"Without traceability, there is no transparency. And without transparency, there is no trust."
— Paul Polman, former CEO of Unilever
The Importance of Product Traceability: From Concept to Consumer
In today's fast-paced and interconnected consumer goods market, product traceability has become essential for manufacturers. Knowing where a product has been at each stage of the value chain allows businesses to not only track and document the production journey from inception to the consumer, but to leverage this information to make critical supply chain adjustments and tailor future production to consumer preferences.
This capability is vital for ensuring product quality and safety but also for compliance with increasingly stringent regulations globally. The supply chain disruptions that plagued manufacturing during COVID have only increased with geopolitical, climate and financial strains on supply bases. The Economist reports that “supply-chain disruptions are expected to become more common. More than half of the executives surveyed (54%) say that organizations must make significant changes in order to effectively manage supply-chain disruptions in the next five years.” This is pushing manufacturers to incorporate greater flexibility and agility in their supply chains and corresponding data.
In this article, I’ll explore the importance of product traceability for consumer goods companies to effectively and efficiently manage their supply chains, and why getting the data model right is the essential first step to unlocking the value of traceability. Next, I’ll lay out the regulatory changes impacting the industry and driving the requirements for traceability. Finally, I’ll share how a flexible data model can not only help companies to remain compliant but increase value through faster responsiveness to market trends and consumer expectations.
The Critical Role of Data in Product Traceability: Building a Data Model that Flows
At the heart of effective product traceability is robust data management and a flexible shared data model. For product traceability to yield meaningful insights into consumer preferences, supply chain deficiencies and potential risks, the data needs to be accessible at each stage by all involved parties. Central to achieving this accessibility is building a data model that can be used by both upstream and downstream players in the value chain.
This makes it essential to work with supply partners to set expectations about data and ensure that your data model will be flexible enough to integrate with numerous suppliers as the need to plug and play arises to meet demand and ensure consistent supply.
Marcelo Lu, Senior Vice President, Care Chemicals NA, at BASF made this point at Veeva’s 2023 Executive Summit. "Being an ingredient supplier into the sector, we help with traceability and transparency,” said Lu. “A lot of the information that brands seek to put on a package we are able to supply. You get examples of companies trying to be transparent, but they’re not able to prove traceability. And sometimes the reverse is there - you can claim traceability, but it's not transparent how you do it. So suppliers being able to enable transparency and traceability is very important."
Data provides the backbone for tracking a product’s lifecycle, capturing details at every stage—from raw material sourcing to manufacturing, distribution, final sale and disposal or reuse. This comprehensive data collection enables businesses to:
Ensure Quality Control: By monitoring every step, companies can identify and rectify issues promptly, ensuring that products meet safety and quality standards.
Enhance Transparency: Consumers today demand greater transparency regarding the origins and production processes of the products they buy. Detailed traceability data satisfies this demand, fostering consumer trust.
Facilitate Recalls: In the event of a defect or contamination, traceability allows for quick and precise recalls, minimizing risk to consumers and reputational damage to the company.
Regulatory Drivers: Transparent Supply Chains Required to Operate
Recent regulatory developments underscore the growing importance of traceability. The EU Green Deal, the SEC Climate Act as well as FSMA 204 are some of the pivotal regulations pushing companies towards greater transparency and accountability.
EU Green Deal: This ambitious initiative aims to make Europe climate-neutral by 2050. Among its many targets, it emphasizes sustainable product policies and circular economy practices. Companies are required to provide detailed environmental information about their products, making traceability a non-negotiable aspect of compliance.
SEC Climate Act: In the United States, the SEC Climate Act mandates public companies to disclose their climate-related risks and impacts. This regulation demands extensive data collection and reporting on the environmental footprint of products, driving the need for meticulous traceability.
FSMA 204: Under FSMA 204, The US Food and Drug Administration will require manufacturers to create traceability lots, each with its own lot code assigned at distinct points in the supply chain and must link that code to other Key Data Events.
These regulations not only compel businesses to adopt traceability but also encourage them to innovate and improve their sustainability practices. Companies that proactively implement robust traceability systems can gain a competitive edge by demonstrating compliance and commitment to environmental stewardship.
Enhancing Supply Chain Flexibility and Agility
Beyond regulatory compliance, traceability offers significant benefits in terms of supply chain management. In today’s volatile market environment, supply chain flexibility and agility are crucial. Having the right data at the right time enables critical decision-making when supply chain agility is most needed.
As Alberto Prado, Global Head of Digital R&D and Partnerships at Unilever recently highlighted at Veeva’s Consumer Products EU Summit in the video clip above, “It's not just about having data - the intrinsic value of data is zero. It is what you do with it that creates value. Data has, in some use cases, an expiry date. You need it here and now. And if it comes in in a week's time, then then it loses value. We have implemented a data governance model as well that helps us with the mindset, because up until recently there was not truly a governance model of who owns this data. Who is responsible for ensuring the quality of this data? Who is responsible for extracting value? And this is where things get complicated, because in large organizations, the team that is responsible for generating and protecting the quality of the data may not be the ones that actually take advantage of it.”
When enterprise organizations put the data foundation in place for true traceability, this enables:
Real-Time Monitoring: With comprehensive traceability systems, businesses can monitor their supply chains in real-time, allowing for quick responses to disruptions, such as natural disasters or geopolitical events.
Informed Decision-Making: Detailed data from every stage of the supply chain empowers businesses to make informed decisions about sourcing, production, and distribution. This leads to optimized operations and cost savings.
Customization and Responsiveness: Companies can better understand consumer preferences and tailor their products accordingly. This responsiveness enhances customer satisfaction and loyalty.
Consumer product traceability is no longer a luxury but a necessity to operate in today’s connected marketplace. “Winning in the coming decade will require a transparent and circular value chain. It is a profound paradigm shift. Digital traceability allows companies to redefine the boundary of operational excellence and balance a broader set of business objectives, including efficiency, resilience, responsiveness and sustainability,” concluded a recent Bain & Company report on Supply Chain Traceability.
With the backing of a flexible yet robust data model and supporting master data management, businesses can ensure product quality, comply with stringent regulations, and enhance their supply chain’s flexibility and agility. As regulations continue to shape the industry landscape, companies that invest in comprehensive traceability systems like Veeva’s will be well-positioned to thrive in an increasingly transparent and accountable world, while building consumer trust and exceeding consumer expectations.
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