Why Serialize: The ROI of Traceability Technology

Traceability is an important component of the next supply chain revolution, and will power efficiency, resilience and competitiveness. But, as with the adoption and implementation of any technology, companies have concerns.  According to a recent study commissioned by Rockwell Automation and conducted by Forrester Consulting, these concerns range from the complexity of integrating with existing systems and equipment (43% of survey respondents) to lack of sufficient standardization (36%), among other issues.

Even as consensus emerges indicating that traceability is a critical enabler in the drive to digitize products, the vague “making the world a safer, more transparent place” is not a compelling enough argument for adoption. Respondents to the Forrester Consulting survey cited the cost of new technology as the number one barrier to adoption.

As new regulatory demands are introduced, companies will need to introduce traceability technology to the mix. Plus, when you consider other issues of growing importance (for example, ESG, sustainability, and consumer engagement), it becomes clear that companies will be compelled to invest in traceability solutions. In fact, many will not be able to afford to not invest in and optimize their approach to serialization and traceability.

Long-Term Value Beyond Immediate Cost: The ROI of Investing in Traceability Technology

How much does a traceability solution cost? Better questions to ask are: “How much revenue is lost to gray-market diversion?” “How much could be gained by being able to improve product marketability through access to better data?” “How much could be saved if you could optimize a product’s journey through the supply chain?” “What kinds of regulatory fines can I avoid?” The answers will vary. Traceability as a tool for supporting improved ROI depends very much on the technology itself and the value of the data the solution collects and delivers. But in almost every case, companies yield a cost outweighed by the benefits of traceability.

One example from the commissioned Forrester Consulting study regarding counterfeiting and grey market diversion indicates that 47% of survey respondants say their companies lose anywhere between 11% to a staggering 60% of sales income each year due to counterfeiting, and 87% say that grey market diversion is problematic for them. But the lack of clear ROI prevents 45% of respondents from implementing traceability and serialization, which can mitigate these challenges.

Optimizing traceability efforts can help protect brands from counterfeiting and diversion while providing valuable data for understanding the supply chain and the market. This can lead to everything from better product planning and distribution to increased customer satisfaction – all of which leads to better brand loyalty and a longer-term return on investment in traceability.

In practice, many respondents of the Forrester survey say their organizations have already implemented some form of serialization. Of those, nearly half (45%) reported an increase of more than 31% in sales income, directly connected to serialization. Only 1% could say that serialization had no impact on their sales ROI (and 3% did not have an attribution structure in place to be able to state this as fact).

Making Your Traceability ROI Business Case

Traceability is more than just a regulatory checkbox that companies must fulfill. As such, investing in traceability as a true digital transformation initiative will deliver a greater return on investment. Making the case for traceability demands selling in the idea beyond just the current cost versus projected cost of a traceability solution. Armed with better data, it is possible to focus on your top ROI drivers and work with a traceability solution to achieve some of the related benefits while keeping technology costs down or at least stable. By extension, one of the biggest elements of successfully realizing maximum ROI is making sure that the company understands and embraces the potential of traceability technology.