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Product Traceability in Supply Chains: The Definitive Guide

In this detailed guide with real-world examples, we explain the benefits of product traceability and the key technologies being deployed today.

Product Traceability in Supply Chains: The Definitive Guide

Product traceability is changing your industry. We wrote this definitive guide to help you stay ahead.

If you’re reading this, you’ve likely seen growing problems with misbehaving distribution partners, downstream inventory management, counterfeits and product diversion within the last two years. Supply chain shocks caused by the pandemic, natural disasters, spiking oil prices, political upheaval and war have compounded these issues, creating new challenges for your brand and business.

In response to this increasingly challenging climate, many of the world’s leading brands have invested in product traceability systems – tools that enable companies to monitor their products downstream in the supply chain all the way to the end customer. Traceability technology is advancing quickly and has changed a lot in just the last two years; QR codes are scanned hundreds of millions of times a day by billions of people, and RFID chips are appearing on more and more products, with both “tags” establishing important roles in traceability programs.

Understanding the different approaches and technologies for traceability is the key to taking advantage of what it can offer your business. Unfortunately, most online whitepapers, guides, and reports on product and supply chain traceability technology are outdated, too focused on selling you something, hard to read, or contain inaccurate information.

Given this gap between demand for high-quality information on traceability solutions and a dearth of quality information, we have compiled key insights based on how we’ve deployed product traceability technology across complex global supply chains for companies like Dupont, ExxonMobil, and Rémy Cointreau.

Whether you’re struggling with specific traceability issues or just exploring this trend in supply chain management, we’re confident that this detailed guide based on recent real-world traceability implementations will provide actionable insight on opportunities and solutions for your organization.

Who is this written for?

Article outline

What is product traceability?

Product traceability refers to the capability to track and trace products in your supply chain from production or manufacturing to the end customer. Product traceability requires the generation and organization of supply chain data, and is used to increase supply chain visibility.

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Products can be traced as they move through the supply chain using QR code or RFID tags (like NFC) that have been applied to product packaging or the products themselves. QR codes or NFC are scanned in the warehouse, by distributors, and ultimately by the end-customer.

The technologies for product traceability developed rapidly over the past decade along with the emergence of regulatory requirements for unit-level tracking of tobacco products (EU, 2014), pharmaceuticals (US, 2013), and medical devices (EU, 2017). Today, many industries have begun embracing traceability technologies for benefits beyond regulatory compliance. Modern traceability technology is benefitting businesses in the following ways:

Highlighting the importance of traceability for sustainability, the European Union’s Green New Deal has defined Digital Product Passports, including standards for tracing a product’s upstream inputs, as a cornerstone initiative to drive companies to be more sustainable, covering a broad range of industries and products.

Overview of technologies needed for product traceability

Traceability requires some combination of the following technologies and technical processes, although not all are mandatory:

  1. A system for generation of unique codes or tags for products, from thousands to hundreds of millions. This is often referred to as “product serialization”.
  2. Hardware and process for printing and applying unique identifiers as barcodes, QR codes, data matrix, or electronic chips (RFID, NFC) on product packaging, cases, and/ or pallets.
  3. Devices for scanning codes on products along the supply chain such as cameras, chip scanners, handheld devices, and smartphone-based mobile apps.
  4. Logistical unit tracking for containers, trucks, etc. – often with GPS and environmental sensors.
  5. Integrations between your Enterprise Resource Planning (ERP) and Manufacturing Execution System (MES) systems, printing, and warehouse systems, and your traceability platform to capture all relevant supply chain events at source.
  6. A product traceability software system or software platform that provides a single source of truth across your supply chain data sources.

Traceability technology example: QR codes and RFIDs applied to products and boxes are scanned downstream in the value chain

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Data matrix codes and RFIDs are examples of other unique identifiers used for product traceability

Key concepts and terms in product traceability

Feel free to skip this section if you’re already an expert : )

What is upstream vs. downstream traceability?

Supply chain traceability can be broken down into “upstream” and “downstream” traceability. Upstream refers to the source and journey of your product inputs, ingredients, or raw materials, while downstream refers to tracing your product after production through the supply chain to the customer.

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What’s the difference between “track and trace” and “traceability”?

Both “traceability” and “track and trace” are often used interchangeably when referring to product or supply chain traceability. Traceability is becoming more popular today and can refer to both upstream and downstream use cases.

What is product traceability vs. logistics traceability?

Product traceability focuses on attaching a unique identifier or code to each individual product and maintaining a record of each product’s journey through the supply chain. This usually requires scanning equipment and people to scan the product and it’s box, pallet, etc. at multiple points in the supply chain.

Logistics traceability usually refers to tracking containers or other logistics assets using GPS sensors along their journey on trucks, ships, and planes.

To achieve product traceability across multiple downstream distribution points and to the end-customer, it’s usually more practical to independently gather product location data from QR code or RFID scans than to try to integrate with various logistics data systems.

Benefits of product and supply chain traceability and visibility

Traceability provides significant value to businesses with complex supply chains and distribution networks by detecting parallel imports, improving distributor inventory management, simplifying product recalls, helping with regulatory compliance, helping achieve sustainability goals, and communicating product origin to end-customers.

We explore each of these benefits of traceability in more detail below.

Benefit #1: Detect parallel imports and product diversion; monitor distribution partners

Brands use supply chain data to understand how products are reaching the market, how their distribution network is performing, and whether or not distributors are violating their contracts and selling to unauthorized markets.

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Rémy Cointreau uses QR codes, NFC tags and RFID to track product route-to-market for premium spirits

Case Study: Rémy Cointreau & product traceability

One key challenge for supply chain traceability programs is how to capture data in the “middle” of the supply chain when products are in the custody of the distributors or channel partners.

In some industries, such as food and beverage and industrial goods, the brands have limited leverage over the distributor and thus limited or no ability to gather supply chain data from them.

Reasons why it’s difficult to get supply chain data from distributors include:

Modern traceability systems address the above challenges for obtaining supply chain data from distributors in two ways:

  1. Have a target market for each product. The traceability system maintains a destination or target market for each product via its unique code. Scan data from endpoints in the supply chain – consumers, customers, professional users, or inspectors, reveal if products were distributed in an unauthorized way.
  2. Make it easy for distributors to scan products without an IT integration or dedicated hardware. Smartphone-based mobile apps for scanning QR codes, RFID, and NFC on boxes, crates, and pallets can make it significantly easier for distributors to fill in blind spots in your supply chain, avoiding the need for costly integrations across many stakeholders.

End-user data from connected packaging campaigns is a key benefit for brands. By incentivizing users to “scan” or engage with the packaging, more data can be gathered while offering end-users useful information.

Benefit #2: Demand forecasting (supply and demand management), distributor inventory management, sales and operations planning (S&OP)

Product traceability can enable better demand forecasting and distributor inventory management, with two categories of benefits:

  1. Visibility into distribution center operations (both in-house and external distributors) can be used for forecasting demand, improving downstream inventory management, and sales and operations planning (S&OP). This is especially important for products which have seasonality or promotions. Better demand management results in less shortages or overstock and better cash flow management.
  2. Knowing the type and amount of inventory sitting in distribution centers can make the brand aware of old products which need to be expedited to market and replaced by newer ones.

Benefit #3: Trace recalls, returns, damaged goods and defects, and products with warranty claims

Traceability systems can help identify products that have been recalled and trace them through their distribution path and further upstream to their manufacturing and production.

Traditionally, tracing recalled or damaged goods have been done manually using text codes with batch, lot, and serial numbers printed on products. This approach lacks unit-level supply chain traceability data and a channel for customer engagement.

In modern traceability systems, unit-level tags on each product provide distribution and shipping information for each item, including the production data (batch, lot) and logistics or shipping data (box, crate, pallet) across points in the supply chain. Companies use this data to identify issues in their distribution that are impacting product quality and in turn their profit margins.

Benefit #4: Regulatory and trade restrictions compliance

Many industries are regulated such that products and their ingredients, raw materials, or other inputs must be traceable to the unit level. This can only be accomplished at a reasonable cost using serialization – the printing, labeling, or even laser marking of unique codes on products and packaging.

Examples of regulatory requirements related to product serialization include:

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Ferrara Candy uses QR codes and ingredient traceability to comply with GMO disclosure laws in the U.S.

Case Study: Ferrara Candy & ingredient traceability with QR codes

A new initiative in the EU called Digital Product Passports would require industries including batteries, textiles, construction materials, electronic waste, plastics, chemicals, and automotive parts to have unique identifiers which can be used to score the environmental impact of their production. The first industries are planned to be regulated before 2024.

Benefit #5: Circular economy, recycling, and carbon footprint tracking and reduction

Traceability enables emerging business models and practices where the product or product packaging is reused, repaired, refurbished or recycled. This is increasingly common in electronics and industrial goods, where a wide variety of products — from computer parts to automotive batteries to barrels of oil — now have recycled components or parts of their packaging reused or re-filled, saving costs and reducing their environmental or carbon footprint.

Supply chain traceability systems are now being used to facilitate these emerging business models and to prevent counterfeit or unauthorized use of such parts, as well as parts from unauthorized channels entering the upstream supply chain.

The newly proposed EU Digital Product Passports program would create standards for such traceability and how to score the carbon footprint of products, and require certain industries to leverage such systems and provide this information to their customers.

Benefit #6: Communicate product origin, quality of products and their ingredient and inputs to end-users

Upstream supply chain data which includes a product’s raw materials and ingredients can be shared to consumers of that product. This is a common use case for consumer packaged goods (CPG), apparel, food, beverage, and coffee brands.

Food brand Knorr uses upstream supply chain data to provide information about the premium ingredients used in their soup products to customers.

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Knorr traces the origin of ingredients in soup products to let consumers scan and access that information

Case Study: Knorr & Brand Loyalty through connected packaging

What companies benefit most from product traceability and visibility in their supply chains?

In general, companies with the following characteristics see the highest ROI for supply chain traceability initiatives:

What kinds of traceability data can be obtained from products and supply chains?

Traceability data is organized into two categories – upstream traceability and downstream traceability. We’ll describe the data that can be obtained from each of these, followed by location and GPS data, below.

Upstream traceability data: “What is in your product”

As we’ve defined previously, upstream (production) traceability data refers to raw ingredients, materials, machine parts, or other inputs to a product. Common upstream data include:

Typically, the inputs of a product from suppliers are stored in the producing company’s ERP system(s). These are associated with product batch and lot data. In recent years there has been a push to also start tracing inputs from different suppliers farther upstream or earlier in the supply chain; this is typically to adhere to regulatory standards, monitor certifications for sustainability or human rights and other standards, and to calculate the CO2 footprint along the entire lifecycle of a product.

No standardized approach for tracing product inputs and ingredients has emerged to date, and different industries have begun trying different approaches. Cloud-based solutions for indirect vendor management, manual data collection, and even blockchains are among the patchwork of solutions being used.

Dedicated platforms collecting and providing upstream supply chain data for specific industries and materials include Circulor for plastics and batteries and Farmer Connect for agricultural products.

All of these emerging upstream traceability solutions seek to directly link products, at the unit level, back to their upstream origin, inputs, and ingredients.

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Melitta Coffee traces beans from farm to bag, sharing the farmer’s story with consumers. The solution is powered by SAP Material Traceability and Scantrust

Downstream product traceability data: “Where your product has gone”

Unlike upstream data, downstream traceability data comes from the point of production and onward in the supply chain. It’s generated by the producer or manufacturer of the product, distributors, and the customer through scanning the product packaging or product or part itself. Common downstream traceability data includes:

Unit (product) & production data

Logistics & shipment data

Channel partner, distributor, dealer, wholesaler, point-of-sale

Customer and consumer engagement data

Location & GPS tracking data

Technically passive and active location data is associated with the product or logistical and shipment data mentioned above, but it’s important enough to call out on its own here. There are two categories of location data:

Passive or hop-based location tracking

Printed codes such as QR code or RFID/ NFC tags, are placed on products or logistic units. When a device “scans” it at predetermined points in the supply chain, the location information is uploaded to a traceability system. Smartphones and tablets with mobile apps are increasingly being used for such scanning. Android-based handheld barcode scanning hardware with mobile apps connected to the brand’s traceability system are also used.

The traceability system only shows the last hop that a product or logistic unit was scanned at. This approach balances between usefulness of data and acceptable costs for most product categories. Scan-based solutions include using QR codes printed at low cost and RFIDs which, though still relatively expensive compared to printed codes, have come down significantly in recent years and are appearing more and more in supply chains for this use case.

Real-time GPS or location tracking (a.k.a. active tracking)

The product or logistic unit beams out its location regularly, for example, every hour, through a cellular or satellite data link. This is usually accomplished by placing a small computer or chip on the product or the logistic unit (container, palette, crate). These devices do not require a device or person to “scan” them for the data to be generated, hence the term “active tracking”.

The units can cost up to and above US$100 and incur monthly global data fees. As such, they are more commonly used with high-value products, on higher-level logistic units, such as cargo containers, or on only a small portion of the supply chain under scrutiny. To make implementation cost effective, businesses can implement a unit-collection process after each trip.

Now that we know the kind of data we can get from product traceability, we will explore the technologies used for traceability in the next section.

Key technologies and solutions needed for product traceability

Product traceability technology can be broken down into two categories:

  1. Unique identifier technology and the technical processes for applying them as codes and tags
  2. Scanning technology, including inline vision systems and handheld scanning devices.

What unique identifiers can be used on products for traceability?

Unique identifiers or codes are the atomic unit of traceability. These codes or chips are printed on or applied directly on products or packaging.

Different technologies have different strengths, capabilities, and costs. The below table shows a summary of the most common identifier technology used for product traceability throughout the supply chain.

Table: Comparison of codes, tags, and chips for product traceability

Text codes

text-code
Cost Low
Description Printed, human-readable alphanumeric information.
Used for Manually checking product information, compliance.
Pros – Cheap to apply at scale. – Low barriers for printing.
Cons Only useful for manual look up; provides no data unless scanned. Not scannable by end users.

 1D Barcodes

 

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Cost Low
Description – Can store dozens of characters.
– Many standards and sizes, including ones with global identifiers.
– Can use GS1/ GTIN or interoperable standards.
Used for Product, box, crate, pallet, traceability.
Pros – Many interoperable standards, such as GS1/ GTIN
– Scannable by a wide range of professional handheld scanning devices.
Cons – Small distortions, dirt, or wear can destroy readability.
– Often not recognizable between IT systems.
– Can have a large footprint on packaging.
– Need a specialized device or app to scan.
– Not easily scannable by customers in-market.
– Being sunset, replaced by QR codes.

Data Matrix

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Cost Low
Description – Small 2D code which can be scanned from any angle.
– Many standards and sizes.
– Can store thousands of characters.
Used for Part, product, box, crate, pallet, traceability.
Pros – Useful for placement on small parts or in machines due to small size and high information storage.
– Resilient to distortion, dirty, wear and tear.
– Can include a link to product URL.
– Used in regulated industries with interoperable standards, such as GS1/ GTIN.
Cons – Not easily scannable by a smartphone and thus not easy for customers in-market to scan.

QR codes

qr-code
Cost Low
Description – Small 2D code which can be scanned from any angle.
– Can store thousands of characters.
Used for – End-to-end traceability on parts, products, boxes, crates, pallets.
– Provides traceability down to the customer.
Pros – Already used in day-to-day life by billions of people.
– Useful for placement on small parts or in machines due to small size and high information storage.
– Resilient to distortion, dirty, wear and tear.
– Can include a link to product URL.
– Used in regulated industries with interoperable standards, such as GS1/ GTIN.
Cons Larger than Data Matrix codes, can have longer print times.

RFID/NFC

rfid
Cost Medium
Description – Small chip which requires no battery.
– Uses radio waves to turn itself on and send data back to a receiver when scanned.
Used for – Part, crate, product traceability.
– Shipping traceability.
– Higher-value products, including luxury fashion.
Pros – Can reduce costs and time needed to calibrate optical scanning equipment for 2D barcodes because it just needs to be within proximity, does not require line-of-site.
Cons – Not often or easily scanned by consumers, customers yet, so not suitable for getting final route-to-market data. Often requires a dedicated mobile app.
– Significantly more expensive per-unit than printed (marked) codes.

Bluetooth Low Energy (BLE) beacon/chip

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Cost High
Description – Tag or chip which is actively sending out data.
Used for – Tracking logistic units, high-value assets and products
– Used for inventory management within the warehouse.
Pros Proactively sends data when in-range of network; does not need to be scanned.
Cons – High capex cost for scanning gateways and cost-per-unit
– Units must pass through controlled, predictable zone(s) in supply chain to scan.
– Need collection process in place to reclaim at end-of-journey.

Ultra-Wideband (UWB) beacon

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Cost High
Description – Tag or chip which is actively sending out data and which can be picked up in a larger radius than a BLE chip.
Used for – Tracking logistic units, high-value assets and products
– Used for inventory management within the warehouse.
Pros Proactively sends data when in-range of network; does not need to be scanned.
Cons – High capex cost for scanning gateways and cost-per-unit
– Large, not feasible to put on many products directly.
– Units must pass through controlled, predictable zone(s) in supply chain to scan.
– Difficult for end-user to scan.
– Need collection process in place to reclaim at end-of-journey.

GPS tracker

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Cost High
Description A small computer which sends real-time GPS data through a cellular or satellite network.
Used for Used on extremely valuable assets and logistical units in supply chain
Pros Proactively sends data all the time via satellite or cellular network
Cons – High cost-per-unit and monthly data costs.
– Large, not convenient or feasible to put on many products directly.
– Must have a collection process in place to reclaim at end-of-journey.

How do you choose a unique identifier for products? For example QR codes vs. RFID, etc.

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Boxes of products traceable with QR codes being aggregated by a Laetus IMV-370

When planning a traceability project and choosing between unique identifiers such as QR codes, data matrix, or RFID, you must consider the following questions:

What’s your use case? For traceability down to the end customer, QR codes, NFCs and RFID have become increasingly popular due to their low cost and ability to be easily scanned by anyone in the supply chain and the customer, providing traceability data all the way to the market. Data matrix codes, though very popular for internal traceability or traceability for compliance, are not easily scanned by customers and thus can’t provide complete route-to-market and end customer information.

What are the pros and cons of QR codes vs. RFID and NFC for product packaging? QR codes are generally the lowest cost option and can often be printed within your existing printing and packaging process. NFC and RFID are costlier – they are chips with a hardware cost and almost always need to be applied to the package with a special process. RFID and NFC are increasingly being used on higher-value items and on boxes, crates, and pallets for certain product categories and supply chain setups where using inline vision or hand scanners to scan QR codes are impractical.

What are some considerations for how to apply a unique identifier to a product?

What’s your product or packaging? The shape, materials, substrates, curvature all have implications for how to apply the identifier and how it can be used. Data matrix and QR codes are more resilient to deformity, wear, and tear. QR codes can be scanned on curved surfaces, but this needs to be considered early in the project.

Where would the identifier go on packaging? For traceability to the end customer, choosing a prominent place for the customer to scan is important. While front labels and on caps are most common, some codes and tags can be placed under the cap, lid, or tag, if they are intended only to be scanned after the product is opened or consumed. Some codes, such as barcodes, are simply too big for certain applications.

Are you printing codes directly on packaging, or applying codes on top of the label? Both options are viable, but there are different implications for costs, process changes, and acceptability for the brand and by the customer.

Simplified example of printing unique QR codes directly on product packaging

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N.B.: QR codes are shown here because they are one of the few identifier technologies which end-customers frequently and easily scan. We highly recommended QR codes for end-to-end product traceability projects.

Are you using a label or packaging supplier, or is it done in-house? Getting the printing and packaging stakeholders involved early is essential. They may have traceability solutions they can recommend, but don’t limit yourself to these as the they may not be familiar with solutions that are a better fit for your use case.

Are you printing or lasering QR codes? QR codes can be printed by analog or digital methods, but are also increasingly being laser-printed on metal products, cans, and machine parts, opening up a new category of products and parts to traceability where adding paper labels is impractical or costly.

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QR code being lasered onto metal. Lasering of unique codes on products and parts becoming increasingly popular for product traceability.

Are you using secure features or not? Many traceability projects have an anti-counterfeiting component, such as using Secure QR codes. Such unique identifier solutions may have security features which need to be considered when planning the printing aspect of your traceability project.

What are the international standards for unique identifiers?

For industries where product serialization and traceability are regulatory requirements, such as tobacco, pharmaceuticals, and medical products, there are organizations such as GS1 which create and maintain standards for interoperable codes, such as GTIN and GS1 Digital Link. This allows for things like supply chain chain-of-custody data to be maintained for a single product across the supply chain. Such standards cover 1D barcodes, QR codes, data matrix, and more.

However, many non-regulatory use-cases for product traceability do not require these standards. In some cases, applying these standards where they are not a regulatory requirement can increase the costs of your traceability program, and it can be challenging to require downstream partners to apply these standards when scanning and updating product traceability data.

What is serialization for unique codes on products?

For unit-level traceability, the identifier — be it an RFID, NFC, QR code, datamatrix, or barcode — must store a serialized (unique) number or code which maps to one and only one product or part. 

“Serialization” is the industry term for the technology used to accomplish the high-volume, zero-conflict generation of random unique identification numbers for use on products and parts. Due to the complexity involved in generating these at scale in a secure way, these codes are usually generated by an ERP system or dedicated traceability system.

What printing technology is suitable for printing unique QR and data matrix codes for traceability?

Not all printers can directly load or print readable data matrix or QR codes. Only Variable Data Printers such as by HP Indigo or Domino support printing serialized (unique) codes on each label, a requirement for unit-level supply chain traceability.

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Analog or static printing technology which is commonly used for packaging, cartons, boxes, etc. doesn’t support variable data printing, which is necessary for serialized or unique code printing.

Analog printers for product packaging which don’t directly support printing serialized (unique) codes include:

Some digital printers, including continuous inkjet digital printer, can only print basic data matrix or static codes, and are not capable of printing serialized QR codes.

If you or your printing partner are using an analog printer for labels, a hybrid printing process is one possible solution for applying serialized codes on products for unit-level tracking.

Hybrid printing is where a label is first printed using analog or static printing such as those mentioned above, with a blank spot left for the code to be added later. Then, later in the printing process, unique codes (such as QR codes) are printed on each product’s packaging by a digital printer.

Most food product packaging is printed with analog printers which don’t support variable data; the label artwork is done using a stamp or plate. Unique QR codes or data matrix can still be printed later using a hybrid method.

There is also the option of applying separate, pre-printed labels directly onto packaging.

Inline scanning and vision systems for scanning codes on products, boxes, crates, etc.

These systems are made up of a specialized camera or chip scanner connected to a local server and placed on the packaging line or line management system. Data from this scanning system is buffered on the local server and then synchronized  with the MRP, ERP and traceability system.

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Laetus SmartSpec is an inline vision system capable of scanning 2D codes at high-volume

Key considerations that impact the selection and implementation of an inline scanning system include:

  1. Line speed
  2. Environmental (lighting)
  3. Product shape and code distortion
  4. Code location (is it fixed or variable)
  5. Field of view, variability in product position on the line
  6. Whether or not multiple products being scanned at or individually

There are three main steps where inline scanning systems are used:

  1. Activation of codes – The scanning system “turns on” a code and makes it usable for traceability, anti-counterfeiting, or customer engagement. Many brands want to control code activation to prevent labels from being leaked to the market. This is especially important if product labels are supplied by a partner, as is often the case. There are also billing-related reasons for code activation, as code providers often price them based on volume used.
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Automotive lubricant bottles packed with serialized QR code caps being activated by a DataLogic 2D image reading system

2. Aggregation and data association – Products are placed in boxes, crates, and pallets in the packaging line, and these logistic units themselves are labeled with different codes or identifiers, often with 1D barcodes. This process of grouping products within logistical units is called “aggregation”. If the system generating the unique product identifier is different from the one generating the barcodes for the logistical units, then there needs to be a data integration between those two systems to enable product traceability.

3. Updating location and other data along the supply chain – Businesses will scan codes on boxes, cases, or palettes as they enter and leave the warehouses and distribution centers. Thanks to aggregation (step two above), it’s possible to track the product in the supply chain based on the scans of the logistical unit without having to scan individual products.

A traceability solution provider can help identify the right scanning system provider based on your production lines. Inline scanning system providers include Laetus, Datalogic, Cognex, and Lake Image.

What is a product traceability system? (also known as traceability software)

Product traceability systems are a new class of software that have emerged in the past ten years to address common challenges faced by organizations implementing traceability in their supply chains.

A product traceability system tracks products after they’re made as they flow through the supply chain. It performs three key functions: generate codes for use on products, capture data across the supply chain, and make traceability data actionable to business users through data analytics tools.

Product and supply chain traceability software is usually a cloud-based web applications powered by APIs and integrations with your supply chain data, scanning systems, ERPs, and more.

Example analytics dashboard in a product traceability system

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The above traceability system provides analytics and workflows tailored to specific traceability use cases.

In this basic diagram of a product traceability system using QR codes on product packaging and on boxes, data flows in and out of the system across the value chain:

Example: Product traceability data across the value chain

product-traceability-with-qr-code

While many basic supply chain traceability needs can be met using just your ERP, some in-house development, and unique QR codes or barcodes printed on packaging, these implementations quickly run into limitations.

Dedicated, purpose-built traceability software has the following advantages:

In the ISA 95 Framework Layer Model, which “Layer” does a product traceability system fall into?

End-to-end product traceability systems are considered Layer 5 solutions in the ISA 95 Framework’s Layer Model for technology and business processes in manufacturing. They consume and connect data across the supply chain network, while also integrating vertically with solutions in layers 0 through 4 through ERP, MES, and other IT systems.

Different pieces of the traceability technology stack fall into the following layers of the ISA 95 framework (L’s) :

Using ERP and MES for product traceability

Enterprise Resource Planning (ERP) systems perform critical traceability functions, including generating and storing unique identifiers and data on raw materials, products, and logistics. They are an integral part of any product or supply chain traceability solution.

The traceability limitations of many such IT systems is in how they capture downstream traceability data, and how they expose and make that data actionable for business users.

Modern traceability solutions integrate with and extend ERP and Manufacturing Execution Systems (MES) systems to capture and make use of data throughout the supply chain down to the end customer. They provide dedicated workflow tools to make that data actionable.

ERPs such as SAP, Oracle, Microsoft Dynamics ERP, QAD, and JDA and MES such as QAD, Oracle MES, and Microsoft Dynamics 365 can be extended with modules for serialization and traceability. However, the costs for extending and customizing these systems can add up across a global organization with many systems, and must be evaluated against the alternative of using a purpose-built traceability system for serialization, traceability, and integration.

Other potential downsides of relying on existing IT infrastructure for traceability include:

Using handheld devices and mobile apps for scanning QR, data matrix codes, and RFID

The workhorse of warehouse management, handheld devices are used to scan in and scan out products throughout the supply chain as they enter and leave warehouses and distribution centers.

zebra-scanner
Warehouse staff using a Zebra barcode scanner

Some product traceability systems have shifted from expensive hand-held scanners with relatively fixed functionality to smartphones and tablets with apps for warehouse and distribution workflows. These apps provide flexibility and frequent feature updates.

Mobile apps for scanning barcodes, data matrix, QR codes, RFID on products and boxes have the added benefit of being able to to double as product authentication tools for inspectors, if this is something your traceability system can support.

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Many supply chain scanning workflows use mobile apps for scanning 2D barcodes.

Blockchains for product and supply chain traceability (upstream and downstream)

A blockchain is a distributed database designed to be jointly managed by a group of stakeholders. By design, it should not be changeable by any one stakeholder.

Blockchains have been proposed as a next-generation solution for product and supply chain traceability, with many digital supply chain, supply chain innovation, and digital transformation teams investing in blockchain proof-of-concepts and pilots for food traceability in particular.

There are many businesses and organizations exploring the use of blockchains to maintain a detailed history of the inputs and lifecycle of each unique product, with this shared record to be used by suppliers and stakeholders in the supply chain. The goal is for this to be easier to integrate with and more reliable than traditional traceability databases due to how the blockchain database is designed.

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This Knorr soup product stores ingredient information on a blockchain.

In response to the interest in blockchains for traceability, several large IT technology providers such as IBM, SAP, and Oracle have released private blockchain-based traceability solutions.

But what are the benefits of using blockchain for traceability, and what are the challenges?

In practice, supply chains are complex and non-technical details can strongly influence whether or not a blockchain solution is viable for use in traceability.

Based on our experience implementing blockchains for coffee traceability, wine traceability, and packaged food product traceability, we have learned that blockchains can be useful solutions for upstream ingredient traceability mainly for three use cases:

  1. Document compliance with regulatory requirements such as certifications
  2. Product recalls of ingredients
  3. Consumer trust use cases

That said, when using blockchains for upstream traceability, the most critical challenge to be addressed is not technical – it’s stakeholder alignment and collaboration among the upstream suppliers to provide data to the blockchain.

For an upstream traceability project based on a blockchain, the blockchain requires data, and data must come from suppliers. This requires either a consortium driven by an industry or trade association or a large OEM producer with leverage over its suppliers to agree to use the blockchain.

Downstream traceability does not require blockchain; traditional database solutions do the job.

Contact us to learn more if blockchain makes sense for your use case.

Ten steps to planning a product traceability program for your supply chain

When we work with organizations to implement product traceability, we recommend the following ten steps to ensure a successful project:

Step 1: Identify benefits and set a long-term vision.

An executive or leader, often in a supply chain, digital innovation, operations, or marketing role, defines some of the key benefits sought and a long-term vision. Problem statements often include factors such as:

See the benefits section above for more detail on the return-on-investment of traceability solutions.

Step 2: Create a working group to define the project.

The executive forms a small working group covering key stakeholders, including:

Step 3: Build a business case, including total cost of ownership (TCO).

The working group scopes and defines the problems to be addressed, quantifies the benefits, defines a target total cost of ownership (TOC) and return-on-investment (ROI) within a two, three, or five-year timeframe. The team iterates on the business case with feedback from the executive sponsor, internal experts, vendors, and consultants, and defines key metrics for internal and external costs associated with the project.

See the section above on benefits for what can be factored into the business case and calculations for return-on-investment.

This should include:

Packaging adjustment costs: Associated with changes to packaging design, requires alignment with brand managers and communication with printing partners.

Marketing budget: Needed for promotion and awareness of your connected packaging campaign, which will capture data from customers in-market when they scan your products.

Manufacturing line integration costs: This includes line hardware modifications, system integrations (middleware/ MES/ ERP), and any scheduled downtime due to installation and testing.

Supply chain operations costs: Changes are needed to internal (and sometimes) external SOPs; additional QA steps for managing and monitoring the serialization and in some cases extending serialization to outside the four walls with trading partners such as distributors, wholesalers, or dealers.

Project management costs: On average 10%-15% of all person-power assigned to this project is spent on various project management activities such as documentation and artifact management, steering meetings, vendor and team alignment meetings, testing, etc. 

Procurement and compliance cost: Legal alignment with company purchasing processes, vendor registration and onboarding, as well as IT security compliance all need to be factored in.

Step 4: Create a formal traceability RFP or project definition document and gain executive approval.

Once the business case is approved at the executive level, a formal project proposal (RFP) can be shared with vendors.

Step 5: Share the project with traceability vendors.

Keep in mind that once the project is internally greenlit, experienced traceability solution vendors will continue to provide feedback that will help you refine your project.

Step 6: Choose an experienced traceability provider to work with.

We recommend finding a traceability solution provider who can:

Step 7: Design a product traceability pilot or proof-of-concept

Once you’ve decided on a traceability solution provider, work with them to set the pilot or proof-of-concept (PoC) project design, including definitions of success that align with your longer-term vision. Usually, pilots begin with one product category in one market, then expand from there. Run workshops with different stakeholders and software and hardware providers based on your business requirements.

Step 8: Launch the pilot and improve.

Based on learnings from the pilot, make improvements to your approach. This typically focuses on:

Step 9: Expand to other products, markets, and use cases.

Once the pilot or proof-of-concept project begins delivering value, look at expanding to more product lines, regions, and distribution channels. Consider how to better leverage your traceability system for other benefits, such as anti-counterfeiting, professional user engagement, and consumer engagement.

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What’s next?

Find a trusted end-to-end traceability solution provider to help guide you through your traceability project. This can save not just resources but months or even years on your quest to achieve product and supply chain traceability.

At Scantrust we frequently meet companies who have just embarked on their traceability journey, with a vision for traceability but needing support with the business case and technical approach. Let us share our technology, experience, and passion for traceability!

Get Scantrust codes now