I recently was conversing with a colleague who mentioned that “supply chain visibility” has passed its peak as a buzzword - we’re now in the disillusionment phase. In a way, I’m both surprised and not. As far as I can tell, most people can’t even come up with a standard definition of "visibility." However, because everyone has apparently become an expert on supply chains in the last few years, a certain healthy cynicism of Buzzword Bingo is most definitely warranted. Similarly, we’re often asked by agribusiness executives about “traceability” in the context of commodity supply chains, but in too many cases, they’re confusing visibility and traceability. Although supply chain visibility and traceability are two related concepts in the context of supply chain management, they have distinct meanings and purposes. Let's explore their differences:
Supply Chain Visibility: Tell Me What I Need to Know Right Now
When we talk about supply chain visibility, we’re referring to the ability to track and monitor the movement of products, materials, and information across an entire supply chain network. This involves capturing and sharing real-time or near-real-time data about various activities, such as production, inventory levels, shipment status, and delivery timelines. The primary objective of supply chain visibility is to provide stakeholders - internal teams, suppliers, customers, and third parties - with accurate and timely information to enable effective decision-making, optimize operations, and enhance overall supply chain performance. It focuses on gaining insights into the current status and location of goods within the supply chain.
Traceability: A Retrospective View of My Supply Chain
Traceability, on the other hand, is the ability to view the history, location, or application of a product or item through some form of recorded identification. It involves capturing and documenting information about the origin, manufacturing processes, handling, and distribution of individual products or batches. Traceability typically includes the use of unique identifiers, such as serial numbers, barcodes, or RFID tags, to track and record the movement and transformation of products at each stage of the supply chain. The primary purpose of traceability is to ensure transparency, accountability, and compliance with regulations, particularly in sectors like food manufacturing or pharmaceuticals with strict quality standards, safety requirements, or regulatory obligations. Of course, traceability can take on different forms depending on the raw material. It’s much easier to track a bag of coffee beans than a bushel of grain from farm to final destination because the coffee bag will likely remain segregated, whereas the grain shipment will likely be blended with other shipments in an elevator or origination facility. However, it’s possible in either case to still have elements of traceability without significantly re-jiggering a commodity supply chain. For example, concepts like mass balance allow for a composite sketch of where a shipment originated, but account for blending that might occur when combining smaller batches from different individual physical sources.
In summary, supply chain visibility focuses on real-time monitoring and sharing of information across the supply chain network to enhance operational efficiency and decision-making, while traceability emphasizes the ability to track and document the history, location, and attributes of individual products or batches to ensure transparency, accountability, and compliance. While both concepts are closely related and often intertwined, they serve different purposes within the broader context of supply chain management.
When It Make Senses to Invest in Supply Chain Visibility
Demand Planning and Forecasting: When accounting for fluctuations in customer demand or seasonal variations around harvest time, visibility helps detect problems quicker so that teams have time to act. By having real-time visibility into inventory levels, production capacities, and customer orders, they can optimize production schedules, inventory management, and distribution to meet customer demands efficiently.
Operational Efficiency: Supply chain visibility helps identify bottlenecks, delays, or inefficiencies in the supply chain. Enterprises can monitor key performance indicators (KPIs), such as order fulfillment rates, lead times, and transportation costs, to identify areas for improvement, optimize processes, and reduce costs. Although we might associate operational efficiency with larger-volume shippers, smaller organizations also benefit from having technology that can augment and amplify often-limited resources.
Collaboration and Risk Management: For enterprises collaborating with multiple suppliers, manufacturers, and logistics providers, supply chain visibility facilitates better collaboration and risk management. By sharing information and insights, all stakeholders can proactively respond to disruptions, mitigate risks, and coordinate activities effectively. Petrichor customers tell us the ability of our platform to securely collaborate with their customers ultimately is a sales enablement tool, so enterprises should consider visibility from the lens of increasing revenue, not just as a cost-cutting or operational efficiency measure.
When to Prioritize Traceability
Regulatory Compliance: Beyond industry regulations for product quality and safety, more regulatory bodies are becoming active in monitoring labeling standards. Successfully navigating these markets is increasingly challenging given the wide range of certification programs, from organic to non-GMO to Fair Trade and others. As governments start to more formally define those standards, or in some jurisdictions like the European Union, require traceability for certain commodity imports, enterprises must be able to respond quickly to requests for information or data sharing with third parties. Traceability systems enable enterprises to track and document the origination, handling, and distribution of ingredients, providing a transparent audit trail to demonstrate compliance.
Product Recalls and Quality Control: In the event of a product recall or quality issue, traceability allows everyone along the supply chain to quickly identify affected batches or components, trace their distribution, and take necessary corrective actions. This enables timely containment of issues, minimizes risks to consumers, and protects the reputation of the supplier.
Sustainable Sourcing Initiatives: Traceability plays a crucial role in supporting ethical sourcing and sustainability efforts. Enterprises can track the origin of raw materials, verify fair trade practices, ensure environmental compliance, and provide transparency to customers about the sustainability attributes of their products. Depending on the downstream customer, this may range from a soft to a hard requirement as part of the procurement process, so engaging in an open dialogue with your customers around their ingredient sourcing needs should be an ongoing process.
It's important to note that while an enterprise may prioritize one aspect over the other, both supply chain visibility and traceability are interrelated and can complement each other. Having all your supply chain information at your fingertips is one reason importers and exporters love working with Petrichor. Supply chain conversations switch from the retrospective (“what happened?”) to the real-time (“what’s happening?”) to the prospective (“what could happen?”). An ideal supply chain management strategy would incorporate elements of both visibility and traceability to achieve operational excellence, regulatory compliance, and customer satisfaction.