What is Supply Chain Traceability, and Why is it Important in 2024?

Managing a supply chain is important for coordinating the flow of goods and services from suppliers to customers. Key to this process is traceability and return management, which ensure efficient operations. Traceability, enabled by advanced technologies such as RFID (Radio-Frequency Identification), IoT (Internet of Things) devices, and blockchain, allows for precise tracking of products at every step of the supply chain. This includes detailed monitoring from production to delivery and efficient handling of returns, thereby enhancing process efficiency and effectiveness. According to KPMG, 87% of businesses see visibility as critical in supply chain management.

As an example, consider the pharmaceutical industry, which faces unique challenges in ensuring the safety and integrity of its products. Counterfeit drugs are a significant global issue, with the World Health Organization estimating that up to 10% of drugs worldwide are counterfeit. Technologies like blockchain offer secure, unalterable records of pharmaceutical movement, boosting safety and trust. RFID and IoT further ensure that returns are managed safely and comply with health standards.

Incorporating traceability and return management, primarily through cutting-edge technologies, addresses supply chain inefficiencies and improves transparency. This approach is important in pharmaceutical industries, where product authenticity and safety are critical. By enhancing supply chain operations, businesses can better meet global market demands and ensure consumer safety.

Here, we will explore why traceability in SCM is important and how to achieve it.

What is Supply Chain Traceability?

Supply chain traceability means businesses can keep track and understand all the details of their supply chains. This involves collecting information and assessing risks at various levels of the supply chain to manage or pinpoint issues with a particular supplier or product batch if needed.

In essence, supply chain traceability is about gathering the necessary data to track your supply chain effectively, while transparency involves sharing this information with others. 

Three important questions to consider are:

  • Who should have access to this information?
  • What information will be shared?
  • How frequently will the information be shared?

Developing a traceable supply chain allows businesses to achieve greater transparency, identify weak points, and manage risks more effectively. Traceability involves recording detailed and accurate information about the supply chain, such as the locations of facilities and any certifications held by suppliers. The more you can trace within your supply chain, the more open you can be with both consumers and stakeholders.

Why Traceability Matters in Supply Chain Management

Some of the key reasons why traceability matters include:

1. Optimizing Product Quality

Traceability is important for maintaining high product quality within the supply chain. It allows businesses to track and monitor the flow of goods and services, allowing them to spot and address quality issues early on. This proactive approach helps prevent product recalls, boosts customer satisfaction, and safeguards the brand's reputation. 

For example, in the food industry, traceability systems can track the journey of products from farm to table. If a batch of produce is found to be contaminated, the system can quickly trace back to the specific farm and batch, allowing for a targeted recall. This precision not only ensures the safety of consumers but also limits the financial impact on companies by avoiding a blanket recall.

2. Meeting Regulatory Requirements

Adhering to industry regulations is another key reason why traceability is important. Many sectors, like the food and pharmaceutical industries, have stringent product handling and distribution guidelines. Traceability systems help businesses meet these standards, thus avoiding fines and legal troubles. 

In the pharmaceutical sector, traceability is important for compliance with regulations like the Drug Supply Chain Security Act (DSCSA) in the United States. This act requires tracking prescription drugs throughout the supply chain to prevent counterfeit medicines from reaching consumers. A robust traceability system helps pharmaceutical companies comply with these regulations and ensures patient safety.

3. Enhancing Supply Chain Insight

Having traceability in place enhances visibility across the supply chain. This visibility helps businesses identify delays, inefficiencies, or areas needing improvement. With this information, they can optimize operations, cut costs, and enhance delivery speed, ensuring compliance with regulatory demands.

4. Protecting the Brand

In situations like product recalls or quality issues, traceability data is invaluable for pinpointing the issue's origin and addressing it swiftly. This rapid response helps limit negative effects on customers and preserves the brand's image. Incorporating return management and traceability can play a pivotal role here. 

For instance, an apparel company uses traceability to manage returns effectively by quickly identifying whether returned items are from a defective batch. If a defect is traced back to a particular production line or time frame, the company can isolate the issue, preventing further returns and maintaining customer trust. This swift identification and resolution process helps minimize the impact of returns on both the environment and the company's reputation.

5. Supporting Sustainability

Traceability also supports sustainability efforts within the supply chain. By monitoring the movement of goods and services, companies can spot opportunities to minimize waste, increase efficiency, and lessen their environmental footprint. This not only aids in achieving sustainability objectives but also reduces expenses and boosts the company's appeal to eco-conscious consumers.

How to Achieve Traceability in Supply Chain Operations

Achieving traceability in managing your supply chain involves using sophisticated technology and efficient data handling. Here are steps companies can follow to achieve traceability in their supply chains:

1. Define Traceability Objectives

Understand why traceability is essential for your operations. Specify the data points of interest, such as the origin of raw materials, details of production processes, and the path of finished products to the consumer. Setting clear objectives will guide your implementation and help evaluate the effectiveness of your traceability efforts, including tracking returns to identify patterns in product defects or customer dissatisfaction.

2. Pinpoint Essential Data for Tracking

Identify key data points necessary for monitoring to ensure traceability. This typically includes product details like batch numbers, production dates, supplier information, shipping routes, and delivery schedules. In the context of returns management, tracking data related to product returns, including reasons for returns, return dates, and the condition of returned products, is important.

3. Invest in the Right Technology 

Use barcodes, RFID tags for wireless tracking, and GPS for real-time shipment updates to automate data collection. Technology that enables easy identification and processing of returned items is essential for managing returns and facilitating efficient restocking, recycling, or disposal.

4. Map the Supply Chain & Identify Critical Control Points (CCPs)

Document the flow of products from the source to the consumer, highlighting CCPs important for monitoring compliance, safety, and quality. Understanding the supply chain flow is important for pinpointing where returns originate and implementing targeted improvements.

5. Select a Robust SaaS SCM Platform 

Choose a Supply Chain Management (SCM) platform that enhances traceability and offers comprehensive return management capabilities. Platforms like Tata BB Matrix provide visibility across the supply chain, including tracking returns, facilitating real-time integration, effective return tracking management, and analytics for monitoring return trends.

6. Develop Robust Data Management Systems

Implement strong data management systems to maintain the accuracy, timeliness, and accessibility of traceability data. Cloud-based solutions are ideal for centralizing traceability information, including returns data, enabling businesses to generate instant reports and analyze return patterns.

7. Implement Clear Standard Procedures (SOPs) 

Establish SOPs detailing how to collect, record, and report data, ensuring consistency in traceability practices. For returns, procedures should include steps for logging received returns, assessing product condition, and deciding on subsequent actions (restocking, repair, recycling).

8. Conduct Comprehensive Staff Training

Teach your team about traceability and how to handle data correctly. Stress the importance of traceability in making the supply chain transparent and ensuring product quality. Training should also cover the procedures for managing returns efficiently, including using technology for scanning and processing returned items.

The Importance of Worldwide Standards in Traceability

Worldwide standards establish the essential framework for traceability systems. Their main goal is to enhance traceability within supply chains by adopting open and interoperable standards. This facilitates a comprehensive visibility of items critical to the traceability process. This not only facilitates the foundation for developing sector-specific guidelines and standards that support traceability efforts but also significantly impacts operational efficiency and cost savings across various industries. 

For example, in the food industry, the adoption of these standards has streamlined product recall processes, leading to a notable reduction in waste and operational costs by 10-15%. 

Similarly, in the manufacturing sector, such standardization has contributed to a 20% decrease in production errors, directly enhancing product quality and customer satisfaction while promoting financial savings.

The application of these global standards for traceability in supply chains is designed to:

  • Serve as the foundation for developing sector-specific guidelines and standards supporting traceability efforts.
  • Provide a structured methodology for organizations to design and implement effective traceability systems.
  • Standardizing the identification of traceable items and the exchange of traceability information regarding the movement or events associated with those items will foster successful and seamless communication within supply chains. This is especially evident in logistics and transportation, where the enhanced traceability has led to more efficient inventory management, reducing holding costs by 5-10% for many companies.
  • Promote the scalability and adoption of traceability systems by leveraging established and proven standards, thus avoiding inconsistent approaches.

The Global Traceability Standards (GTS) have been formulated to aid organizations and industries in creating and implementing traceability systems. These standards aim to deliver critical insights and knowledge to organizations focused on establishing long-term goals for traceability.

Maximizing Supply Chain Traceability for Operational Excellence

Enhancing supply chain traceability involves strategic measures for improved efficiency and accuracy, including return management. Blockchain technology establishes a secure digital ledger with transparent and tamper-resistant transaction records accessible to all parties involved. Barcoding or RFID technology automates data capture, reducing errors and ensuring precise tracking of products, including returns. Centralized tracking systems offer real-time visibility, aiding prompt decision-making and issue resolution, especially in return management scenarios. 

For instance, a food company utilizes barcoding to swiftly trace the origin of contaminated products, minimizing health risks and safeguarding consumer trust, even during return processes. 

Regular audits across supply chain stages maintain compliance and identify discrepancies, enhancing return management effectiveness. Clear documentation and labeling processes support accurate data capture and facilitate communication among partners, which is important for handling returns efficiently. 

These efforts collectively enhance supply chain reliability and effectiveness, fostering seamless operations, customer satisfaction, and streamlined return processes.

Optimize Supply Chain Traceability with Tata BB Matrix

Did you know that India's biggest online grocery store, handling over 15 million orders every month, once had a big problem? Their Order Management System (OMS)  and Warehouse Management System (WMS) were all over the place, causing communication issues and leaks in data. This led to slow operations, late deliveries, and unhappy customers. But then they implemented Tata BB Matrix's OMS and WMS, streamlined the company's order processing and enhanced overall efficiency. 

Key enhancements included:

  • Consolidating incoming orders from multiple channels
  • Providing real-time visibility of orders from placement to delivery
  • Automating various warehouse processes
  • Ensuring quality control and compliance

You can also improve your supply chain operations with Tata BB Matrix, a trusted solution provider. Our combined order management system (OMS) and warehouse management system (WMS) make your operations smoother and more efficient. Experience real-time order tracking, automated warehouse processes, and improved quality control and compliance measures. 

To know more, book your demo with us today!

FAQs on Supply Chain Traceability

What is supply chain traceability, and why is it important?

Supply chain traceability refers to businesses' ability to track and understand all the details of their supply chains. It involves collecting information and assessing risks at various levels of the supply chain to manage or pinpoint issues with a particular supplier or product batch if needed. Traceability is crucial for maintaining product quality, meeting regulatory requirements, enhancing supply chain insight, protecting the brand, and supporting sustainability efforts.

How does traceability help optimize product quality?

Traceability enables businesses to track and monitor the flow of goods and services, allowing them to spot and address quality issues early on. By maintaining high product quality within the supply chain, traceability helps prevent product recalls, boosts customer satisfaction, and safeguards the brand's reputation. For example, in the food industry, traceability systems can monitor the entire path of products, starting from the farm and ending at the consumer's table. This comprehensive tracking enables precise recalls to be initiated promptly if contamination issues arise.

How does traceability contribute to risk management in supply chains?

Traceability helps businesses identify and mitigate risks throughout the supply chain, including supplier disruptions, quality issues, and regulatory non-compliance. By tracking products from source to destination, businesses can quickly pinpoint the origin of problems and take corrective action, minimizing the impact on operations and ensuring continuity of supply. Traceability also supports proactive risk management strategies by providing real-time visibility and insights into potential threats, allowing businesses to implement preventive measures and protect against future risks.

Can traceability improve supply chain resilience?

Yes, traceability can improve supply chain resilience by enhancing visibility, agility, and responsiveness. By tracking products and components across the supply chain, companies can identify vulnerabilities, diversified sourcing strategies, and develop contingency plans to mitigate disruptions. Traceability enables businesses to adapt to changing market conditions quickly, unforeseen events, and supply chain disruptions, ensuring continuity of operations and maintaining customer satisfaction.

What role does technology play in enabling supply chain traceability?

Technology, such as RFID (Radio-Frequency Identification), IoT (Internet of Things) devices, and blockchain, enables supply chain traceability. These advanced technologies allow for precise tracking of products at each step of the supply chain, ensuring data transparency, accuracy, and security. RFID tags and IoT devices facilitate wireless tracking, while blockchain technology provides secure, immutable records of product movement, enhancing traceability and data integrity.

How does traceability support sustainability efforts?

Traceability supports sustainability by enabling companies to monitor the movement of goods and services and identify opportunities to minimize waste, increase efficiency, and reduce environmental impact. By monitoring supply chain processes, businesses can optimize operations, reduce expenses, and appeal to eco-conscious consumers. For instance, traceability can help companies minimize returns and efficiently manage product recalls, reducing financial and environmental costs.