Mike Lorbiecki, vice president of sales at IFS North AmericaIn the U.S. alone, food recalls and foodborne illnesses bear an annual price tag of $77 billion, including discarded products, loss of revenue and healthcare costs. On top of this, the damage caused by a product recall to a company's reputation can be even more devastating and much harder to recover. Mike Lorbiecki, vice president of sales at IFS North America, looks at how supply chain software needs to integrate three new technologies — the Internet of Things, Big Data and cloud computing — to achieve full visibility across the entire food and beverage supply chain.
Consumers are becoming key drivers for change in the food and beverage industry. Their demand for socially responsible and ethical business operations is requiring businesses to provide greater visibility into the origins of their products. Added to this pressure are international safety regulations that must be complied with — which becomes increasingly difficult as supply chains become more global.
Food and beverage companies need to show they recognize both consumer demand and regulatory restrictions by providing full transparency into every stage of the supply chain. But is it possible to do this in a cost efficient way while maintaining high quality operations? Enter traceability.
Effective Traceability
Traceability verifies the history and location of a product by means of recorded and documented identification.
The ability to capture data to enable traceability has been around for a long time — the 2002 Bioterrorism Act included a requirement for traceability systems to be used for all businesses involved in the food supply chain. However, manually entering traceability data leaves the possibility for inaccuracy, and the technology needed to be able to automatically track a product in a cost efficient way has not been available.
For small- and medium-sized businesses, many traceability systems simply track a few key ingredients back to a single point in the manufacturing process. Technology to provide full traceability across enterprises or entire supply chains has turned out to be a real challenge for these companies, especially those in the food and beverage market.
Three Challenges, Three Solutions
There are three main challenges traceability technology needs to overcome in order to be rolled out industry-wide.
The first challenge is the technology used to label and trace products. Labels need to be durable and reliable enough to survive every step in the distribution process. They also need to be cost efficient — labeling technologies need to be affordable for small- and medium-sized businesses to offer the same visibility as the larger chains. However, in the past, data collection on a multinational scale has come with a price tag, with no way of tracking every product at a reasonable cost.
Second, consumer awareness is also becoming a challenge. There is a rising demand from consumers towards corporate social responsibility — 42 percent of North American consumers say they are willing to pay more for products and services from companies committed to positive social and environmental practices.
Consumers want to know where their food came from and how it was produced, and be able to check a product’s journey — from farm to fork.
The third challenge is meeting the legislation that surrounds the food and beverage industry. The Food Safety Modernization Act (FSMA) has become a primary driver for improved traceability in the food industry, with the need for full visibility into the supply chain quickly becoming a necessity.
Advancements in three key technologies — Internet of Things (IoT), Big Data and cloud computing — offer a solution.
The Internet of Traceable Things — A Connected Supply Chain
The IoT revolution is reshaping modern food and beverage supply chains with impressive business opportunities. With IoT, simple labeling and identification technology now offers a viable, cost efficient solution. Consumers are now able to scan a product label with an app on their smart phone and can immediately track its journey through the supply chain — giving companies the chance to show full transparency into the products on their shelves. Cost measurement and transaction quality can be efficiently managed with the use of IoT to provide an affordable, automated traceability solution with a quality guarantee to meet strict regulatory legislation.
However, to really profit from IoT, enterprise software must be able to process the data from IoT-enabled devices and pinpoint what is actionable, efficiently and in real-time.
Big Data, Fast Traceability
A connected supply chain means the collection of more and more data. Big Data is now seen as a key strategic business tool, especially in the process manufacturing industry where companies are seeing real benefits for traceability. Food contamination costs the global economy $55 billion per year, and, in the past, was difficult and time-consuming to find the source. By using Big Data analytics, organizations in the process manufacturing industry can now sift through the noise, see exactly where the problem came from and stop it from continuing further down the supply chain.
But then comes another question, one particularly relevant to smaller- and medium-sized companies in the food and beverage industry whose IT budgets are not large — just how do you store and manage all of this important data? This is where cloud solutions come in.
Lifting the Clouds of the Supply Chain
Food and beverage companies can now benefit from fully managed cloud solutions where the software provider will manage everything from the cloud infrastructure and operating system, to the database and applications used for traceability. This means organizations can focus on supporting business requirements and objectives rather than admin-heavy tasks, such as inputting and storing data, meaning more time spent on important operations.
With cloud solutions for traceability, companies can achieve multi-enterprise, 360-degree visibility into every step of the supply chain, from manufacturing to delivery, with different points of each stage feeding back traceability information.
Broad and Agile ERP Systems Needed
In order to achieve this level of visibility across the entire supply chain, these three technologies need to be integrated into an agile and adaptive supply chain solution capable of delivering all of these developments in your industry.
The supporting ERP system has to be broad enough to log transactions along the entire supply chain, but also be deep enough to offer industry-specific functionality — able to log material movements, analyze results and preventive actions. With a broad footprint of functionality for full visibility and quality management, the ERP system can make adhering to strict industry regulations a simple task.
Traditional ERP systems separate the different processes in the supply chain, meaning full visibility of all business operations isn't available. But a new generation of Supply Chain Management software, such as IFS Applications, that can be delivered cost effectively through the cloud, give companies a 360-degree view of their supply chain for full visibility into the origins and delivery of all products. These ERP solutions delivered across the supply chain should be flexible enough to enable easier integration of emerging technology, such as Big Data analytics and IoT, for tracking information which is then fed back to cloud-based services.
Full traceability — The Achievable Goal
With this level of integration, supply chain functionality should include demand forecasting for better stock control and management, and multi-site logistics and inventory lifecycle management for better overall visibility, as well as mobile apps for barcode scanning and inventory traceability.
Traceability Going Forward
In the future, we will see even more devices capable of enabling traceability. These devices won’t just store the data, but analyze it in order to help reduce operating costs and adhere to strict industry regulations and consumer expectations. Technology advancements in IoT, Big Data and cloud computing are still relatively new to process manufacturing, so things aren’t going to happen overnight. The next few years will be the time for businesses to watch and learn — and be prepared.
Companies will need to spend this time putting a strategy in place to reap the traceability benefits of this technology, with an ERP system that can support them every step of the way.
