On the trail of the product

Traceability is the ability to identify, follow, monitor, and verify individual products as they make their way through the supply chain, from manufacturing to the final consumer. Companies achieve this by endowing every product with a unique digital identity.

We should regard traceability as a powerful business tool that does much more than ‘follow items’ and boost operational efficiency. By leveraging unique digital identities for every product, modern traceability solutions help mitigate risks and create an impressive array of value for brand owners and their supply chains. It is the equivalent of creating a ‘digital twin’ for every product that contains real-time data about the item’s history, production, hierarchy, and movements through the supply chain.

Protecting products

Counterfeit cosmetics bypass quality control processes and regulatory oversight, which means they can contain harmful substances. They mimic the originals, undercutting sales and harming brand reputations. Traceability is the best line of defence against counterfeits, which the Organisation for Economic Co-
operation and Development (OECD) said accounted for 2.5% of world trade in 20191. Unique digital product identities empower cosmetics companies to mitigate financial impacts by capturing real-time data at every node of the supply chain, ensuring that only genuine products are making their way to consumers. In the same way, traceability also helps detect diversion and theft, safeguarding consumers and protecting margins.

Furthermore, unique digital identities are a means to establish direct communication with consumers and encourage them identify and report counterfeits from circulation. The same ‘digital traceability infrastructure’ that enables data collection along the supply chain allows brands to invite consumers to be part of the authentication process. 

For example, while at the store or after receiving an online order at home, the customer can interact with a trigger on the package (e.g., a QR code or an NFC2 chip) to verify that the product is genuine. If the code is fake, then the product is fake, and the brand is informed in real time and the customer alerted.

As online and unauthorised sales channels proliferate, ‘crowdsourcing’ product interactions helps cast a much wider net in the fight against counterfeits and makes brand protection strategies preventative, not reactive. 

Powering trustworthiness

Transparency means the whole supply chain is visible, from raw materials, production, and packaging to distribution into retail channels and post-purchase. A lack of it in complex supply chains that move billions of products can cause significant consumer and brand risks.

Without traceability, which creates a full, shareable, fact-based profile of every product item and its supply chain journey, transparency is impossible. By doing this, traceability enables brands to support their claims (e.g., product provenance, sustainability, ethical sourcing) and tell the world, ‘We are what we say we are’.

In this way, traceability and trans-parency are strategic concepts. Today, more and more cosmetic companies are adopting transparency in their business strategies and mission statements because of its significant benefits for operational efficiency, consumer engagement, brand protection, and profitability.

Examples include the following:

• enabling broader and more granular data collection to better understand ESG3 performance and to enable more accurate reporting 
• providing granular data to consumers, including the origin of materials and proof of sustainable and ethical sourcing
• using traceability and transparency to build trust-based relationships with consumers and to differentiate products across markets
• guiding consumer behaviour on recycling and capturing more accurate data on recycling rates (supporting a response to new green taxes)