[#3 Traceability] Key success factors in choosing a traceability tool

The rise of globalization and free trade have favored an increased complexity and fragmentation of supply chains in all industries.

Until recently, gaining control over the nature and localization of each step of their production process was not a priority for corporations. However, many environmental scandals and human rights violations in supply chains have brought to light the risks related to such low visibility. The aforementioned events have also contributed to a tighter legislative context, with for instance the advent of laws regarding the corporate duty of vigilance and environmental labeling.

Recent sanitary and geopolitical crises have exacerbated companies’ urgent need to better understand their supply chains to anticipate shortage risks. Such a context encourages an increasing number of companies to launch their own traceability initiative as a prerequisite to any decarbonization or human rights strategy. This type of dynamics requires strong investments in both financial and human resources, to mobilize internal stakeholders and suppliers at any rank of the supply chain.

How can we anticipate and pave the way for traceability approaches, which remain rooted in the choice of a tool adapted to companies’ needs?

Our experience has revealed the following keys to success:

Insight n°1: align technologies and goals

Two major kinds of technologies currently exist to pursue traceability: blockchain and SaaS (Software as a Service). If the former enables data securing through an unalterable recording of every transaction made between different actors, it is more adapted to supply chains that are at least partly known by purchasers. In the luxury industry, the Aura consortium uses its own traceability platform to ensure product authenticity thanks to blockchain technology.

On the contrary, SaaS technology proves useful when the goal is to work up an unknown value chain (based on an ascending logic). This approach enables purchasers to invite suppliers to join the platform so that they can invite their own suppliers, and so forth until the targeted rank is reached. The supply chain is then progressively discovered as the approach is implemented.

Insight n°2: anticipate obstacles on the supplier side

Any traceability initiative may trigger various forms of obstruction, both internally to the company and externally from suppliers. We have identified three major obstacles that require validation on the choice of a traceability tool and its ability to propose relevant mitigation levers:

• Confidentiality: it is a crucial ingredient to any traceability initiative. Some suppliers are unwilling to share information in an attempt to protect their knowledge base and expertise. This occurs during discussions on product formulas in the cosmetics industry for instance. Several traceability platforms limit the amount of information shared with clients, such as IMDS, which can identify confidential data, or Transparency-One, which offers the possibility to choose a visibility level among three options: total, geographic, or composition only;
• Human resources: the time investment required for buyers and suppliers to declare all necessary information must not be underestimated. An ergonomic tool, that can adapt supplier experience depending on their feedback and that offers interoperability solutions is likely to be preferred by all stakeholders. For example, Tilkal, a tool based on a B2B blockchain, allows the creation of APIs with the client’s or supplier’s internal system and eases connections to other traceability platforms.
  Similarly, platforms offering human and personalized support onboarding the tool are equipped with a significant asset to ensure success. It is the case of Transparency-One with its partner SGS, or TrusTrace, that gives access to a call center to support suppliers in their first connections and declarations.
  Finally, the structure of the tool plays an important role in saving time when declaring known and unknown data in supply chains. If the focus of the initiative is on discovering supply chains, platforms built as networks such as SupplyShift or Transparency-One enable all participants to share information with any one of their clients without repetition of data declarations, thus proving very efficient. Blockchain technologies propose similar solutions: information can be shared between all members of the network (for example, Sustainability Map). In some specific supply chains, it is typical for buyers to have suppliers in common, at different ranks of their supply chains. Hence, again, the essence lies in the ability to share their information with several clients simultaneously;
• Costs for suppliers: at initial stages, suppliers tend to consider a traceability initiative as an additional requirement from their client, without linking internally with their ESG or business approach. Choosing a free or low-cost platform such as Sourcemap is a valid strategy to avoid the accumulation of obstacles during project implementation.

Insight n°3: consider industry idiosyncrasies when choosing a traceability tool

Each industry has its own attributes and challenges that might impact the choice of the tool and the type of data to be collected from supply chains.

First, it is recommended to survey existing sectorial initiatives and open the dialogue between suppliers and industry actors. Traceability platforms and blockchain technologies are becoming widespread for supplier use across industries. It is therefore primary and relevant to draw from other actors’ experience and achievements to maximize the initiative’s return on investment. For instance, the IMDS platform is quite popular in the automotive industry.

The composition of products to be traced is also a decisive information source: it determines the granularity of the information being declared through the traceability tool. A smartphone would need to be traced entirely – from the screen to its motherboard components. On the contrary, a cotton tee-shirt is not transformed by such granularity concerns and remains a one-material product despite having undergone several stages of production. Blockchain technology could therefore be more apropos to trace products of “simple” composition (for example, the tracer of food items – Connecting Food).

Finally, the level of personalization offered by platforms is key. It could serve to measure ESG risks in supply chains or eventually upgrade monitoring boards with data visualization elements that are based in purchasing processes.

There is no ONE best, most perfect traceability platform. Both SaaS and blockchain platform types presented here are fitting and the cue lies in paying attention to the project team developing the tool. In other words, the more engaged the project team in a co-construction approach, bringing together clients and suppliers, the more fashioned and bespoke the project will be to its goals.

Developing familiarity with any digital tool and deploying it with the aim of reliable traceability requires conducting a pilot phase with several supply chains or priority suppliers. A pilot phase is relevant to test, measure results, define the right support tools for suppliers, and build an efficient deployment plan. The interactions and dialogue with suppliers, together with the tools made available to them, undoubtedly dictate the win of the traceability initiative.