THE TRACEABLE AND SUSTAINABLE SUPPLY CHAIN

Traceability in the context of the supply chain is the process of identifying and tracking a product or component’s path from raw material to the finished goods. A good traceability system stores, provides and verifies information about the products, components/ parts or materials and their transformation throughout the value chain – that is from the raw material source, to manufacturing, up until the final retailers and ultimately consumers. Using the definition of traceability from the International Organisation for Standardisation (ISO), the Business for Social Responsibility (BSR) and the United Nations (UN) Global Compact have come up with the definition of traceability in a guidance report (1) as shown below.

Traceability: The ability to identify and trace the history, distribution, location and application of products, parts and materials, to ensure the reliability of sustainability claims, in the areas of human rights, labour (including health and safety), the environment and anti-corruption.”

By ‘sustainability claims’ here, it means to say that from a holistic perspective, the supply chain is secured and sustainable in the long-term, and the associated manufacturing processes and practices involved are not posing any threats, damaging or harmful impact on society as a whole and environment in which they live.

So why does Kind Consumer and or other businesses need traceability? There are a number of drivers, some coming from consumers’ increased appreciation of sustainability claims and their demand to know more and more information nowadays about where their products come from, how they were made and even how they would be disposed of, recycled, renewed or where would they end up, and others from legal, environmental requirements and benefits to be realised.

The guide report by BSR comprehensively grouped these drivers/benefits into 4 main categories as below (1).

The ‘Values & Efficiencies’ category discusses direct business values. ‘Stakeholder Pressure’ explains the need for information transparency and a means of verification for sustainability claims. ‘Regulation’ updates a number of relevant regulations and compliance needs, and ‘Global Alignment’ looks at a much broader importance of securing natural resources and standardization of practices across an industry.

Depending on the type of industry and business one operates in, and thus the attributes of commodities concerned, the significance of these drivers/benefits may vary. In a pharmaceutical supply chain such as the one applicable to Kind Consumer’s products which fall into the licensed medicines and medical devices category, traceability plays a role of even greater importance for the security of the supply chain. The traced supply chain, where the traceability system records and follows the trail as products, parts and materials move from their original suppliers all the way to the final end retailers, can prevent illicit/counterfeit goods from coming into the certified supply chain which in turn prevents unintended or mistaken administration and handling of drugs.

Traceability plays a very important role in dealing with counterfeit drugs as they are a major problem to stakeholders and consumers. The 2010, WHO bulletin described that worldwide sales of counterfeit medicines could top US$ 75 billion, according to an estimate published by the Center for Medicine in the Public Interest in the United States of America (2), and these sales are increasing at about 13 percent annually (3). It was further mentioned that estimates range from around 1% of sales in developed countries to over 10% in developing countries, depending on the geographical area according to its revised figures in 2006 (4) (5).  The picture below illustrates the extent of the problem i.e. serious potential threats to public health.

Source: Drug Counterfeiting (6)

The FDA legislated the Drug Supply Chain Security Act (DSCSA) in November 2013 (which became effective at the start of Jan 1, 2015) mandating that companies in the supply chain carry out business only with trading partners that hold a valid state or federal license and that customer’s credentials must be verified (7) (8).

Drug counterfeiting is a serious and complex issue and deserves a separate blog post in itself!  But it’s worth noting that a good traceability system can provide measures to significantly mitigate the risks associated with counterfeiting. The standards such as Pedigrees or Epedigree for drug products were ratified in the beginning of 2007 in the US (9) (10) among other mitigation measures, to facilitate traceability such as tamper-evident packaging, authentication, media, improved physical security and increased criminal penalties (11) .

Having understood what traceability is, why it is needed and important, we can now move on to looking at how companies can implement a good traceability systems. On a higher level, there are governmental and national schemes or initiatives that one can join to address traceability and sustainability. Most traceability schemes are independent, multi-stakeholder organisations whose purpose is to ensure the sustainability of raw materials and for whom traceability plays some role. They serve as a resource forum to exchange best practices and standards, and they are generally labelling or certification organizations, and industry or commodity roundtables (1). The following table shows the existing traceability schemes across commodities that businesses can join for whom sustainability is important.

Source: A Guide to Traceability (1).

On a medium level, we can see how the traceability system works in terms of models or types. Three models were defined (1). The first is ‘Product Segregation’ whereby items/products (as they can be) are physically segregated for certified materials from non-certified materials, and companies can get sustainability certificates on products made from certified materials only. This application is prevalent in certain types of fruit commodities, textiles, seafood, etc. Alternatively, where physical segregation is too expensive or impractical to implement, e.g. in processed commodities such as sugar, cotton, tea, where certified materials were mixed with non-certified ones for processing, the ‘Mass and Balance’ model can be used. In this model, sustainability claims and certificates can be made and issued in relation to proportions of certified materials entering and leaving the value chain. The last model is the ‘Book and Claim’ model whereby sustainability certificates can be traded on a platform in order that that the purchasers/owners of certificates can claim for their support of sustainability sourcing. Such model is represented for commodities such as energy where Renewable Energy Certificates (REC) were traded. Existing traceability schemes would also fall under these models.

On a lower or detailed implementation level, we can look at technologies available and advancing today to address tracking and tracing. Technologies such as UPC barcodes and RFID tags are the two most common methods according to GS1 specifications. GS1 is a not-for-profit international organisation that develops and maintains standards for identifying (for identification of items, locations, shipments, assets, etc. and associated data), capturing (for encoding and capturing data in physical data carriers such as barcodes and RFID tags) and sharing (for sharing data between parties) (12). The FDA in the US is establishing a unique device identification (UDI) system (13) to adequately identify medical devices through their distribution and use requiring Class III medical devices to comply by 24 SEP 2014, Class II and I devices to comply by SEP 2015 (14), and device labellers must also submit certain information about each device to FDA’s Global Unique Device Identification Database (GUDID). The public will be able to search and download information from the GUDID (15) (16).

Despite the improvement and increasing development of traceability schemes, technologies, and tools nowadays, there are still challenges to fully implement a full traceability system. By having an understanding of how the system works, one can understand that major collaboration is critical and required from all parties involved along the supply/value chain. This is where parties’ devotion, values and commitment were put into practice with the foundation of schemes, incentives and standards. And all must work together to achieve a common goal of sustainable supply chain and in a holistic picture, realise the most benefits from the chain.

The challenges were starkly showcased in a BBC programme by Panorama about “Apple’s Broken Promises” (17) which depicted that Apple were failing to protect its Chinese factory workers from abusive working environment. Furthermore, raw materials for IPhone, specifically, the material Tin (Sn), were allegedly being imported from Indonesian mines where children were working in some of the most dangerous working conditions in the world. Apple felt offended by Panorama claims and responded with a formal letter (18) (19).

I would like to summarise by saying that though I can neither ascertain the proportional significance of these presented events and circumstances nor their progression or retrogression over time, the story did shed light on several difficult challenges such as cultural barriers, poor visibility and transparency of local management, and the existence of stakeholders/middlemen with differing interests who often have short-term goals or priorities. This again underlines the importance of the multi-stakeholder scheme, as a neutral party that is responsible for the assurances across the whole of the supply/value chain and that can exercise leverage with suppliers and producers where an individual company may have little influence.

WORKS CITED

1. Tara Norton, Julia Beier, Lauren Shields, Anita Househam, Elena Bombis, Daniella Liew, Nilou Safavieh, Tannaz Fassihi. A Guide to Traceability, A Practical Approach to Advance Sustainability in Global Supply Chains. New York : BSR & UN Global Compact, 2014.

2. Bulletin of the World Health Organisationm, Growing Threat from Counterfeit Medicines. WHO. [Online] [Cited: January 29, 2015.] http://www.who.int/bulletin/volumes/88/4/10-020410/en/.

3. Counterfeit Pharmaceuticals, A Serious Threat to Patient Safety. http://www.pfizer.com/. [Online] [Cited: January 29, 2015.] http://www.pfizer.com/files/products/CounterfeitBrochure.pdf.

4. Counterfeit medicines. WHO. [Online] November 16, 2006. [Cited: January 29, 2015.] http://www.who.int/medicines/services/counterfeit/impact/ImpactF_S/en/.

5. IMPACT: International Medical Products Anti-Coutnerfeiting Taskforce. ww.who.int. [Online] [Cited: Jaunuary 29, 2015.] http://www.who.int/medicines/services/counterfeit/impact/TheNewEstimates….

6. Sanofi-Aventis. Drug Counterfeiting. http://ec.europa.eu/. [Online] [Cited: January 29, 2015.] http://ec.europa.eu/internal_market/indprop/docs/conf2008/wilfried_roge_….

7. Drug Supply Chain Security Act (DSCSA). U.S. Food and Drug Administration. [Online] [Cited: January 30, 2015.] http://www.fda.gov/Drugs/DrugSafety/DrugIntegrityandSupplyChainSecurity/….

8. Guidance for Industry Drug Supply Chain Security Act Implementation: Identification of Suspect Product and Notification. U.S. Food and Drug Administration. [Online] [Cited: January 30, 2015.] http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformati….

9. Pedigree Standard. GS1. [Online] [Cited: January 30, 2015.] http://www.gs1.org/gsmp/kc/epcglobal/pedigree.

10. Epedigree. Wikipedia. [Online] [Cited: January 30, 2015.] http://en.wikipedia.org/wiki/Epedigree.

11. Track-And-Trace Solutions for the Pharmaceutical Supply Chain – How Bar Codes and RFID Can Improve Traceability, Safety and Business Performance. [Online] [Cited: January 30, 2015.] https://thelabelman.co.uk/white-papers/PHARMACEUTICAL%20SUPPLY%20CHAIN.pdf.

12. GS1. Wikipedia. [Online] [Cited: January 30, 2015.] http://en.wikipedia.org/wiki/GS1.

13. Improving Patient Safety and Supply Chain Efficiency with GS1 Standards in Healthcare. GS1. [Online] [Cited: January 30, 2015.] http://www.gs1ie.org/Download_Files/Healthcare_Files/GS1%20in%20Health%2….

14. Medical device suppliers and manufacturers – do you comply with UDI? GS1. [Online] [Cited: January 30, 2015.] https://www.gs1uk.org/our-industries/healthcare/udi.

15. Unique Device Identification – UDI. U.S. Food and Drug Administration. [Online] [Cited: January 30, 2015.] http://www.fda.gov/MedicalDevices/DeviceRegulationandGuidance/UniqueDevi….

16. Compliance Dates for UDI Requirements. U.S. Food and Drug Administration. [Online] http://www.fda.gov/MedicalDevices/DeviceRegulationandGuidance/UniqueDevi….

17. Apple’s Broken Promises. BBC. [Online] BBC ONE, Dec 18, 2014. [Cited: January 29, 2015.] http://www.dailymotion.com/video/x2df9zb_bbc-panorama-apple-s-broken-pro….

18. Apple goes to war with the BBC. The Telegraph. [Online] [Cited: January 30, 2015.] http://www.telegraph.co.uk/technology/apple/11303052/Apple-working-condi….

19. Williams, Rhiannon. Read: Apple’s letter to UK staff over Chinese factory conditions. The Telegraph. [Online] December 19, 2014. [Cited: January 29, 2015.] http://www.telegraph.co.uk/technology/apple/11303406/Read-Apples-letter-….