many industries, traceability is mandated by national or international regulations for specific industries or types of products. For example, targeted rules apply to pharmaceuticals, children's products, produce, packaged foods, aircraft parts and minerals. Two such rules include the Food Safety Modernization Act and Dodd-Frank section 1502.

Traceability provides a number of benefits. It offers the ability to investigate and troubleshoot issues related to a component or ingredient. This becomes crucial during events such as recalls, so stakeholders have the means to locate the source of the problem. In turn, this enables a company to either distance itself from a problem -- for example, to say its food or product was not affected -- or to take corrective action.

Traceability also offers a way to boost brand image amid consumers' growing concerns about the sourcing and path of what they eat and the products they buy. In addition, the data generated from a traceability program can help companies optimize business processes, such as informing planning and supply chain management strategy. It can help address performance issues related to lead times, transportation costs and inventory management.

Traceability is also a key element of supply chain sustainability, a concept to which it is closely related. Risk management, security, triple-bottom line and corporate social responsibility are other related concepts.

Given the complex nature of modern supply chains, especially multi-tier global supply chains, end-to-end traceability is both critical and exceedingly difficult for companies to accomplish, whether the motivation is to adhere to legal mandates or best practices, or both. Despite the ideal of end-to-end traceability throughout the chain of distribution, execution can be difficult for numerous reasons, including a lack of visibility into remote operations, raw materials sources, and working and environmental conditions, and, closer to home, a lack of motivation from senior management. Experts say support from top leadership is critical.

To create strategies for creating a traceability program, companies can include researching common standards, get expert advice, and align with industry groups. Support for a traceability program may include elements such as initiating a supplier program to ensure standards are met and the necessary data is collected, using auto-ID such as barcoding and RFID in support of the program, and mining data from supply chain, logistics and global trade management software. In recent years, supply chain management software vendors have added more features to help facilitate traceability.

This was last updated in June 2016

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