Our Newsletter:
Traceability Insider

August 2014
How Digitization is About to Change the Rules of Your Business

June 2014
Food Waste, We are Fed Up, and a Gladson Case Study

May 2014
Ag Tech and the Power of Catchy Criticism

March 2014
Labels are Soooo 1990, “Thorny” food labeling law

January 2014
Oxymoronic Grocery Predictions and Big Data for the Produce Industry

December 2013
The Gift of Growing – Helping Kids Get Their Hands Dirty!

November 2013
Produce Brand Strategy, Visibility and Transparency

September 2013
A "Lean" Supply Chain, Knowing your Shopper

April 2013
Food Waste, The Rolling Stones, Raley's, and Tanimura & Antle

March 2013
First Look! FDA Releases IFT Traceability Report and Lessons from Europe's Horsemeat Crisis Every Fresh Food Brand Should Learn

January 2013
What Does the Future Hold?

September 2012
"Locale" Produce and Reducing the Impact of Recalls

January 2012
Making the Case for Traceability

September 2011
GTINs – the Devil Is in the Details

August 2011
Turbocharge Mobile Marketing with HarvestMark and QR Codes

May 2011
Traceability Insider

January 2011
It's a New Year. What's the latest on PTI?

May 2010
HarvestMark Makes its VoiceCode™ Solution Open Source

December 2009
IFT Publishes Traceability Report for FDA

Holiday Issue 2009
What Happened at the FDA/USDA Hearing on Food Traceability

September 2009
Know Your Farmer, Know Your Food

August 2009
How to Avoid Synching Without Trace

July 2009
What's the Value of PTI?

May 2009
Case-Level and Item-Level Traceability-What You Need to Know

April 2009
Still Have Questions about PTI? Don't Worry, You're Not Alone

March 2009
PTI, GS1, GTIN, GLN? HarvestMark's Got the FAQs

January 2009
The First PTI Milestone is Around the Corner

December 2008
A Pivotal Year for Food Safety

November 2008
FDA Solicits Public Comment on Enhanced Produce Traceability

October 2008
Produce Traceability Initiative Action Plan Released

September 2008
How Will Greater Transparency Enhance Your Business?

Español - 01 2012
Elaborando el Caso para Trazabilidad

Español - 03 2012
La Más Reciente Norma de la FDA es Efectiva Inmediatamente. ¿Debería Usted Estar Preocupado?

August 2013
How Walmart Could Implement PTI, Crowdsourced Shopper Insights

June 2010
How to Interpret the PTI announcement of "Goal Unchanged, Milestones Adjusted"

December 2010
An Update on the PTI

July 2010
Produce Traceability in Foodservice

February 2010
What's Going on with the PTI

March 2010
Consumer Attitudes to Traceability

August 2010
HarvestMark Launches Consumer Campaign in Portland, OR

March 2011
Have you heard of the PLU DataBar Initiative?

November 2011
Traceability? There’s an App for That

December 2012
It’s all new. Introducing HarvestMark 2013.

March 2012
The FDA's Latest Ruling is Effective Immediately. Should You be Worried?

June 2012
Do QR Codes REALLY Drive Shopper Engagement?

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July 2009: What's the Value of PTI?

In his recent editorial Traceability: You do the math, The Packer Editor Tom Karst asked: "what's the cost-benefit of the Produce Traceability Initiative (PTI)?" This apparently simple question had not been tackled directly. As a result, many produce companies are sitting on the fence', unable to justify an investment with an unclear payback.

One answer is "it's a cost of doing business because the government or retailers will require it", and by implication doesn't need to be analyzed. This may be so, but for many grower/shippers that's unsatisfactory. Produce industry executives need a business case for adding PTI. After all, if a compelling business case is made then compliance will be in a company's self interest.

The promise of PTI is whole chain traceability, resulting in faster, narrower recalls and a reduction in the collateral damage' caused to innocent growers and shippers from others' recalls. We can build a model to analyze the value of this promise. We want to model both a recall that implicates the shipper, and the one in which the shipper is not implicated, but is still affected. First we must make a best-guess at the probability of each recall happening sometime in the future. Then we calculate the negative economic impact of the recall's resulting drop in sales, followed by a period of recovery.

We can then make an assumption about the reduction in the depth and duration of these recalls if PTI is implemented (note, we do not assume that PTI reduces likelihood). That gives us the value created by PTI. Subtract from this the ongoing cost of PTI (labels, software, hardware, labor, etc.) and restate it in today's dollars' to take into account the time-value of money, and we have the net present value of PTI.

Now, of course, many of these inputs are unknowable, such as the likelihood and timing of a recall. However, one can make reasonable assumptions based on experience. The key number to look at is how effective does PTI need to be on softening a recall and accelerating its recovery, for it to be at least a breakeven investment given a set of reasonable starting assumptions. If this breakeven number seems reasonable, then we can conclude that, above this number, PTI creates value.

Okay, so what happens when we run the numbers? Well, there is no single, simple answer. But, with some reasonable set of starting conditions for produce like tomatoes, cantaloupe and leafy greens where there have been recalls in the past enhanced traceability needs only to reduce the impact of a possible recall happening in the next 10 years by a believable amount and it's going to pay back. In other words, we don't need to assume miraculous results for traceability to be a smart investment.

Our analysis is conservative in several important aspects. It assumes that retailers show no preference for traceable produce, nor pay any premium for traceable produce. It also does not reflect the sales lift that could result from increased consumer confidence in a brand. It also doesn't attempt to value improved visibility into the supply chain, or ability to quickly get and respond to customer feedback.

Calculating the value of traceability is imprecise but it's not impossible. When shippers have the tools to determine the value of better traceability for themselves we think that when they put in their own numbers many will agree the benefits outweigh the costs.

The HarvestMark team put this model into a tool that allows a shipper to "twist the dials" and see the results for their own business. The tool is available here.