Faced with the challenges of meeting regulatory requirements Essay

Faced with the challenges of meeting regulatory requirements and satisfying consumer expectations for safe fresh foods, industrial segments are evolving on different and separate, yet parallel paths in order to define their own traceability guidelines and also to address the supply chain-related areas and aspects of food safety. The importance of the unique identification, exchange and tracking of product data is greatly felt at critical events, which is addressed by the supply chain. It not only ensures food safety but also establishes cost efficient business process through which various stakeholders in the supply chain are connected.

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The major drivers for the growing importance of traceability and transparency

1. Food fraud

2. Ensuring that sustainability claims are true

3. Regulatory demands and legal requirements

4. Stakeholder pressure

Obstacles in today’s supply chain

1. Supply chain complexity

2. Increase in the overlapping and conflicting demands which comes from different regulators

3. Lack in digitalization and weak or no presence of supporting systems

An integrated and self- sufficient food traceability approach would build and improve upon existing food tracing standards and protocols, like the Produce Traceability Initiative, and utilize existing tracing tools, such as Critical Tracking Events (CTEs) and Key Data Elements (KDEs).

This would provide benefits to all, including:

• Improvement in food safety via precise and efficient recalls

• Developing new operational efficiencies and increasing level of engagement gained by all members of the supply chain

• Increase in the potential revenue growth for all fresh food categories

These standards allow end-to-end traceability and ensure in linking flow of information to physical products. In any event of food outbreak or recall, sharing of traceability information between partners in the supply chain of that product becomes critical for well-defined and effective recall.

1. GS1 System

2. 2D Bar codes

3. Composite Bar codes

4. Radio Frequency Identification (RFID)

5. Electronically Readable Coding Techniques

6. Edible Bar codes

• GS1 System

– GS1 System ensures unique identification of products; the data collected can be encoded into data carriers such as bar codes. “A data carrier is a way of representing data in machine readable (binary) form”. GS1 System uses following data carriers:

– ITF-14 carry 14-digit identification numbers are not expected to be used and incorporated through the point-of-sale GS1-128 Bar code symbol is extremely flexible and can encode through various data elements GS1. DataBar is a linear symbology used for small items.

– It has wide acceptance across a number of industries; can be integrated into production, shipping, and receiving systems; data can be communicated in electronic data interchange messages between trading partners

– It is inexpensive and globally accepted

• 2D Bar Codes

– Two major groups. Data matrix symbology looks like a matrix of geometric shapes. Multi-row bar codes look like linear bar codes but the bar codes have been shortened and stacked on top of each other horizontally

– Smaller than normal bar codes and hold more information

• Composite Bar codes

– Composite symbols combine a linear and 2D symbol. Symbols are arranged and printed close together and carry linked information.

– More information can be stored

• Radio Frequency Identification RFID

– A tag is attached to the product. The tag contains a chip that stores information and an antenna which is fitted in the system allows the chip to be read by radio waves from a reader device. Once the radio waves are generated, a chip detects the signal and information is transferred to the computer.

– Two types of tags exist. Passive tags, these tags are powered by an external source and have longer operating lives but they can only be used for short ranges. Active tags, these tags are powered by an internal source and have long operational lives with longer reading ranges. It is not important that the tag is in line of sight and multiple tags can be read virtually simultaneously, which in return can reduce labor costs, reduce manual screening, improve variable memory, and the tag memory can be rewritten or appended

• Electronically Readable Coding Techniques

– Electronically readable codes are attached to a product through normal printing procedures but with special inks

– Not as sensitive to dirt or bad conditions, can be invisible, cheaper than RFID

• Edible Bar codes

– Applied directly to food, and considered a food additive. Information can be encoded on a microscopic particle. Binary codes are usually used because they are easier to read.

– Reach through real time documentation

BLOCKCHAIN

The reason blockchain technology is interesting is that there are certain functions that are very valuable for the digital world that hasn’t been invented before the blockchain.

1. Digital units impossible to copy: If we use the blockchain we can be sure there is no risk of copying and “double spending” or “double selling” of a particular item of food. Each characteristic of the food such as certificates of fair trade or limited use of antibiotics can neither be duplicated.

2. Digital files that can’t be manipulated: While digitization has come far in many respects there is another property, except for being possible to copy, that traditional IT solutions has not yet solved. It is very difficult to detect if a digital file, video, photo, contract etc. has been manipulated or forged.

3. Digital processes that can’t be manipulated: A third problem the blockchain has solved is securing a process. The most discussed example of such process is trade finance, where a sequence of actors have to confirm what they are doing at various stages in the agreement. They have to bear the responsibility for goods being shipped and confirm the process for actors and those involved throughout the chain of transportation and shipment. If the container comes with coal and not bananas, you want to know who is responsible in the supply chain and who received and kept goods, and money they shouldn’t.

4. Low barriers to entry: This is not entirely unique for the blockchain, but all three aspects described above can be integrated at a low cost. The blockchain technology enables trust in low cost technologies that under other circumstances are considered insecure.

The blockchain can make verifications of any digital record trustworthy. An e-mail, a photo, or a SMS are usually perceived as insecure. This is of great importance in the food supply chain because a large number of farmers and those involved in the process directly have very limited and scarce IT capabilities. A system that requires every farmer and those involved n the supply chain to have a SAP-solution with Oracle databases will never be realized and promoted because of the high cost associated with it. The blockchain on the other hand makes it possible for small farmers, small middleman and truck drivers or a fisherman, as an example, to enter trustworthy data to the supply chain with a simple device such as smart phone. Data and processes cannot be manipulated or hampered, because hashes, digital fingerprints( ways of storage of encrypted date) that are stored in the blockchain, will reveal any manipulation or change of the data or processes in the system.

USER INTERFACES

The user interfaces are designed for different users. There are three main categories of user interfaces.

1. End-users – typically the consumer These users are expected to use their mobile and a dedicated app for the solution. It is expected to be a read-only application in the first place and will therefore not require any log-in. The consumer will then be able to scan a barcode, Rfid-sensor or QR-code. Through this they can access the information related to that particular product. Depending on the choice of solution the consumer may access all the steps in the supply chain or only the place of production and the description of the food.

2. Professional users – wholesalers, retailers, freight companies, farmers and processing and packaging companies. Each one of these will have an interface either through mobile or desktop, or integrated in the ERP-system. They will know the previous and following parties in the supply chain as well as the food origin and various specifications of the food, in some cases they will get more information than what is needed by the consumer.

3. Smart contract/software administrators- These users will administer the contract for the other users. If there are changes in the process or contracts that have to be made this will be managed through this interface. The governance of the system can be organized with a public authority, or a company or group of companies, that is trusted for doing this. The contract code should normally be open source so that any changes are visible to all participants and can be challenged if there is a setup for governance of this.

FILE STORAGE

The information that is added to the blockchain is normally restricted. It will not contain all information, but instead contract verifications, hashes, and identification of who has added this information. If, for example, a farmer takes a photo of the crop and add it to the blockchain the photo can be either:

1. Uploaded to the blockchain and fully transparent for the nodes in the blockchain, but this requires the blockchain to store a significant amount of information.

2. Uploaded to a separate database but accessed by the blockchain. On that basis, access can be restricted or open for anyone who interacts or tries to manipulate with the blockchain.

3. Stored in a database that is owned or controlled by the person or organization uploading the photo, but it is not possible to access through the blockchain. Only the creator of the file/photo decide who they want to share their data with.

The system requires the possibility to make random and unexpected inspections to realize the full potential. However, grassroot activities such as photos or random reporting can also work and can increase granularity and trust in the system. If there are many middlemen in the supply chain the connection with the production can be lost if the product is not defined by a barcode or other product identification.

The main weakness of the system is the installation and deployment cost. It is important to create an incentive to use the system. This could, as in the case with beef and fish, be made with regulation or with higher prices paid for better traceability by retailers and/or consumers. For less costly products, transaction costs will be important to handle.

TRACKING FOOD VOLUMES

Tracking of food volumes in the supply chain, while identification of individual grains, beans or oils like palmoil, olive oil etc. are difficult or impossible to track it is possible to track the volumes bought and sold by each participant in a blockchain solution. The benefit from using the blockchain is that no central party needs to be trusted in getting all the data on transactions and volumes. With the blockchain volumes produced of, for example organic soybeans, cannot be higher than the one bought for any party in the supply chain. If you buy ordinary rice in order to increase the volume of the more expensive basmati rice and then try to sell the entire volume at the higher basmati rice price you don’t have enough units of basmati rice in the blockchain linked to your organization’s private keys. Volumes cannot be increased in the blockchain. In this case there is no need to transfer a particular identification or the product-ID, but the product category (such as fruits of different kind or any other organic product) and the volume. Since the incentive and means to manipulate or hamper the food is largely eliminated. hence the system that controls volumes and not individual food items will be enough and sufficient to prevent fraud. Thus, by tracking volumes and not the individual product item we then have a much better trust and validity in the supply chain. One of the other benefits with this solution is that we can handle situations in multiple places for example where food is processed, cut, repackaged and shipped and final sales destination etc. If we control volumes and not the individual product item the incentive for fraud or any other mal practice disappears almost entirely. It may also be possible to use alternative standards for representing the food that are popular in market, they will be of interest and will demand enough of time and money but something that will be less of interest if the package already is classified with a standards system such as GS1.

Weaknesses: the major weakness of this is that traceability becomes weaker with this system compared to tracking of food ID. For a consumer or a restaurant that wants to trace down to farm level, where it originates from (merroir and terroir for example), or the time in transit or temperature, this can be more difficult to guarantee.

The product’s lifecycle along its journey from source to consumption which can be traced with help of these technologies, results in true supply chain visibility. Enhanced supply chain visibility and consumer awareness of the merits and effectiveness of fresh food traceability should also help consumers regain their confidence in the affected product and return to their previous buying habits in a shorter period of time, helping to bring monthly product sales back to normal levels more quickly. Implementation of this kind of system will help customers to self scan the items and understand the sources behind it.

The use of barcodes on fresh food products at the case and item level should reduce inventory management inefficiencies and produce the following benefits:

• Improved product availability by reducing fresh out-of-stock rate to dry grocery out-of-stock rate

• Improved inventory rotation

• Improved inventory accuracy and forecasting

• Reduced labor costs as a result of automation

• Lost sales avoided

This results in decreased economic damages following a food recall due to isolation of affected products and more efficiently restored consumer confidence and enhanced consumer offering through increased consumer confidence, branding and center-store type promotions, and more direct interactions with consumers.

But this comes at a cost, there are high level of implementational challenges. Significant amount of investment is needed both in terms of technology and labor implementation and this outweighs the major advantages of integrated traceability approach. The cost of implementation of this approach till the grass root level requires heavy investment and good knowledge of IT backed by the fact that there is low or no resistance in the implementation of the system. Unless the IT sector expands and there is increase in the level of IT awareness all over India there are less chances of full supply chain visibility and which in turn poses challenges to the implementation of integrated traceability. It comes at a cost at all levels, hence there is a chance of huge money loss if implementation is not properly done.

There are other tangible challenges in implementing an integrated approach to traceability. The most significant and pressing of these barriers are the possibility for increased government regulation which can in effect be harsh and oppressing and the inherent challenges which had remained in the industries is the alignment across different industry sectors.

The major issue associated with integrated traceability is that there are multiple stake holders involved and aligning them into the similar mode is a difficult task. Economies of scale is an inherent advantage of any integrated traceability systems, more companies adopt a system, it should become significantly more effective and easier for others to incorporate the same system in the process. However, it may be difficult at first because there is reluctance to adopt any system and to obtain a full commitment from all supply chain companies, as they may be resistant to industrywide change. Low adoption and slow implementation may reduce the benefits of the implementation of a traceability system industrywide. The same issue may arise if multiple traceability systems are developed then it will become difficult for individual stake holders to align their data and needs and end up competing against each other for participation. Such a scenario would result in compelling or forcing government to regulate the industry instead of allowing to operate freely. But findings of various pilot projects and case studies confirm that companies often overestimate the technology challenges in implementing traceability processes.

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