One of the blogs I frequently read and occasionally guest post on is Apriso's Manufacturing Transformation Blog. Chris Will, Chief Technology Officer at Apriso, recently posted an article on the ownership of product traceability in the supply chain. I've known Chris for many years and, over much of that time, I have been working closely with him on technology strategies for product traceability.
I thought Chris's post made several important points, especially in the areas of:
- Increasing focus on product traceability
- Managing governance in a distributed and global supply chain
- Justifying investments in technology solutions
In this article, I want to continue the dialogue around some of the ideas he highlighted, specifically on industry challenges and how to best address them.
Challenges with End-to-End Product Traceability
Product traceability is a critical component of manufacturing and supply chain operations for many industries, including: automotive, aerospace and defense, electronics, consumer packaged goods, food and beverage, and life sciences. Through conversations with leaders from these industries, we've identified three top challenges in achieving end-to-end product traceability:
1. A Disconnect in Incentives
There are a two main disconnects in the supply chain regarding product traceability. One is regarding how OEMs, brand owners, and retailers often underestimate the business value of end-to-end product traceability. These companies often look at traceability as a risk reduction or cost avoidance strategy rather than an initiative in supply chain efficiency or as an innovative method for differentiating products in the eyes of customers.
Second, even if these companies do properly value the benefits of traceability, the benefits don't always flow upstream into the supply chain. Suppliers are often even more reluctant to invest in or participate in product traceability initiatives.
2. Overconfidence in Existing Software
Many executives today believe they already have the needed information in existing systems. Unfortunately, though, this almost always falls short during an actual adverse event or mock recall. Typically, data is in distributed systems or paper-based systems and cannot be retrieved or brought together in the needed time frame to be useful.
3. Overconfidence in Supplier Quality
In much the same way many executives assume the right data is in existing systems, they also assume their suppliers have the needed data collected in a format that can be quickly shared with trading partners in the case of an adverse event. Again, companies often fall short of their own internal assessments when systems are tested.
Question: How can these challenges be addressed?
Answer: Industry leadership by OEMs, brand owners, and retailers.
Every industry has a different power base. In automotive, it's the OEMs. In electronics, it's the brand owners. And in consumer products, it's the retailers. In each case, these are the players that have the most to lose in the event of a product quality or safety issue, the most to gain in terms of supply chain-wide visibility, and the scale needed to effect change.
End-to-end product traceability will become a reality, and quickly, when these players decide it's in their self-interest to do so. These players will likely bear the brunt of the cost, both for themselves as well as the extended supply chain. This will include investing in their own IT infrastructure as well as providing support and IT tools to the supplier network.
To engage with these suppliers, OEMs, brand owners, and retailers will have to convince them that these tools will not just be a cost of doing business, but will also help improve the quality and efficiency of their own operations. Furthermore, suppliers will have to view these investments as part a strategic relationship of shared benefits and that these benefits will not just be squeezed out as part of future cost cutting measurements.
Investments in end-to-end product traceability are on the horizon. It's just a matter of facing the reality of our current situation, understanding the true business value of investing in these systems, and aligning incentives across the distributed supply chain.
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