Traceability and operations visibility

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Introduction

The global demand for traceability and visibility in supply chains has had a mushrooming effect in the emergence of supply chain management solutions incorporating new technology concepts such as block chain (more appropriately referred to as DLT’s (Distributed Ledger Technologies)), artificial intelligence (AI), Internet of things (IoT), big data and cloud solutions. The driving force behind this demand comes from various sources including consumers, government agencies, brand owners, retailers, and increasingly from concerned associations of value chain segments such as producers’ organisations, manufacturers’ organisations and retailers’ organisations.

Much of the debate is conducted at a high level in very general terms in contemporary media. As a result it is not always easy to fathom the exact nature of the underlying business requirements and the business benefits of the technology-based solutions on offer. This memo is an attempt to start contributing to this general debate from a more structured perspective, specifically looking at supply chain traceability in the context of the business requirement for operations visibility.

Supply chain traceability

The concept of supply chain traceability is used mostly to describe visibility of the progression of physical items as it move through a supply chain consisting of two or more organisations. That would naturally include the progression both inside organisations and between organisations. Traceability is normally delivered through the implementation of a traceability solution. A typical traceability solution, like any other enterprise-wide technology based solution, is based on a conceptual solution stack consisting of policy and regularity imperatives (at company level, supply chain level and at government level), business process and procedural routines, hardware and software configurations and infrastructure services. However, unlike any other enterprise-wide technology based solution, supply chain solutions operate across entire value chains, potentially spanning several enterprises.

At a high level, the technology–based element of a traceability solution consists of the functional components shown below in Figure 1. The data capture component is operating at the coal face on the factory or shop floor according to agreed procedures and serves to convert physical items handling events into electronic data. Data capture approaches can be based on manual entry of declarations or quantities, or by direct electronic recording of machine-readable data or a combination of both. Declaratory approaches are also referred to as honesty approaches and is less reliable than the alternative. For high data integrity and forensic hardness the direct capturing of machine-readable data is a pre-requisite. The data structuring and maintenance component creates a synchronised traceability audit trail according to the sequence of consecutive item handling (data capture) events. In terms of data distribution and presentation it should be noted that access to information is usually regulated in terms of role-based parameters such as organisation, job role, name, password, etc. If an operations visibility solution cannot fulfill the obligations posed by each of these three functional layers, then perhaps the solution is not a traceability solution.

Figure 1: High-level schematic representation of the essential functional components of a typical traceability system.

A supply chain wide traceability audit trail

One of the most distinctive characteristics of a supply chain wide traceability system is its ability to create and maintain a traceability audit trail that spans the entire supply chain.

Some honesty approaches rely on dispatch-receive declarations to create an audit trail. The dispatching party declares what, when and to whom dispatch occurs. The receiving party declares what, when and from whom receiving occurs. By analysing these declarations the logical dispatch-receive linkages between organisations are used to define the movement of physical goods from one organisation to another through the supply chain.

Evidence based approaches make use of direct digital machine-to-machine monitoring and data capturing using, for example, barcode scanners, RFID scanners, weighbridge and platform scale controllers, etc. Typically these technologies monitor and record the transformation (production) process logic of input-transform-output inside organisations. It then links this internal reference between output items and input items to that of the next location based on the dispatch-receive linkage between organisations. Such approaches tend to provide a forensically hard supply chain traceability audit trail. Forensic hardness however may not be a business requirement for a specific supply chain, in which case the honesty model is perfectly suitable. It is also represents a low-cost approach to traceability.

The supply chain traceability audit trail also serves as the body of evidence from which to confirm origin of the physical flow and the chain of custody that a specific batch, item or item instance has been subjected to. The traceability audit trail also serves as the reference against which a physical item is verified or authenticated.

A traceability audit trail as the basis of supply chain operations visibility

According to the mantra that one can only manage what is measured, the ability to monitor and record business process and procedures (e.g. critical item handling events and other data of interest associated with the product items under focus and the supply chain business rules) become critical inside an organisation that wants to participate in a supply chain wide traceability audit trail.

Physical item-handling traceability alone is not enough to provide an enabling operational visibility overview for management. The synchronous traceability audit trail of the flow of consecutive item handling events needs to be enriched with details about product items (such as product quality), processes and facilities (such as temperature for cold chain situations), sustainability practices (such as farming practices for food production), compliance to agreed standards (for example HACCP) and other agreed performance indicators of a specific supply chain.  Operations visibility systems uses the synchronous timeline of item handling workflow (traceability) and enrich it with these other variables that supply chain members agree to monitor, record and share amongst themselves. In general, all such additional data and information recorded on an operations visibility platform rely on a traceability audit trail to ensure synchronisation of data from digital sensors and manual inputs with the item-handling events workflow both within and between organisations.

The purpose of expanding operations visibility, both vertically in terms of item-handling events down to item instance level of granularity, and horisontally in terms of item-handling events both within and between organisations across entire supply chains, is to enable better managerial decision-making and control. However, experience to date shows that the majority of business models currently in use in different industries do not provide much understanding and guidelines to supply chain members on how to leverage business, for the benefit of both the individual members and the supply chain as a whole, based on the high level of visibility that a forensically hard approach such as Fractal Traceability TMTM provides.

Validation, verification and authentication of traceability and operations visibility information

It is important for business managers to understand the difference between these three concepts in order to assess the integrity of identity and other important attributes of items, processes, locations and people based on queries and reports by traceability systems. For example, for physical items:

Identity validation means that the system ensures that the Unique Identification Numbers used to identify an item has indeed been issued by the ID allocation subsystem of the system. In the case of systems using the GS1 standard it means ensuring that the item has been allocated a GTIN/SGTIN from the code block assigned by GS1 to the organisation under focus.

Identity verification means that a system considers other data associated with the item under focus such as order and contract information, e-pedigree from origin (including chain of custody), quality data, etc.

Identity authentication refers to a process to determine that an item is what it is presented to be. It is the act of confirming the truth. It could include, for example, confirming identity and ownership of an item with synthetic DNA marking or spiking, covert barcodes and customised markings.

A standard traceability system should offer identity validation and verification by default and it would offer identity authentication by means of an agreed approach of incorporating additional marking technology and item attributes, even if these cannot support real time on-line interaction but involve off-line in-situ procedures.

It seems to increasingly becoming acceptable in the food industry to use verification techniques of information about food products (typically based on DLT’s) as a proxy for traceability reporting of, for example, origin, chain of custody, quality, etc. This could lead to a higher probability of false acceptance of products since the source of data and information used in the verification process is not necessarily validated.

Efficiencies of real-time supply chain traceability solutions

In a real time supply chain traceability solution the item handling workflow of within-organisation activities combine with that of companies upstream and down stream in the chain into a synchronous supply chain traceability audit trail. It also links up with the service activities of essential service providers such as analytical laboratories and financiers. This kind of synchronous workflow linkage leads to an exceptionally high level of supply chain integration. Under these conditions operators and supervisors in the different supply chain organisations become enslaved to the synchronicity of the common workflow pattern that runs across the entire supply chain. For example: The analytical laboratory needs to be linked onto the same traceability platform in order to update, in real time, the product items and batches with the results of sample analysis. An orgsanisation cannot receive a shipment of incoming goods if the supplier organisation has not yet dispatched the goods.  An operator at any workstation cannot enter or upload data before or after the item-handling event. The only window of opportunity for data capture is during the item-handling event, provided that the standard operating procedure for the specific event type makes provision for such data capture. This same aspect of a real-time system also makes it more difficult to tamper with data since the data cannot be altered before or after the event.

The Fractal Traceability TMTM approach, for example, assumes that supply chain efficiency depends, amongst others, on the individual efficiencies of its operating members. It therefore enforces a specific requirement that an organisation’s operations has to be completely traceable in itself before it can participate in a supply-chain wide traceability audit trail. This requirement necessitates a traceability audit and, if gaps are identified, a gap-analysis to identify alternative ways to remedy the internal traceability audit trail. This process alone has been found to significantly enhance internal operations visibility and managerial control over operations.

The efficiency gains also stem from third party service providers such as financiers providing services that are designed around the level of visibility that the service provider are allowed by the operating supply chain member. For example, a financier is willing to provide off-balance sheet financing against the risk mitigating effect of committed demand and access to real-time data on inventories, orders and the movement of inventories.

One of the most significant areas of leverage towards higher efficiencies lies is the replacement of clipboards and spreadsheets on the factory and shop floor by procedures using direct electronic data capturing onto database linked devices. Experience to date in the cotton industry showed that a change management process is essential to support staff in moving from a spreadsheet driven process to a real-time database driven process, which is naturally very unforgiving in the sense of not allowing changes to the operations outcomes of item-handling event monitoring and recording.

Summary

The understanding of physical item level traceability across an entire supply chain is often lost in the technology hype and concepts generalisation that result from media campaigns triggered by the huge global demand for more operations visibility in the supply chains of especially food, pharmaceuticals and high-value commodities.

By carefully considering the exact business requirement for operations visibility and item level traceability, and following a scientific approach in evaluating the operating environment and crafting alternative solutions, a sensible operations visibility solution can be created using appropriate technologies that are proven and reliable.

The biggest challenge for real-time item level traceability throughout entire supply chains is not the technology solution, but the readiness of management to embrace the high levels of supply chain integration that results from such collaboration and the discipline that is required from the factory and shop floor staff in operating in one synchronous workflow pattern.

Current supply chain management models do not provide much guidance in leveraging business based on operations visibility beyond first and perhaps second tier suppliers. It means that the global debate on traceability in supply chains is still only touching the tip of the iceberg in leveraging supply chain visibility (i.e. including traceability) into increased efficiencies and lower risk of doing business across entire value chains.

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