RFID Enables Traceability in the U.S. Food Supply: Market Incentives to Establish Traceability

Markets give food suppliers three primary incentives for establishing traceability: improve supply-side management, differentiate and market foods with subtle or undetectable quality attributes, and facilitate traceback for food safety and quality.

Incentive 1: supply-side management
A firm's traceability system is key to finding the most efficient ways to produce, assemble, warehouse, and distribute products. During 2000, American companies spent $1.6 trillion on supply-related activities, including the movement, storage, and control of products across the supply chain. Firms have an incentive to find ways to reduce these costs. In the food industry, where margins are thin, supply-side management, including traceability, is an increasingly important area of competition.

Electronic coding systems, from the bar code system to cutting-edge technologies like radio-frequency identification systems, are helping to streamline the U.S. food supply system. As technological innovation drives down the cost of traceability systems, more and more firms across the food supply chain are developing and maintaining electronic tracking systems. In some cases, buyers manage these systems to monitor supply flow. In other cases, firms establish systems to link suppliers and buyers. A few big retailers have even created proprietary supply-chain information systems that they require suppliers to adopt...