World Economic Forum
This report originally appeared on the World Economic Forum.
Leadership teams are facing a pivotal shift. To compete effectively, companies need full visibility throughout their value chains. This paper presents a framework for understanding how traceability accelerates progress towards more sustainable outcomes and, in parallel, delivers better business results and improved competitiveness. It encompasses company issues and broader community issues that are critical in enabling traceability. It also details the four steps critical to a successful traceability effort: connecting traceability to sustainability and business objectives; building a collaboration ecosystem across your value chain; deploying key enablers such as data and technology; and taking a rapid test-and-learn approach to get started.
In some ways, the traceability journey is analogous to a digital transformation. The multitude of technology options and application areas is overwhelming. It is relatively easy to set up a simple pilot but scaling it and amplifying the benefits across different application areas is challenging. Traceability adds a new element of complexity – the need to collaborate closely with a vast ecosystem of value-chain partners.
Successful companies are taking the lead and engaging partners in the value chain to help achieve broader sustainability goals while building solutions tailored to their own strategic objectives. They start by assessing their industry sector dynamics, regulatory requirements, customer expectations, stakeholder demands, competitive dynamics and potential value chain shocks. Each of these considerations informs the company’s goals and potential trade-offs.
An important first step is preparing the organization for the journey. Traceability requires cross-functional coordination across the entire value chain, often in ways that challenge traditional operating models. Traceability also involves collaboration between companies that may not have worked together in the past. Partners must identify how to collect, govern, protect and share relevant information across the ecosystem.
Choosing the underlying technology to share and host the data brings another set of challenges. Each company needs to ensure data security and privacy. In addition, the technology must scale across partnerships and application areas, connect to existing systems, and interoperate with other traceability systems inside and outside of the company. Those demands require significant investments and partners will need to determine how to share the costs and benefits. Most successful traceability efforts start small, with a high-value application. That approach allows companies to set up the right standards for data, technology and collaboration, and ensure value for every participant. A micro-battle approach, with each initiative serving as microcosm of the scale solution, has served many sectors well.
As we have seen in digital transformations, the biggest risk for companies is ending up in a pilot doom loop. Experimentation is easy, but transformation at scale is hard. For complex and cross-functional topics like traceability, it is imperative to determine in advance how to scale each initiative. Successful efforts may start small, but they also start with a detailed scaling plan across application areas, use cases and enablers.
The four sections that follow explore each step of traceability transformation in depth and share best practices from industry trailblazers. Our hope is that this framework helps management teams plot a successful path forward and achieve their sustainability and business-performance goals, while establishing a foundation on which new cross-company and multistakeholder collaborations can emerge.