<B>Traceability</B>

Antonio Díaz Morales.Professor.Instituto de Empresa

14 September 2004

Today’s more sophisticated and demanding consumers are placing increasing importance on product quality. As their purchasing power grows, product safety – traceability – is becoming a key factor.

Once again, European standards are popularizing a term used in a variety of markets, despite the fact that it has not been recognized as a word by the Real Academia Española (Royal Academy of the Spanish Language). From 1 Jan. 2005, all companies in both the foodstuffs and distribution sectors will be obliged to insure complete traceability of their products. This means they will have to provide possibility of finding and tracing, through the production, transformation and distribution stages, a foodstuff or fodder, an animal for human consumption, or a substance to be used in foodstuffs or fodder, or one which may be used as such (EC Regulation 178/2002).

This represents a great challenge for these sectors, since their information systems will have to be readapted, as they were in 2000 with introduction of the euro. This time however, the situation is more complex. Not only is “traceability” of products required, but also traceability of the entire value chain. Companies will likewise have to monitor traceability of their suppliers, which further complicates the picture.

From the market point of view, it is important to note the reasons that have led to this standard being adopted in Europe, the U.S. and Japan, and the advantages its use will offer business management.

The term “traceability” was developed at the State University of Colorado in 2000 by Gary Smith, who defines it as “the ability to identify the source of an animal or its products, as far removed from the production process as necessary, in accord with the purpose for which traceability has been developed.” A more practical definition would be: the capacity of producers, industries, representatives, consumers and public authorities to trace a certain product and its related processes throughout part or all of its useful life.

In the EU, the purpose of traceability is to guarantee foodstuff safety for consumer protection. It is one way of recovering trust in beef consumption after the so-called “mad cow” disease affair. Similar standards are being developed to guarantee foodstuff safety in Japan, while in the U.S. it has resulted from the need to implant production process certificates throughout the entire foodstuff chain, as a control method in the face of possible bio-terrorism.

Who is affected?

Traceability will affect all agents on the market: consumers, distributors, manufacturers and government.
The standard has been developed to defend consumers after recent foodstuff crises. When deciding what to buy, today’s consumers demand the following:

::Identification from a source
::A mark of distinction from alternative products
::Knowledge that the foodstufff is non-toxic
::Verification that it is healthy (level of fat, vitamins, proteins, etc.)
::Proof that it is simple and convenient to cook.

Distributors are faced with the obligation to sell products with traceability that guarantees their origin and quality. To comply with standards and avoid fines, their providers must be required to provide traceability for all their products. They must also conform to the standard for products sold under their own brand, as well as those which, in the eyes of customers, are brandless and associated with the establishment in which they shop.

Compliance with this standard will have a clear impact on business for manufacturers, where it may be approached from various points of view: as an obligation to enable respect of the standard; as a method for gaining knowledge about and improving their processes; or as a tool for emphasizing the healthy nature and quality of their products. Traceability may make it possible to strengthen the quality of components in the product and guarantee their origin - especially for products with a designation of origin. Recent foodstuff scandals would have been less dramatic if complete traceability had been conceivable, since it would have been possible to immobilize only the problematic products and avoid spreading panic in the population.

Manufacturers who export their products will also find that international demands for traceability will require it not only of their products, but also in real time. This is because delay in obtaining information may lead to impeding product movement, with a loss in quality and service for destination markets. This could represent a barrier for entering markets with strict standards.

Officials are united

Governments play a relevant role in guaranteeing product quality and compliance with standards. Both the Spanish Ministry of Agriculture, Fishing and Foodstuffs, and the autonomous regions, associations and federations within the various sectors stand together and promote traceability to improve foodstuff quality and avoid fraud. This suggests that the trend will be unstoppable and undergo considerable development in the short term.

Failure to meet this standard could mean that countries such as France and Belgium could stall transit of our products as a result of the lack of immediate traceability of information. We must remember that France controls almost all the land transit of our goods.

The problem lies in how to make traceability possible throughout a product’s value chain - from source to final consumer - and consequently, offer products that are more competitive in price and terms of delivery.

In six months we will again examine Spain’s capacity for response to this Community standard, where our domestic trade, but also our exports, stand at risk.

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