Supply Chain Compliance: 5 reasons why it is worth knowing where products originate from
Written by Tom Vieweger
September 22 2022
Have you recently heard of the term "Lieferkettensorgfaltspflichtengesetz"? If not, you are probably not doing business in Germany. But if you do, you will have heard of this new legal initiative – in short, LkSG, translated as "Supply Chain Due Diligence Law." The law will come into force on January 1, 2023, and aims to improve the international human rights situation by making it legally binding to ensure certain standards of due diligence in supply chains.
Globally, there are increasingly more (legal) initiatives to improve visibility and compliance within supply chains. Often, these activities refer to the term "ESG": environmental, social, and corporate governance. As an additional example, the European Union recently announced the publication of its "Sustainable Business Initiative."
Besides regulatory necessities, consumers are curious and critical about how their favorite brands treat workers and the environment. Therefore, fashion retailers and brands can meet customers' expectations by becoming increasingly sustainable and transparent.
Our customers expect products that are safe, sustainable, and responsibly sourced and we are committed to ensuring that is exactly what we can offer.
Fashion retailers are faced with current supply chain disruptions. Sourcing from abroad, e.g., the Far East, was cheap and easy not too long ago. However, highly globalized and complex supply chains now face rocketing energy costs, higher shipping costs, wages, and a general labor shortage. This situation keeps retailers enormously busy to ensure getting products to stores and consumers with as little delay as possible.
In times of scarce supply and transportation problems, many brands and retailers want to bring their supply chains closer to home. At the same time, companies do not have a lot of visibility over their supply chain.
Five reasons to care about supply chain visibility
Customer expectations, human rights, and supply chain due diligence laws all over the world require detailed supply chain visibility now more than ever. Today's consumers ask where their clothes were made, by who and whether these people were paid fairly and treated with dignity and respect.
In this context, tracing is critical to understanding accountability in supply chains - where do products come from, which ways did they go, and where are they now?
Meet regulatory necessities: Globally, new laws and regulations are in the making, aiming to improve labor conditions, environmental impact, and finally, the quality of the products. While legal requirements are often perceived as an obstacle to business, they can also unlock innovation, innovative ideas, and alternative approaches. Hence, transparent supply chains can also become a positive aspect.
Boost sustainability: Customers increasingly expect to see where an item comes from (and how it was produced). This requires secure tracking-and-tracing possibilities; there cannot be sustainability without traceability. In addition, monitoring the product journey helps to demonstrate its impact on the environment.
Protect the brand: Every product is given a (counterfeit-proof) unique product identity, e.g., the SGTIN (Serialized Global Trade Item Number), which in combination with the so-called TID (a manufacturer-supplied, read-only tag identifier), can be made into a combination of identifiers that cannot be copied. Then, the EPCIS repository can track and trace the product's origin and query if the identity is genuine.
Reduce waste: Items get lost underway in the supply chain. By adding RFID read points at the place where products are handover to another stage, it is possible to identify leakage and anomalies. E.g., it is possible to identify products that have been registered when they left the producer but never arrived in the DC (Distribution Center) – this helps to find "gaps" within the supply and transportation network.
Make products "omni-available": For ensuring a positive shopping experience in this omnichannel world, stock visibility is of vital importance since it enables all channels to access the stock of all locations.
Platforms make it easy and reliable to share information
Communication between the participants in a supply chain is essential to ensure direct exchange. However, even within companies, data are often kept in silos. Using standards like EPCIS, you can structure and streamline your supply chain traceability, get the transparent data needed to prove product provenance, and share it with partners, legal authorities, and clients. Along the way, professionalizing and increasing the efficiency of data collection and consolidation remains a challenge for many companies.
Global standards and open formats reduce lock-in on every level to maximize an organization's ability to future-proof today's decisions. E.g., EPCIS (the Electronic Product Code Information Service) is an enabling standard to create and share visibility on stock positions in the supply chain or a value network.
Simply put, it provides a common language to capture and share so-called EPCIS events telling you the WHAT, WHEN, WHERE, WHY, and HOWof products traversing through supply chain processes. That enables knowing what a product is, where it came from, who made it and what happened to it over time.
Why RFID is the enabler
RFID makes it easy to register, track, and trace products. If each item is equipped with an RFID label, including a chip that stores a unique identity, it can be seamlessly captured wherever the status or the location of that product changes. RFID technology can be applied on the item level for achieving the following benefits:
Increasing efficiency and lower costs
Increasing accuracy and reducing (stock-related) risks
Increasing visibility and improving service
Summary
Supply chain compliance, traceability, and visibility are absolutely critical in today's world. Besides the numerous regulatory requirements around the globe, the consumer expects to know where a product is made, how it is made, and what it is made from. Impactful item-level visibility unlocks opportunities to make processes more reliable, efficient, and sustainable.
Do you want to learn more about how you can benefit from RFID and digital identification?
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