Although the issues surrounding product recalls, counterfeiting or staying compliant with emerging traceability regulations have been present for quite some time, these topics have recently come into focus again. Take a look at the effect that a global supplier network has had on the U.S. Government’s purchase of products in the defense industry: countless examples have made headlines pertaining to counterfeiting and its relation to national security, injuries, and even deaths. National security aside, other industries have experienced similar news.
As these issues have the potential to significantly impact operations and business performance, organizations must not only figure out how to identify their origins – but more importantly – how to prevent them from occurring. The best way to address this challenge is to invest in and improve your tracking and traceability (T&T) capabilities. However, once the decision has been made to embrace a product traceability initiative, the next question for a manufacturer, especially one that leverages a distributed and global value chain, becomes “Who owns product traceability?”
Justifying an Investment in Product Tracking and Traceability
The challenge with justifying an investment in product traceability solutions and / or the purchase of traceability software is that it generally requires either a proverbial “carrot” or a “stick” as an incentive – such as a government or customer mandate, a requirement to address counterfeiting concerns or the need to better protect brand integrity – before it will get backed in an organization. Without this incentive, it becomes difficult to become a top-of-mind issue. Convincing an executive to allocate time and resources can be met with pushback when he or she may have a number of other investments that provide more direct, visible benefits.
Corporate Governance; Where to Assign Responsibility
Without the clarity of who holds the responsibility for T&T, rationalizing an investment becomes even more difficult. Many believe it’s the responsibility of those involved with quality management or manufacturing execution, but often those groups are more focused on making a product to the agreed upon specifications or cost targets. This doesn’t always imply that they’re digging deeper to validate whether or not materials are counterfeit or whether a complete product traceability record is properly captured, recorded and readily available for future retrieval.
To effectively track and trace materials, the responsibility has to be bigger than simply quality and manufacturing. This can differ by industry and context. For instance, a company in the life sciences industry may want to take a more risk-based approach by placing the responsibility into the hands of the Chief Risk or Compliance Officer or by creating a separate role that is more involved and broader than quality.
Trends in Product Tracking and Traceability
In the Food and Beverage (F&B) and packaging industries, with the passing of the 2011 Food Safety Modernization Act (FSMA), came the emergence of a more refined focus on food safety and defense. F&B and packaging companies have more requirements, which have driven the creation of new Food Safety and Defense roles. In the long run, this development may drive investments and enhancements in T&T. Whether it’s in regard to an OEM in the life sciences industry, a food processor in F&B, or other industries like automotive, consumer goods, or aerospace and defense, each must establish strategies to improve the safety of products and eliminate the potential for counterfeiting.
Emerging Regulations: The 2012 National Defense Authorization Act (NDAA)
This act was created to ensure that defense contractors are screening equipment for counterfeit and defective parts. If proper screening isn’t conducted, there’s a potential for criminal and civil liability for the contractors. The NDAA shifts the burden of detecting counterfeit or defective parts onto suppliers. We will likely hear more about this issue as time goes on, especially if charges are brought up on a contractor. Again, when the issue involves possible criminal prosecution and is pushed down to manufacturers that have suppliers of their own, T&T will likely become a CEO issue that is managed on a day to day basis by both general council and perhaps a Chief Risk or Compliance Officer.
In all of these industries, a common theme we’re seeing is managing global traceability at the executive level for large OEMs or companies that rely on a global supply chain. This means that T&T will likely play a larger role within organizations, being pushed down throughout operations and across areas such as quality and manufacturing, and ultimately, to the global supplier network. Organizations can hold suppliers responsible for the integrity and validation of materials, mandating various conditions for doing business. This creates a scenario whereby supplier viability is tied to being able to deliver non-counterfeit products, within specification. With more ownership in the procurement process, it’s likely that companies will improve business performance throughout their product’s lifecycles.