What Is The ROI On PTI?
Jim Prevor’s Perishable Pundit, May 25, 2010
We’ve dealt extensively with traceability, and a most valuable contributor to this coverage has been Gary Fleming. During his time as Vice President of Industry Technology & Standards at the Produce Marketing Association, Gary contributed to at least five pieces on the subject:
Guest Pundit — Traceability And The Need For A Common Language
Guest Pundit — Pairing The Global Language With Technology
Guest Pundit: Traceability — A Forgotten Piece Of Food Safety
Pundit’s Mailbag — Traceability
Pundit’s Mailbag — Joint Response To Produce Traceability Cost Concerns
More recently Gary, who left PMA to launch, along with his wife, Charla, his own consultancy, known as the Symbolon Group, has contributed the following pieces:
Gary Fleming Speaks Out:Produce Traceability Series Part 1: ‘Absent Of PTI’
Symbolon’s Fleming Sheds More Light On Traceability
Today we come to the final piece in Gary’s most recent three-part series for the Pundit. What has become increasingly obvious is that short of a government mandate, significant portions of the industry will not move to adopt the Produce Traceability Initiative unless they are persuaded that there are benefits beyond those that relate to enhanced traceability in the event of a food safety outbreak.
One can agree or disagree with this attitude, but food safety encompasses a great deal and if a company conforms to the law and meets the requirements of its customers, it is very difficult for an outsider to a priori make the judgment that a company should invest more in traceability as opposed to, say, better wash systems, more traps, bigger buffers, more product testing or larger donations to the Center for Produce Safety.
Of course, this doesn’t mean that PTI is a failure. As Bruce Peterson, President at Peterson Insights, pointed out in his letter that we featured here, one may be placing a burden of excessive expectations on PTI in expecting it to “solve” all industry traceability issues. If the goal was to set an industry standard, and the various deadlines for execution are viewed only as hopeful wishes, then PTI is a great success in that it has established a set of industry standards and thus gives the industry something to work toward.
Clearly, the challenge in implementation is that most expenditures are done for one of two reasons: Either A) because “we have to” — there is a new law or regulation or client dictate and if we don’t do it, we will lose our license or customer and have to close up. Alternatively, B) the action is taken because it provides a return on investment adequate to motivate the expenditure.
Well, obviously if the law required PTI, that would seal the deal for almost all reputable companies. And as we mentioned here, if Wal-Mart, Kroger, Safeway, Supervalu, Sysco, Pro-Act and Markon all really do refuse to buy from people not PTI-compliant, that would pretty much be a “tipping point” for the industry and would move most large buyers and sellers into compliance.
But if the law does not require PTI and buyers won’t constrain their supply chains, then we are left with attempting to justify PTI on a return-on-investment basis.
This was the challenge we put to Gary Fleming. Could he try to explicate the benefits of PTI, both related to traceability and other benefits? We wanted to see if there was enough here to give industry executives ammunition to go before their boards of directors and build an ROI-case for PTI. Gary rose to the challenge and sent us this piece:
Benefits Derived from PTI (Produce Traceability Initiative)
In the first article of a three-part series to the Pundit, I had discussed what would happen to whole-chain traceability “Absent the PTI”. In the second article, I discussed traceability projects in other food sectors that could have impact on what your company is doing. In this final article of the three-part series, I will discuss some of the benefits that can be derived from implementing the PTI. As there are so many ancillary benefits to implementing PTI, I will only cover a few.
I will segment the benefits to implementing PTI into two separate categories: (1) those for traceability and (2) those not directly related to traceability.
Benefits Related to Traceability
The goal of the PTI was to create a process that utilized existing technology and existing standards to enable whole chain traceability with the minimal amount of costs. If we were not to go the standards route and everyone did what they wanted (as has been the situation), it would be difficult and time-consuming to put the pieces of the traceability puzzle together, causing both inaccuracies and severe time delays. This has been clearly evident in past recalls.
1. Standardizes what information is needed. What companies do inside their own four walls, while advantageous to them, does little to no good for those subsequent handlers of the product. If everyone has a different idea of what should be put on the case, it would be impossible for receivers to anticipate the different variations of what would be shown on the case for their hundreds of suppliers. Not only would they not know what the information is, but they would not have the capability to store it. Standardizing what traceability information is shown on every case allows every company in the supply chain to know what information should be put on the case, what information to expect and how and what information needs to be stored.
2. Standardizes how the information is captured. Without a standard on how the information should be captured (i.e., barcodes), any entity receiving product would have to accommodate multiple technologies (e.g., barcodes, RFID) and multiple formats (manual, two-dimensional barcodes, passive/active tags, etc.). Standardizing the use of barcodes to be used to capture this information (i.e., the GS1-128 linear barcode) not only allows for the vast majority of warehouses to use existing scanners, but also standardizes the format of the information encoded in the barcode. This addresses both the business need of capturing and storing pertinent traceability information needed for a traceback investigation, as well as the technical need of knowing the format of the information and how it is to be stored.
3. Allows for quicker access to information. With this pertinent information now stored in databases, as opposed to being filed in a cabinet on pieces of paper in multiple divisional offices, companies can now key in a GTIN and Lot/Batch # and within seconds know, at minimum, the following: (1) who shipped them the product, (2)when, where and how much of this GTIN — Lot/Batch # combination was received, (3) who was the product shipped to, (4) when, where and how much was shipped, (5) where was it stored in our facility, (6) on what purchase order/invoice was it received, and (7) on what purchase order/invoice was it shipped. This can be done in seconds, not weeks, giving the FDA the information they need to conduct their traceback investigation quickly, efficiently and accurately, with minimal delay.
4. Allows use of existing systems. What is used within your own systems to track product within your own operations can still be used. All that is required by the PTI is for companies to augment their internal systems to use the GTIN as the primary identifier of the case and the Lot/Batch # to track product back to a single lot or batch. Most companies already have an identifier for a case and most on the supply side already store the lot/batch. The balance of the information is already found on the purchase order, invoice or bill of lading. The PTI does not require companies to ditch their current traceability systems for something else.
Benefits Not Directly Related to Traceability
There are other benefits to implementing the PTI that are unrelated to traceability. To name a few:
1. Standardizes industry language. It is not uncommon for the supplier to have one number to identify the case, the distributor/wholesaler to have a different number for that same case and then finally, the retailer/operator having yet a different number for that same case. How efficient would it be for all subsequent handlers of a case to use the number that first appears on the case? This would eliminate the tremendous amount of cross-referencing and the resulting maintenance and errors caused by this process.
2. Enables electronic commerce. With the use of GS1 standard numbers, such as the GTIN for cases and the SSCC for pallets, it allows companies to use electronic commerce such as EDI (Electronic Data Interchange) and XML (eXtensible Markup Language) more efficiently. One study done at a major retailer indicated that with the use of EDI, it would save $9 per invoice. They were processing over 50,000 invoices per week. This more than paid for the investment made to use EDI within a single year.
3. Enables other supply chain efficiencies. Other efficiencies are now possible with the incorporation of GS1 standards such as CRP (Continuous Replenishment), ASN (Advanced Shipping Notice), Demand Forecasting, Enhanced Category Management, and use of RFID (Radio Frequency Identification).
4. Increases automation. Whether it be automating the input of business transactions (e.g. purchase orders, invoices, bills of lading, passing documents, load tendering, etc.) through the use of electronic commerce, or by automating the capture of information through the use of barcodes or RFID, a tremendous amount of human labor can be saved by replacing manual activities with automated ones.
5. Reduces inefficiencies. In an environment where raising the price to protect margins is not palatable to either your customers or consumers, cutting costs is a better option. Eliminating inefficiencies through automation, use of standards, increased partnerships, warehouse efficiencies, packing efficiencies, shared information (all of which are natural by-products of implementing the PTI) will all work to increase profits without raising prices. This is a win for the produce supply chain and a win for the consumer.
Every point mentioned above has been proven in other industries. Look at just about any former food industry initiative and you will find each and every element above as part of the initiative. Look also at the other food traceability initiatives: GS1 Foodservice Standards Initiative, Meat and Poultry Traceability Guidelines and National Fisheries Institute traceability project. All of them are endorsing the same fundamentals as the PTI: use of GS1 standards, use of barcodes (specifically the GS1-128 barcode), use of the GTIN to identify the case, the use of the Lot/Batch # to help with traceability. This is being done across the entire food supply chain, not just produce.
The produce industry, while different in many respects, is not too different from those sectors that have either already implemented these fundamentals or are just beginning. There are processes/practices that are virtually the same across all food sectors that can benefit from these fundamentals including, but not limited to: how product is packed, repacked, comingled, shipped, received, stored, warehoused, transported, ordered, invoiced, reconciled, etc.
It is not difficult to understand how the fundamentals of PTI have helped other food sectors or other industries. Nor should it be difficult to transpose those learnings to similar processes/practices in our industry, as a lot of these practices are horizontally integrated. The difficult part is to understand that doing nothing is not acceptable. We can do nothing and not solve the problem, further putting our industry and the consumer at risk. We can choose to do something on our own and in a proprietary manner, which will not help the FDA, nor your subsequent handlers. Or we can choose to do something that becomes an industry standard, allowing for critical mass and thereby getting our return on investment.
Remember, in the recall game, you are guilty until proven innocent. Even further, your subsequent handlers are guilty until proven innocent, thereby further exposing your product by those who have handled it and keeping it off the shelves until they are cleared. The easier we make it for the FDA, the easier they will be able to clear your product and the faster your product will make its way back to the shelf and on the consumer’s plate.
We appreciate Gary’s efforts to explicate on the matter. To some extent, PTI suffers from the problem of all standards… the investment always outweighs the cost until they become true standards with the vast majority of the industry standardized. Then industry efficiencies kick in.
We are not sure how persuasive this list Gary has provided will be. That is something each company will look at for itself.
What we would hope is that people will think expansively. Maybe right now, the benefits are not 100% clear but tomorrow is another day, and sometimes laying the linguistic foundation for tomorrow’s industry may lead to efficiencies we don’t even dare list right now.
We’ve had our disagreements with the way PTI came about. We hope the industry will take note of the difficulties that come down the road when agreements are hatched in secret. For the most part, the industry would benefit from vigorous debate earlier in the process, not after the trade is presented with a fait accompli.
Regardless of the lack of transparency with which PTI was developed, there is, at its core, a vision of a seamless industry, think RFID tags on every unit whirling through time and space and think of the ability to instantly see where everything has ever been.
There is nothing in PTI about RFID or readers on restaurant doors and in trucks, but inherent in a common language, a list of what information must be there and how it must be recorded, is, in fact, the kernel of information to move the industry to new levels.
The great Jewish sage Rabbi Tarfon is attributed with this pronouncement regarding obligations: “You are not obligated to complete the work, but neither are you free to abandon it.”
To our way of thinking, this is the way to think about PTI. It is a great work, with a kernel of vision so bright for the industry that we must not abandon it. Yet all those detailed timelines for implementation, all that expectation that we would complete this work so quickly, were and are over-done.
Yet we ought to move forward, and if our ROI is a little inadequate we have to remember a tale in the Talmud about Honi and the carob tree:
One day, Honi the Circle Maker was walking on the road and saw a man planting a carob tree. Honi asked the man, “How long will it take for this tree to bear fruit?”
The man replied, “Seventy years.”
Honi then asked the man, “And do you think you will live another seventy years and eat the fruit of this tree?”
The man answered, “Perhaps not. However, when I was born into this world, I found many carob trees planted by my father and grandfather. Just as they planted trees for me, I am planting trees for my children and grandchildren so they will be able to eat the fruit of these trees.”
So the fruit of our efforts on traceability may pay off, not today or in knowable ways, but in the future and in ways we can scarcely dream of.
Many thanks to Gary Fleming, President of the Symbolon, for helping us think through this important issue.