Lessons for Developing Countries

Traceability has become a key word in the global food industry due to increased incidents of food contamination and false labeling of place of origin or ingredients, resulting in increased public distrust of food safety. With their economic interests at stake, the private and public sectors in developed and developing countries are looking into establishing traceability systems for food supply chains in order to regain consumer and importer confidence and reduce the risk of future problems.

Implementing a traceability system does not, in itself, ensure food safety; it does allow a more rapid and efficient response to food safety problems, enabling quick identification of problem sources and their location in the supply chain. Well-planned traceability systems have been shown to improve efficiency in the management of the supply chain for both the public and private sector. Having reliable information about the movement of food within the supply chain also means that, in the event of a food safety incident, the source of the problem can be more quickly identified and appropriate action taken. Unsafe products can then be pulled out from the market while products traced to safe sources can remain, limiting both the danger to consumers and economic damage to the food industry. Traceability also allows the verification of compliance with labeling regulations, making it an important element for the supplier in obtaining the trust of buyers and consumers. It is expected that traceability systems will be increasingly adopted worldwide.

In reviewing the development of traceability systems in Japan and taking a close look at case studies in Oita and Kyoto Prefectures, we make the following recommendations for developing countries:

• With the global trend of increasingly strict standards and traceability requirements, investment in traceability systems is essential to ensure ongoing access to the markets in the developed world. Establishing traceability systems will help ensure that products not only meet World Trade Organization export requirements but are prepared to meet the requirements of the stricter private sector buyers— requirements that can function as trade barriers to products from developing countries.
• Traceability systems strengthen industries and prepare them to handle future supply chain crises or changes in market dynamics. An efficient traceability system lowers the risk posed by potential accidents or market threats and is therefore an important investment for industries aiming to compete in the global market.
• Traceability systems improve transparency throughout the supply chain and ultimately lower the transaction costs associated with recording, transferring, sharing, and querying information. Transparency and lowered transaction costs encourage sustainable supply chains, which are the foundation of environmentally and socially sustainable production and processing practices.
• Traceability systems gain the confidence of not only international buyers, but also domestic consumers who are increasingly concerned about food safety. Traceability systems can allow for direct communication with the public in the producing and buying countries, a type of communication that is increasingly in demand throughout global markets.
• Traceability systems can improve business efficiency throughout the supply chain by quickly and accurately recording, sharing, and reporting information. This efficiency can ultimately improve profits, a benefit to both domestic industry in developing countries and their international trade partners.

Japan's experience in utilizing information and communications technology (ICT) to make input and output of data more efficient and reliable also provides some broad lessons:

• Traceability systems help prevent food safety crises and food scandals. In both case studies in Japan, the traceability systems allowed the industries to strengthen their business and to prevent shocks to the industries from food scandals or crises in the sector. The value and effectiveness of a traceability system becomes clear when there is a food scandal, e.g., false information on labels or avian flu, putting the industry in a crisis situation. The two Japanese industries discussed in this paper have not faced a crisis since the introduction of their traceability systems. However, especially in the Oita case, the introduction of a traceability system allowed the industry to take advantage of market opportunities when consumers became distrustful of products grown overseas. The traceability system strengthened the industry.
• ICT supports efficient traceability throughout the supply chain. Creating and running a traceability system requires coordination and agreement among the businesses at all stages of the supply chain. The case studies illustrate that ICT allowed the industries to do something they had not been able to do before: quickly and efficiently share information related to their key concerns. In the case of shiitake mushrooms in Oita, this was related to tracking product volumes in order to verify place of origin. In the case of poultry in Kyoto, it was sharing information on production history. ICT allowed for faster and more efficient sharing of information between different stages of the supply chain than a paper-based system could provide.
• Cooperation within the industry is essential. The two case studies showed that for a traceability system to be operational, cooperation among stakeholders in the supply chain was essential. There was a need to first establish a body responsible for gaining agreement and consensus within the supply chain. An association of traders, producers, or processors of a specific food product can often play this coordinating role for all the small stakeholders in all stages of the supply chain. For establishing this coordinating body, public sector involvement was essential. Once established, the public sector role was diminished and the governing body could take on the role of maintaining the system, supported by member fees.
• Traceability systems must be considered a long-term investment. The key advantage to using ICT within a traceability system is that it allows information to be digitized for faster utilization, i.e., transfer, share, query, and analysis of data. The initial investment in ICT hardware, software, training, and maintenance can be a considerable cost. However, all indications suggest that ICT-based systems are safer and more reliable than paper-based systems. In this way, not only will transaction costs be reduced through faster transfer of information, but safer systems will lower the risk industries face from supply chain accidents. A safe traceability system can be seen as a worthwhile investment for industries in developing countries that are aiming to compete globally in the long term.
• Information technology (IT) illiteracy among farmers is not a constraint. One of the main concerns regarding the use of IT at farm level is that farmers in developing countries are not IT literate. However, lack of IT literacy was not a constraint in Japan even though farmers in rural Japan are generally older and are not necessarily IT literate. With a combination of farmers or representatives of farmers' organizations reporting in paper form and a small number of staff to input the data electronically, an effective traceability system can be established.
• Public funding is crucial for inclusion of small players. Experience in Japan shows that large companies often have the resources and motivation to invest in their own internal traceability systems to increase their efficiency and reliability in the market. However, for building systems that involve multiple stages of the supply chain and include smaller suppliers, public funding is crucial. In Japan's case, local and regional governments have often provided the initial support for establishing and testing the systems and producer associations have often provided the coordination among the businesses. One key lesson is that the amount of resources needed to support adequate consultation among stakeholders is often underestimated. This can lead to a lack of consensus among traceability system stakeholders.
• A well-planned central database influences the cost effectiveness of the system. Because traceability systems vary depending on the characteristics of the food products and the distribution routes being traced, the scope of a traceability system and its data needs can vary widely. The needs of the industry and its goals should determine the size and structure of the central database. A crucial part of planning a traceability system is carefully researching and agreeing on what data is needed, how it will be inputted, and how to provide the output. In case of export products, traceability information should be made easily available in the major importing and exporting countries of the products.
• Outreach and education is essential. Traceability systems are most effective when all business in the supply chain, both vertically and horizontally, participate in the system. The outreach and promotion of the traceability system must be part of the system's maintenance. Promotion not only attracts more participants to the system, which ultimately increases the number of traceable supply chains, but it also educates consumers on the reasons for the sometimes higher price tags of traceable products.

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Comment(s)

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1. Prof. J. George
   (posted 10 June 2009 / 06:30:36 PM)
   
   A good study indeed to keep one updated with the new developments in the area of food safety. The authors have in a short and concise WP givena concise lessons fron the study. They need to be complimented on the effort. The authors must be encouraged to develop this WP into a full blown research paper. However, some comments that must find placein the full paper are as follows: (1) Can these lessons be generalised over different developing countries and production landscape where issues of livelihood and food security are paramount? (2) The public sector certainly needs to play a dominant role and hence the funding quantum and pattern needs a different exclusive treatment to make it more localised. Who will do it? (3) How do we get this traceability into a major concern as in Japan itself only 20% are following/participating in the ITES initiative for traceability.
   (4) Two case study products have certain limitations in other developing countries as they have a different definition of smallholder producer and these two products are not produced on an industrial scale dimensions. What adjustements are required or needs to incorported to the study to make it acceptable/practicable on wider spectrum of developing countries?