Achieving Traceability

Feature Article | November 29, 2004 by admin

EU Regulation 178/2002 calls for reliable procedures to trace foodstuffs at all stages of the value-added chain. Accordingly, suppliers, manufacturers, distributors and retailers have full responsibility for goods which do not comply with the requirements for food safety. If damage occurs, or if the authorities in charge request it, all required information concerning the origins and whereabouts of the goods must be disclosed. The Regulation comes into force on January 1, 2005. Auditing and consulting firm Deloitte, in conjunction with Germany’s foremost food retailing publication, “Lebensmittel Zeitung”, carried out a study to determine the traceability status of goods in the food industry. To this end, in the summer of 2004, approximately 350 employees of food companies in the German-speaking parts of Europe were questioned; the results have been published in the report on the study entitled “Rückverfolgbarkeit 2004” (Traceability 2004).

EAN-128 to be introduced

Study

Study

95 percent of food production and processing operators but only 35 percent of distribution and retail operators are currently in the process of establishing traceability systems. The subject of traceability has preoccupied the industry since well before the EU Regulation was passed. To ensure the quality of their products, food companies have long been interested in – and capable of – tracing goods in the supply chain and conducting recalls of goods. Less than half the companies in the food industry are already using the EAN codes which are uniform across Europe to identify items consistently. 32 percent of all companies use barcodes in different formats to automatically collect data for raw and auxiliary materials and for semi-finished products. 45 percent use barcodes to identify the finished product.
However, within the next six months the situation is going to change drastically. By the end of that period, up to 30 percent of the interviewed companies want to have concluded implementations on the basis of EAN-128, the newest barcode version. Companies which are not yet in a position to apply standards according to the European Article Number Code (EAN) might easily find themselves left out. The more frequently goods are traded and the more logistics services are outsourced to external providers, the more important it becomes to standardize product labels and to use appropriate procedures for transferring the information.

EAN-128

EAN-128

A number of international initiatives are aimed in the same direction. The American Uniform Code Council (UCC), for example, has agreed with the EAN Organization on joint UCC/EAN standards for identifying products. Concerns about the outbreak of epidemics and the fear of bio-terrorism have strengthened the call for technologies to trace and recall spoilt foodstuffs. Several countries have passed legislation concerning the traceability of meat. To stem the increasing occurrence of product fraud in the context of drugs, the FDA (American Food and Drug Administration) requires that the pharmaceutical industry trace the flow of its products more effectively.

EPC system change

The study found that during the next five years companies will continue to invest primarily in barcode applications. Only then do they plan to invest more heavily in RFID radio technologies. A transition phase can be expected during which RFID labels will be used in addition to EAN codes. Data can then be collected using both barcode scanners and RFID readers. A fundamentally new orientation is expected only with the introduction of the Electronic Product Code (EPC). The EPC has been agreed upon as the global standard for real-time product identification. Individual data exchanges – as with the EAN – between the companies involved are rendered redundant. Instead, the product information (for example, data concerning production, distribution, expiry) will then have to be retrieved via an EPC identifier from the EPCglobal Network which will be in application worldwide. In the EPC environment, RFID labels will be used exclusively to identify the goods. This system change will only be successful if RFID solutions are considered as part of a medium- to long-term IT strategy early on and are incorporated accordingly.
The companies agree that, aside from the use of standards, efficient and effective traceability can only be ultimately realized with a suitably optimized batch management system. Even if most companies are currently using their own systems to trace and manage batches, the trend towards software standardization is clear. Approximately 20 percent of the interviewed companies are planning to implement standard ERP and product logistics solutions within the next two years. As a result, by 2006 a total of somewhat more than 50 percent of companies will be using forward-looking standard solutions, such as SAP Auto-ID Infrastructure (SAP AII). These solutions will enable companies to change over the supply chain quickly and easily to new technologies, for example RFID, and thereby ensure that they can adopt new standards, such as EPC, in the short term.

Costs and benefits contentious

The majority of companies expects potentially high benefits to result when RFID replaces barcodes. Almost 60 percent think that RFID will result in “more efficient handling” with respect to traceability and recalls, as well as “an increase in reliability because of greater accuracy when goods are received”. Furthermore, around 50 percent of all companies are assessing the benefits potential in the areas of order-picking and shipping as well as for “logistic lead times” to be from high to very high. Here, too, it is recommended that RFID be regarded as part of a medium- to long-term IT strategy. The first step in this approach is to conduct appropriate feasibility studies for each specific enterprise or to determine business cases. The experiences of other companies may be helpful but they cannot be a substitute for a company-specific analysis.
As far as cost-effectiveness is concerned, the study revealed very different opinions. For example, only 32 percent of food production and processing operators, 45 percent of suppliers and 49 percent of distribution and retail operators are convinced that RFID can be used more cost-effectively than barcode-based systems. Approximately a further third of all companies sees no difference at all, and between 10 and 26 percent of companies are even afraid that the use of RFID will be less cost-effective than barcode-based solutions. The different assessments are probably due to the fact that only limited experience has so far been gained from RFID deployment. What is more, because of the smaller quantities involved, the cost of RFID system components is still higher than for existing systems. In particular, the fact that RFID tags are still more expensive than barcode labels is presently an obstacle to cost-effective deployment. Therefore, it is all the more advisable to set up appropriate pilot projects. Deloitte has learned through consultations that many companies are currently planning pilot projects to demonstrate that RFID use is both technically feasible and cost-effective in various areas of deployment.

Pinpointing additional features

It will be critical for the success of RFID to pinpoint additional benefits compared to barcode-based systems. For example, about one third of all companies see “better control over the flow of goods in drop shipment business” as a benefit. This applies particularly if RFID is used with multi-use transport containers for fresh produce deliveries. Positive developments are also expected for “wastage reduction”. About one fifth of companies also envision new business opportunities or benefits for “automatic sorting of returns”. Thus, most of the RFID projects currently being conducted are also testing new multi-trip transport systems and additional features.
However, with everything that is at issue it is particularly vital not to lose sight of the goal of all of the efforts that are underway. The study has clearly shown that traceability is not primarily aimed at fulfilling legal requirements such as those resulting from the EU Regulation. Rather, the goal of all efforts and investments is to ensure the highest level of quality for foodstuffs. While powerful and future-proof IT solutions and innovative technologies such as RFID make an essential contribution they are only an incidental, albeit important, matter.

Norbert Taplick

Norbert Taplick

Jochen Kuhnert

Jochen Kuhnert

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