What is traceability and how does it work?
Traceability has recently gained considerable attention in the food industry. A growing demand from consumers forced food producers to keep track of the product’s quality and origin. New developments in technology made this easier and more accessible. Other industries are now rapidly following. The ability to track every aspect of the manufacturing and distribution process has three key benefits; it increases supply chain visibility, improves quality control systems and reduces risk. By keeping a record of the entire production and distribution history and (selectively) disclose this information, suppliers are able to react to any issue.
Usually, the information trail about a product’s origin, production process or composition stops when a product is shipped from one company to another. The information stays within the so-called data silo. By opening and connecting these silos, it is possible to distribute information through all companies in a supply chain. Distribution usually happens through digital handshakes, in which information is shared and verified. Blockchain serves as the perfect technology to facilitate these handshakes, since the two parties on each side of the shake don’t necessarily have to trust each other.
Blockchain is the solution when sharing information gets tricky
Although it might be more and more logical for brand owners to increase the transparency and traceability in their supply chain, their suppliers aren’t always properly incentivized to follow suit. They might fear an increase in costs from the ‘paperwork’ or are afraid to lose a certain flexibility. But above all, they might be hesitant to share sensitive information with partners or competitors. Aligning these stakeholder interests and forming consortia is one of our key propositions. It is possible to design the blockchain and digital ecosystem in such a way that information is shared to the system, but shielded from other supply chain participants. This allows for extracting the necessary data to create a traceable product, without exposing any sensitive data.
How we trace materials that can’t be traced
When tracing goods or materials through a supply chain, you need to consider how to trace within a production facility and how to trace between production facilities. Tracing between facilities is usually the easiest part, because the product doesn’t undergo any transformation. Ensuring the products are properly identifiable through QR-codes or IoT sensors, for example, is the most important aspect. Traceability within sites is often more difficult. Products undergo transformation or materials get mixed, losing much of the necessary information for traceability in the process. There are different approaches to overcome some of the problems when products get transformed or mixed within facilities:
Segregation allows for products or materials from equivalent sources to be mixed during production. You may lose some of the information, but it allows you to keep track of certain important aspects. Take organic versus non-organic orange juice, for instance. All oranges from any organic source are allowed to be mixed.
Mass Balance allows for physical mixing of materials from various categories. It ensures balance of volumes in inputs and outputs over a certain time period. In the case of FCE wood for example, you track how much certified and non-certified wood is inputted in a wood factory in a month. The same ratio applies to the output.
Book & Claim
With Book & Claim there is no link between the physical flow and claims. This approach rewards certain producers when traceability is not possible at all. It drives demand via the sale and purchase of certificates. While creating critical mass of certified material, it also provides market access to all within the industry, regardless of their global location or size. An example would be the REC carbon certificates.
How we design blockchain based traceability platforms
We start by mapping the supply chain and identifying all actors and roles. Given the challenges posed above, it’s very important to understand the positions and interests of the actors. This will be the start of aligning those interests and defining the user’s requirements. Depending on the required level of detail and the complexity of implementation, we chose a fitting traceability approach (as described above). Blockchain technology has been a much hyped technology in this space, but it is important to remember blockchain is an infrastructure technology. Meaning it needs an application with in-built rules on top. A traceability system’s key feature is robustness, so it requires a well thought through design and a rigorously tested development. This can be achieved through iterative design cycles based on user-centered design methodologies. Starting development small, focusing on key features and gradually expanding from there is the way we prefer.
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