(Credit: Pixabay)Supply chain disruptions highlight an important need for companies to be able to track products through every step, and traceability systems are tools investors should demand their businesses have, according to a new report from Planet Tracker.
Traceability systems track the history, location and application of a product. An argument against such tools for supply chains accountability has been that they are too costly, but reducing exposure to hidden supply chain risks could outweigh that impact, Planet Tracker says.
The systems can help both financially and with environment, social and governance or sustainability issues. In terms of financial benefit, Planet Tracker says, they can help with a reduction in operating costs, but there is also evidence of higher profit margins for businesses that are able to certify their sustainability credentials.
Traceability systems can show evidence that companies are delivering on their ESG commitments, whether on net zero objectives or meeting government regulations. Traceability systems can also manage for risk and profitability, Planet Tracker says.
That can also lead to transparency, meaning information is easily available to disclose to stakeholders.
Being able to track a product’s information and the various items it is reliant on to ensure proper completion and delivery can help a company predict potential disruptions. It can also help diversify sources.
Traceability is going to become even more important in terms of sustainability as goals get more ambitious. Planet Tracker says this is especially true for issues like Scope 3 emissions, which take place from products and transportation that a company doesn’t directly own. Additionally, without environmental supply chain disclosures, investors cannot properly price ESG risks and opportunities.
Having information about how a product is produced throughout each step may also increase the value of that product to its consumers. A study by MIT Sloan School of Management found consumers may pay up to 10% more for a product from companies that provide more supply chain transparency. A survey last year by OpenText revealed that 82% of consumers would buy from companies with ethical sourcing policies in place.
Corporations may have to implement traceability systems anyway as regulations become more commonplace. Regulations are increasing across the world, targeting a variety of industries and addressing concern such as deforestation.
Systems can come in the form of paper, basic electronic systems, or integrated hardware.
Planet Tracker says integrated hardware is the most reliable. That is especially so if underlying data processing systems are interoperable, meaning different applications can communicate and share information.
Planet Tracker says blockchains are a good example of platforms that can use a variety of systems and information over time and tie it all together. Yet, according to an PWC estimate, just 5% of companies use blockchains.
Cost of implementing these systems remains a factor for companies, and they vary depending on the type of system that is being installed — but they can bring about savings by avoiding disruptions before they happen or making sure a process is efficient, eliminating waste.
Planet Tracker also pointed out returns on investment and specifically looked at the textile industry, pointing out that a one-time supply chain investment in wet processors of $455,000 produced an annual savings of almost $370,000 and paid itself back in just a little over a year.
There also can be obstacles in implementation, such as gaps in supply chain information and a lack of industry data standards that slow the adaptation of the systems for some organizations. Still, Planet Tracker says there are enough tools and technologies, even mobile data, that can help bridge those gaps so that companies can take advantage of traceability results.
