Across nearly every industry, the inability to resolve product problems as they arise can cause a lack of trust with consumers that’s hard to rebuild.
Whether the issue involves counterfeit medicines with life-threatening consequences, or a tainted ingredient that causes an outbreak of foodborne illness, when a crisis hits, companies must react quickly to determine the source of the problem, and pull the affected product from the supply chain.
In such situations, outcomes can be costly, including lost revenues, waste, high resupply costs, and increased logistics expenses — not to mention the potential for enormous brand damage. Without processes that enable full visibility and traceability, every one of those risks becomes greater than it needs to be.
When fielding product-quality issues, including recalls, warranty claims, and unit-level repairs, organizations need to regain the consumer’s trust by communicating their course of action proactively. Business network technology, which enables everyone in the supply-chain network to share relevant information in real time, tracks the full chain of custody for every item from start to finish. It provides visibility across final products, intermediates, and raw materials in real time from their source, across trading partners and to the end consumer.
Agility and real-time collaboration within the business network are high priorities for every participant, given that end consumers can quickly make or break the success of products. Omnichannel requirements for outbound sales and product returns only add to the scale and complexity of network requirements. Product safety remains top of mind for many consumers, who are likely to prefer brands that ensure quality by providing full traceability across the network. The good news is that a key advantage in the digitization of the supply network is providing greater traceability — up, down and across the network.
The Basis for Crisp Execution
It doesn’t take much to ignite a crisis when there’s a problem. Firms have learned that any missteps in handling a crisis are costly, in a social media-driven world where brand damage can be rapid and irreparable. It’s a very real concern for consumer-facing businesses, given that over the last 20 months alone, the FDA has reported and tracked nearly 1,000 product recalls across sectors.
Global enterprises today know that when it comes to product issues, especially recalls, they need to:
To do this all this effectively, businesses must assert greater control over their supply networks. They need technology that tracks the full chain of custody for every item, providing visibility into products, intermediates, and raw materials in real time.
By rapidly extracting only the affected product in a recall, and at the precise locations in the supply chain, companies can minimize the impact on consumers, preserve their reputations, and minimize costs. They need to know exactly how much product needs to be replaced in order to resupply affected locations for minimum business impact.
Identifying the Cause of Quality Issues
When an issue does arise, traceability requires the ability to do root-cause analysis at the process level. It calls for network-level master data management that’s extensible across multiple data types and geographic regions. Just as there’s a need for a single version of the truth (SVOT) from a demand-signal perspective across the network, businesses also need an SVOT at the process level from a product-quality and safety perspective.
In this way, traceability becomes another foundational element of a quality culture. With a process-level SVOT across all trading partners, true traceability can be achieved, along with the requisite root cause analysis when an issue occurs. Much of the relevant data is being created through the internet of things (IoT), where sensors track critical variables that help pinpoint whether a variance occurred throughout the trading network.
Addressing Consumer Safety
Today’s consumer is more informed than ever. They want to know what they’re buying, that it’s authentic, where it came from, who made it — and they want organizations to prove it. Chain of custody enables items, shipments, and origins to be completely tracked, so that all approved sources of raw materials, intermediates and finished products, as well as their paths through the supply chain, are 100-percent verifiable and auditable. Chain of custody can help consumers to understand environmental impacts, but takes on life-saving significance where counterfeit pharmaceuticals are a concern. This is especially true in places like Africa, and also applies to any medical product or food that must be maintained at safe temperatures to prevent spoilage or degradation during its journey.
Addressing a public hearing in February, 2018, FDA Commissioner Scott Gottlieb said, “Ensuring reliable patient access to safe and effective medicines requires maintaining a closed, secure U.S. drug supply chain for the distribution and delivery of finished drug products. Every link in that chain must be secure: From the moment finished drug products leave manufacturing facilities to final delivery to pharmacies or providers’ offices where medicines are ultimately dispensed to patients. That’s why FDA and stakeholders have been working collaboratively toward full implementation of the Drug Supply Chain Security Act (DSCSA) in 2023.
“I know that reaching true interoperability for systems and processes that can produce full information for each transaction going back to the manufacturer — down to the individual package level, in near real time — is challenging,” Gottlieb continued. “Seamless state-of-the-art security throughout the supply chain must be our shared goal. A fully digitized supply chain can also help develop predictive analytics to reduce health care fraud, waste, and abuse. It can allow regulated industry and regulators to more easily manage or avoid costly or dangerous supply disruptions. It can help support innovative manufacturing and distribution technologies at a time when the drugs being developed are becoming increasingly tailored to specific patient populations.”
A similar challenge is occurring in the food industry. The Centers for Disease Control and Prevention estimates that 48 million people fall sick, 128,000 are hospitalized and 3,000 die annually in the U.S. due to foodborne illness. This results in an annual cost of $93.2 billion and a cost per outbreak per restaurant of up to $2.6 million across fast food, fast-casual, casual dining and fine dining restaurants. As FDA Deputy Commissioner for Food Policy and Response Frank Yiannas has said, “Today’s food system is amazing, but it does have one major Achilles heel: A lack of traceability and transparency.”
The cost of not adopting systems for tracking chain of custody is easy to see, whether it’s the E. coli outbreak in 2018 (tied to the consumption of romaine lettuce), or the 66% increase in meat and poultry recalls from 2013 to 2018, as reported by the U.S. Public Interest Research Group (PIRG). The inability to proactively stop problems as they arise has caused a lack of trust among U.S. consumers. The romaine outbreak resulted in 2018 sales plummeting by more than $136 billion versus 2017 sales, and the implications are still being felt in 2019.
In the event of a recall, time is of the essence in determining the source of an outbreak. In 2018, because of uncertainties about extent and location, a great deal of food went to waste, as essentially all romaine lettuce was thrown out. Similarly, 12.1 million pounds of beef were recalled by the USDA, as well as 206 million eggs over salmonella concerns. In 2018, the U.S. food system took reactive actions, rather than the proactive ones that would be possible with systems in place to enable traceability and transparency.
The Missing Link for Customer Loyalty
With full chain-of-custody visibility across the business network, consumers can gain confidence that a company takes product safety and supply-chain security seriously. Businesses are responding accordingly, in a bid to win new customers and secure the loyalty of existing ones. In this way, multi-party business network technology is challenging the status quo by making supply chains more secure, and recall management more targeted, efficient and faster. Most importantly, by enabling everyone in the supply chain to share relevant information in real time, organizations can avoid the devastating effects that product recalls can have on customers, brands, and shareholders.
Joe Bellini is chief operating officer at One Network Enterprises, provider of an AI-enabled business network platform.