Tracking Where Food Comes From

by: The Operations Room

by Martin Lariviere

What is it worth to have visibility in a supply chain? When the consequence of screw ups can be catastrophic and deadly (think pharmaceuticals), it is worth tracking everything from raw materials through to consumption. So why are agricultural products any different? If anything, contaminated spinach or eggs can affect more people than any one prescription drug problem. Why then not trace produce and farm products the same way drug makers follow their products?

The Los Angeles Times reports that a number of tech firms are working with large growers to make such detailed tracking possible (Amid mounting safety concerns, technology helps track food from farm to table, Oct 3).

In general, such trace-back systems work in a way that’s similar to how Federal Express tracks its packages. On the farm, animals and crop sections are given a “smart” label with a unique identifying number. The label is then attached to a bin, crate or container used for transport. Workers then can use a hand-held computer or smart phone to scan the labels and record key information, such as date and time, location, workplace temperature and which truck hauled the food away. The information is usually uploaded to a central online database, where it is stored and can be accessed via the Web. Each time the food moves or is handled by someone new, the data can be updated and recorded.

The results of this are pretty impressive. Dole (NYSE:DOLE) — a big producer to prepared greens — can trace a head of lettuce down to 100 feet from where it was picked and has not had any contamination problems leading to recalls and resulting bad press since they installed the system. Concerns over contamination and recalls have been a driving force behind these systems to date but some firms have used the system as a marketing ploy. California Olive Ranch allows customers to look up on the Web where the olives in their bottle of oil were grown and crushed. Others have seen operational advantages.

[Jamie] Strachan [of Growers Express in Salinas, a leading produce growing and packing company] said he discovered some unexpected benefits. The production process worked more smoothly. Warehouse managers were able to go online and figure out how much produce was coming out of a particular field, with little hassle.

So just how wide-spread will this technology become? There are a couple of barriers. First, is cost. Some of this is being done with RFID (radio frequency identification) chips, which cost a quarter or so per pop. That sounds cheap until you think of slapping one on every carton of a dozen eggs in America. There is also the question of agreeing on standards:

An apple can make five stops before a consumer takes a bite. The fruit is picked from a grove, trucked to a sorting center, boxed at a packing company, sent to a distribution warehouse, and finally unloaded and placed on display counters at a grocery store. Each location would have a different method for recording and storing data.

So we need all the players in the apple supply chain to agree on a standard which might well be different from what those in the corn or green bean supply chain think is best. Thus coordination across the entire agricultural market could be very challenging. Legislation would be one answer but such attempts have been hung up in Congress. The real answer might be public pressure working back from retailers. A number of grocery chains (notably Food Lion (DEG)) have stated that they won’t do business with suppliers that don’t conform to traceability by 2012.