Supply chains respond to scandals with product-tracking strategies

The news has been grim lately: toys containing lead-based paint; pet food laced with poison. When a recall occurs, time is of the essence. A manufacturer's bottom line—and image—depends on finding the tainted goods and returning them to the plant, pronto. Then it becomes a matter of cleaning up the supplier base.
By Jean Thilmany, contributing editor (thilmanyj@yahoo.com) November 1, 2007

The news has been grim lately: toys containing lead-based paint; pet food laced with poison. When a recall occurs, time is of the essence. A manufacturer’s bottom line—and image—depends on finding the tainted goods and returning them to the plant, pronto.

Then it becomes a matter of cleaning up the supplier base.

Right now, several vendors of supply chain and product life-cycle management (PLM) applications are calling for bills of material (BOM) generated from enterprise systems to go beyond simply issuing a list of components. Now, the BOM should contain the origin of each supplied part—and the products that those parts are used in.

From the BOM—with help from RFID tags—springs a method to trace products from supplier to plant floor and out the door. These same systems ensure supplied products meet the manufacturer’s standards, making a recall unnecessary in the first place.

When used this way, such systems are said to be executing product traceability and product genealogy processes. For example, PepsiCo and The Quaker Oats Company both use a supply chain and transportation management application from RedPrairie to assure food safety. The application follows finished products into stores, and can trace where ingredients came from in minutes—well ahead of the four hours mandated by the FDA, says Tom Kozenski, RedPrairie VP of product strategy.

“Our system provides a database that says where the finished goods are going so you can notify [the right parties] to pull the inventory from the truck or the warehouse,” Kozenski says. “You can stop [product] even if it’s getting ready to go out the door. We can connect to the point-of-sale device to make a sale inactive on the spot.”

The system already captures BOM information, by supplier, for supply chain management purposes. That same feature drives the product traceability function, Kozenski says. Should a recall occur, the manufacturer knows which products include recalled parts or ingredients. Using RFID information, parts can be traced back by the batch number or lot number included on the BOM.

Agile Softwar e also has a number of customers that use the vendor’s PLM software in much the same manner. For example, its telecommunications user companies mark each piece of equipment with a serial number, meaning components can be traced back to the supplier, says Dries D’hooghe, Agile’s director of product strategy and product management.

Agile PLM also keeps suppliers accountable to the code of conduct they’ve agreed to before signing on with a manufacturer. A supplier that violates the code—by delivering a product that includes lead paint, for example—could otherwise spark a recall nightmare for the OEM.

But the OEM can’t simply ask a supplier to sign a statement agreeing to a number of rules and trust the supplier to magically abide by them. This is where the PLM system comes into play. Often, manufacturers inspect a percentage of a supplier’s products before they hit the plant floor. A component that doesn’t measure up gets noted in the system. If a supplier doesn’t invoice on time—or correctly—it’s also recorded in the system. Poor performers eventually wind up on the gray list, D’hooghe says.

“Everything gets thrown together to give your supplier an internal score,” he says. A low score alerts the manufacturer that the supplier is likely a poor—even dangerous—source for materials. The system also keeps tabs on a supplier’s supplier.

“In the past, people tended to outsource their approved manufacturer list to suppliers and let them deal with it,” D’hooghe adds. “Now they say, ‘I’ll tell you which ones you can use and you tell me which ones you do use, and if you want to change that list, you’d better include me in this approval.’ ”

It’s easy to see that in an era of headline-making recalls, these systems offer a way to keep tabs on suppliers, and on products.