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Traceability has hidden benefits for industry, expert says

by Chip Carter | October 28, 2010
ORLANDO, FL — Whether traceability comes from a government mandate or a competitive market, there is much motivation for the produce industry to pursue it, Thomas Eckschmidt of Brazil's PariPassu told attendees of a workshop during the 2010 Produce Marketing Association Fresh Summit, held here Oct. 15-18.

"Traceability allows us to tell our story first," Mr. Eckschmidt said. “Some people out there are just waiting to tell stories about how bad our food can be.”

In Brazil, where there are no traceability laws, the top three retailers all have strong and growing traceability programs in place.

“There’s absolutely nothing requiring traceability,” Mr. Eckschmidt said. “This has all happened through force of market.”

Retailers launched traceability initiatives because consumers demanded they do so. Restaurants in Sao Paulo are required by law to keep open kitchens that anyone can visit at any time. As a result, most of that city’s eateries have large picture windows that reveal activity in the kitchen.

Just as those windows let consumers stay aware of what is happening in Sao Paulo’s restaurant kitchens, in the produce and retail industries, “traceability equals transparency,” Mr. Eckschmidt said, adding that it is increasingly important in an age where “companies are not trusted any more.”

Brazil’s top three retailers are Pao de Acucar ($15 billion U.S. in sales last year), French hypermarket Carrefour ($14.6 billion) and Walmart ($11 billion). PariPassu works with 6,000 farmers, packers and distributors in Brazil’s supply chain, tracing 600 SKUs; last year the company traced 2 billion pounds of food. Even PepsiCo has joined in “to show where the potatoes come from that go into their [Frito-Lay] chips,” Mr. Eckschmidt said.

Carrefour started the quest for traceability in 1999 with its “Guarantee of Origin” program, whereby the chain self-audited its growers and suppliers. In 2007, Pao came aboard tracing a single item — bananas (though it is worth noting that there are dozens of banana varieties in Brazil) — from 11 suppliers. By last year, that chain’s program had grown to 300 items.

Walmart’s Brazilian operations adopted traceability standards earlier this year, “showing it’s not a trend — it’s not going back,” Mr. Eckschmidt said. “Traceability is a one-way road.”

This year, Pao took traceability a step further, providing information and barcodes that are easily understood by consumers. Smartcodes let shoppers scan barcodes with smartphones and find information about products, including the shipper and distributor (and soon, the farmer), with pictures showing the process of an item’s farm-to-fork journey.

Mr. Eckschmidt compared today’s traceability initiatives to the launch of the ISO 9000 family of standards for quality management systems in the 1980s. “ISO 9001 forced the supply chain to improve downward,” Mr. Eckschmidt said. “Traceability is the same thing. What those two things have in common is discipline.”

Many U.S. grower-shippers wonder what benefit may come from increased costs of implementing rising traceability standards — other than risk mitigation. Mr. Eckschmidt said that retailers and the produce industry stand to benefit mightily from such initiatives.

“Discipline will bring traceability to the food chain,” he said. In Brazil, “What did retail get out of this? Better quality, because every step in the chain has to pay attention to traceability.”

The most tangible example of that is a steep drop in return rates. In 2008, Brazil’s top three retailers refused almost 7 percent of shipments due to traceability issues. By last year, that had dropped to about 4.5 percent. Year to date in 2010, just 2 percent of shipments have been refused.

Growers, shippers, transporters and retailers all stand to benefit, Mr. Eckschmidt said. “As soon as you start paying attention throughout the [traceability] process, you have more control. Better quality, less returns, and [you] avoid losing sales. Things we’ve never measured before are part of the benefit.”

Growers can avoid emergencies in the field, suppliers can find actual bad apples in mixed batches, and “you will identify weaknesses in your supply chain and organization. If someone’s causing a problem, you can provide more training — or say goodbye,” Mr. Eckschmidt said. “Traceability answers all those questions.”