This underlying theme was echoed in a number of presentations from several speakers at the recent Traceability Inter-Operability conference hosted by the Traceability Institute in Denver a few weeks ago.  The main barrier to widespread traceability adoption by the food industry, these presentations argued, was the lack of a single traceability standard which could exchange traceability data seamlessly from one company to another throughout all their trading partners in a supply chain.

Unfortunately, each speaker was talking only about the traceability standard that their company commercially offers, and their implicit message was “If only everyone would speak my language, all companies in the food supply chain would be able to communicate and this industry would begin to rapidly grow.”  In other words, the presenters wanted all of the other solution providers in the audience to abandon their traceability solution and jump on the presenter’s bandwagon–“my way or the highway”.

This argument and this conference took me back to the early 1980’s when I attended similar data interoperability conferences about how banks should be working together to begin electronically process credit cards.  At that point in time, credit cards were handled manually rather than electronically.  Many of you are old enough to remember the time when, at retail check-out, the store’s cashier would put your credit card in a flat-bed device, nicknamed a “click-clack” machine, then put a receipt form on top of the credit card, and finally slide the click-clack machine’s lever from one side to another, making an impression of the credit card and the merchant’s information on the two-part paper form.  After signature, the top paper copy was given to the customer and the bottom, cardboard copy was retained by the merchant and processed by the banks the same way they processed their checks at some later date.  

In the early 1980’s, the banks knew there were compelling reasons to process these transactions electronically in near real-time rather than wait many days to enter into their system, but they couldn’t agree how to process and exchange this information.  So, they held a number of conferences where each solution provider or “wanna-be” central data switch presented the arguments about why their company should be the one and only company to provide this electronic data interchange service and why their data standard was the only one that would work.  

Not only wasn’t a single standard adopted in the early 1980’s, but each time you use your credit card today, it is likely to route through many different networks, each with a different data standard, and still be able to provide an approval or decline in a matter of seconds.  In fact, there are over 64,000 different data standards and hundreds of different networks in existence among the global banking industry but to almost all consumers it appears as a single system.

Flash forward to 2010 and the Traceability Inter-Operability conference.  The messages at this recent conference were the same as those at the early banking conferences thirty years ago–“Adopt a single traceability provided by my company and everything will be perfect.”

From our perspective, this proposition is flawed on at least four levels.  Firstly, there is the assumption that the lack of a clear interoperability standard is retarding the growth of traceability within the food industry.  Secondly, this assertion assumes that a single standard will result in the best solution.  Thirdly, there is assumption that a single traceability company will win all the chips.  And fourthly, that full transparency of all traceability information equally shared with all trading partners is a good thing.

Based upon our experience in the global credit card industry, we believe each of these assumptions is false.  

The growth of traceability companies is not being impeded by a lack of traceability interchange among companies because most companies haven’t even taken their internal traceability conversation to that level.  They are only concerned about internal traceability within their four walls, and they think they have already solved this problem with their one-up supplier and their one-down customer so they don’t need the help of a third-party traceability supplier.  Unfortunately, as we’ve discussed many times in this column, this belief is usually not anchored in reality and each time we’ve done a traceability audit with a food company, small or large, we’ve found glaring holes that would create serious problems for the company with the government regulators during a high profile recall.  Even if most companies had flawless internal traceability, they don’t have traceability data inter-operability on their radar.

Will a single standard from a single solution vendor be the best solution?  In our strong opinion no single standard will meet all of the needs of every member of a single supply chain much less all supply chains.  In the early 1980’s we tried at my previous company, VeriFone, to push a single standard and got nowhere.  Each bank wanted a different twist on the common theme and no single standard was going to work.  The only way that we broke the logjam was to finally acknowledge that many solutions were going to need to bloom, each working within a loose, minimalistic standard.

The argument is likely to be made that the credit card example isn’t the best model for food traceability data interchange because technology has changed today.  This argument, which I’ve heard for many years, actually argues against a single standard because with today’s technology it is so much easier for many different networks to bloom which can use modern middleware technology to inter-connect appearing as a seamless single network, but, in reality, being many interconnected networks.

So, if a single traceability standard promoted by a single company isn’t the answer, what is going to work?  

First, there has to be a realization that no single company and no single standard is going to win all the chips.  Just as with the credit card system, each company, each supply chain will have its own unique objectives for a system and these objectives will be different even though there will be at least one common objective–being able to provide at the appropriate time an e-Pedigree for ownership of all the ingredients in a product from the retailer all the way back through all upstream processors to the first mile producers of all raw products used in a specific finished good.

To accomplish this objective, there are only a few “standard” things that need to be accomplished:

1. Agree on a numbering standard or a small set of numbering standards.
2. Agree on the minimum data elements that must be included by all players to create the e-Pedigree ownership traceback.
3. Agree how e-Pedigree data about upstream suppliers beyond one’s immediate supplier must be kept confidential until these data are needed during a high-profile recall.

Yes, these are standards, but they are very minimalistic and skinny standards, and are the skeleton upon which many traceability solution vendors can hang added value services, and distinguish themselves among other traceability solution providers.

When principles similar to these three were applied to the credit card industry in the early 1980’s, the electronic authorization and settlement of credit cards did begin to rapidly grow.

Let me conclude by strongly complimenting the newly formed Traceability Institute for organizing this important conference, and providing the forum for discussing this next important step.  Providing education to food companies and providing unbiased leadership fo
r the several companies offe
ring traceability solutions is critical for our industry especially given that relatively few food companies have truly solved their internal traceability challenges much less begun to think about traceability data interchange with their trading partners.  

As I noted during the conference, the true competitors at this point in time of companies offering traceability solutions are not the other companies offering traceability solutions, but the complacent food companies that think they have already solved the traceability issue only to find when they become involved in a high profile food recall that their systems fall far short of the mark, and their company is badly damaged or even destroyed.  Working together through the Traceability Institute and other vehicles, traceability companies can be successful by identifying the minimalistic standards that will be needed for inter-operability, acknowledging they will not be the only winners, and then developing the specialized services that differentiate themselves from other service providers.

Further information can be found at www.tracegains.com.

First the news headlines. Even though the U.S. House of Representatives had voted to cut off funding for the NAIS as part of the Farm Bill, a joint House-Senate conference committee agreed a few weeks ago to continue funding the program to the tune of $5.3 million for fiscal year 2010-2011. This funding is a reduction from the $14.2 million authorized for last year and less than the $14.6 million the Senate approved, but the program will continue. However, a growing number of Congressional members have made it clear they want to see effective leadership from USDA to dispel some of the more egregious NAIS rumors running unchallenged in the countryside (e.g., backyard farmers with only a few chickens for home use or sale to friends will have to tag and track each animal). They also want to expand the number of farms and ranches that have registered with the NAIS premises database from the current anemic 35% to closer to the 90% needed for an effective national system.

The second piece of good news for NAIS supporters is that U.S. District Judge Rosemary M. Collyer in Washington, D.C., dismissed a civil suit filed by the Farm-To-Consumer Legal Defense Fund and a group of Michigan cattlemen against the USDA and the Michigan Department of Agriculture (MDA) over the National Animal Identification System (NAIS). The group’s suit, filed last September, sought to enjoin the implementation and enforcement of NAIS. The suit was dismissed primarily because Judge Collyer ruled the program was voluntarily adopted by state departments of agriculture and was not federally mandated.

Even with a bit of good news, the anti-NAIS forces continue to rally their troops by claiming that NAIS is overly burdensome, and is unnecessary because existing livestock records, such as brands, ear tags, veterinary logs and auction barn records do a good job of tracking cattle movements. Dr. George Teagarden, the Kansas state veterinarian, agrees that the current, fragmented record-keeping system can be used “to find the animals in question, but it can be months after the fact.” According to Dr. Teagarden, this time lag isn’t nearly fast enough and he cautions, “A highly contagious animal disease will devastate this country.” He underscores this dire prediction by noting that in Kansas in a single month cattle from all 48 of the Continental U.S. states arrive at least once a month. The speed of commerce is way too fast to be handled by the fragmented, paper-based system. Dr. Teagarden advocates a mandatory ID and traceability program that is consistent across state lines, and notes, “What voluntary system do any of you know that ever worked?”

Apparently, a number of national governments agree with Dr. Teagarden, and recently several have made or are poised to move their systems from voluntary to mandatory. Within the last few months these key countries have made major moves towards mandatory traceability; moves that are likely to impact USA policy and USA producers.

Brazil. Brazil has just announced that by 2011 all livestock producers will be required to participate in a mandatory traceability system. The new system will rely on simpler technology than the current, voluntary SISBOV system which is RFID-based, and every segment of the Brazilian supply chain, from cow-calf operator to slaughter facility including transporters will be required to provide a complete chain of custody records. Real-time electronic record-keeping is not being mandated, but standardized record-keeping whose data can be transmitted via Internet portals to centralized databases will be used. The SISBOV system will continue to exist for those who want to use it, but the expectation among Brazilian officials is that most producers will use the standardized, simplified paper-based system.

Korea. South Korea has instituted a traceback system on domestically raised beef, and has indicated that it would require traceback on imported product by 2010.

Japan. The Japanese government has had a domestic animal identification system in place for several years, and on three different occasions the then-minority political party, the Democratic Party of Japan, had unsuccessfully tried to pass legislation that would require the same level of traceability for imports. In August the DPJ successfully became the controlling party for the first time in a long period, and newly appointed Prime Minister Yukio Hatoyama has vowed to once again try to revise the Beef Traceability Law. He doesn’t have control of the Upper House of Parliament, but he may be able to persuade his two coalition partners to go along.

How do these foreign government actions impact the U.S. meat industry? The Brazilian action probably has less direct impact on the US than do the Asian actions, because the Brazilian action was aimed at broadening acceptance of Brazilian beef in the EU. There will be some impact, though, because the largest of the Brazilian meat companies, JBS, is also one of the major U.S. meat producers so there will likely be some technology transfer from Brazilian ranches to their U.S. counterpart.

The Asian country actions, though, are likely to have a major impact for USA producers because both Korea and Japan are major importers of American meat. According to Ken Stielow, Chairman of the Cattleman’s Beef Board – Beef Checkoff program, “Exports are key to the future of the US beef industry.” The National Cattleman’s Beef Association (NCBA) monetizes this statement by indicating to its producers that widening exports to Japan could “add $50 per head to your bottom line”. Losing the Japanese market has been shown to cost producers about $180 per head. And since the margin of profit per head in a good year fluctuates between $50 to $100 per head, the economic impact of the export market is hard to deny. Additionally, when you multiply these numbers by 35 million animals harvested annually, the impact on the entire agri-food sector is significant.

This impact can be further seen in the fluctuations of the price per head producers receive for their cattle as exports either rise or fall. Sales of beef to Korea rose sharply in Q3 of 2008 as beef trade resumed and producer prices rose as well. Since then, US beef exports have sharply slowed down with weekly shipments of beef muscle cuts to Korea in August 2009 at 725 metric tons per week compared to 3,031 metric tons per week at the same time last year. It is believed the Korean market alone could grow to become a one billion dollar per year market which would further boost cattle prices for U.S. producers. So, the impacts from the Korean and Japanese domestic initiatives may have far reaching impacts on the U.S. producer if those countries successfully impose the same rules for imports as they have for domestic product.

A major key to Brazilian acceptance of a mandatory livestock traceability system by Brazilian legislators was the simplification of the system of initially registering an animal and then tracking its movements from birth to export. The predecessor voluntary system in Brazil known as SISBOV is an RFID-based identification system with real-time electronic data collection and transmittal. While effective, this system is technologically sophisticated and beyond both the economic means and technological understanding of a large percentage of Brazilian producers. Embracing and actively promoting a simplified registration and tracking system by USDA, we believe, will go a long way towards helping reduce opposition to NAIS.

Even with all of these developments, make no mistake — NAIS is still on life support, and it may st

ill die. But when the market
place speaks and producers begin to feel the pinch or bulge in their wallets, or, God forbid, we have the type of catastrophic event Dr. Teagarden prophesies, even the most hardened producer will either adapt to the new reality or leave the business. Simplified technological approaches may help tip the scales, and we have seen within our own animal tracking commercial activities over the last eleven years that our simplified technologies are the ones most often embraced. As is so often the case, technology can pave the way towards adoption or rejection.