The product shortages and supply-chain delays of the global covid-19 pandemic are still fresh memories. Consumers and industry are concerned that the next geopolitical climate event may have a similar impact. Against a backdrop of evolving regulations, these conditions mean manufacturers want to be prepared against short supplies, concerned customers, and weakened margins.
For supply chain professionals, achieving a “phygital” information flow—the blending of physical and digital data—is key to unlocking resilience and efficiency. As physical objects travel through supply chains, they generate a rich flow of data about the item and its journey—from its raw materials, its manufacturing conditions, even its expiration date—bringing new visibility and pinpointing bottlenecks.
This phygital information flow offers significant advantages, enhancing the ability to create rich customer experiences to satisfying environmental, social, and corporate governance (ESG) goals. In a 2022 EY global survey of executives, 70% of respondents agreed that a sustainable supply chain will increase their company’s revenue.
For disparate parties to exchange product information effectively, they require a common framework and universally understood language. Among supply chain players, data standards create a shared foundation. Standards help uniquely identify, accurately capture, and automatically share critical information about products, locations, and assets across trading communities.
The push for digital standards
Supply chain data’s power lies in consistency, accuracy, and seamless sharing to fuel analytics and generate insight about operations. Standards can help precisely describe the physical and digital objects that make up a supply chain, and track what happens to them from production to delivery. This increased visibility is under sharp focus: according to a 2022 survey of supply chain leaders by McKinsey and Company, more than 90% of respondents from nearly every sector invested in digital supply chain technologies during the previous year.
These standards rely on number and attribution systems—which can be encoded into data carriers and attached to products—to uniquely identify assets at every level. When data is captured, it provides digital access to information about products and their movement through the supply chain.
Numbering and attribution systems such as the Global Trade Item Number (GTIN) identify traded items and products; likewise, Serial Shipping Container Codes (SSCCs) identify logistic units. Global Location Numbers (GLNs) identify business data including an invoice address or a delivery location. Global Product Classification (GPC) codes are a global standard that use a hierarchical system to classify items by characteristics.
Data carriers include Universal Product Code (UPC) barcodes, one-dimensional (1D) barcodes familiar to consumers, commonly scanned at the point of sale in North America. Outside the U.S. and Canada, the European Article Number (EAN) barcode is used. These barcodes encode GTIN identifier data.
In recent years, more complex and robust data carriers have become common, including radio-frequency identification (RFID) tags and two-dimensional (2D) barcodes like QR codes (quick-response codes). These codes contain vastly more data than simple 1D barcodes.
These identification and data capture standards work alongside others for information sharing, including master data, business transaction data, physical event data, and communication standards for sharing information among applications and partners. Phygital information must meet a wide range of needs, including regulatory compliance, consumer and patient engagement protections, and supply chain and trading partner requirements, such as procurement, production, marketing, and ESG reporting.
Regulation is an important industry driver: chain of custody and authentication of products and trading partners are vital for safe, secure supply chains. “Governments and regulatory agencies have leveraged the pervasiveness of standards adoption to further global goals of food, product, and consumer safety,” says Siobhan O’Bara, senior vice president of community engagement for GS1 US, a member of GS1, a global not-for-profit supply chain standards organization.
New developments in standards across industries
Global standards and unique identifiers are not only driving today’s supply chain evolution, but they also allow for robust use cases across a wide variety of industries. Here are a few examples to consider.
Healthcare: Today’s healthcare organizations are under pressure to improve patient outcomes, prevent errors, and control costs. Identification systems can help by empowering patients with information that help them follow medical protocols.
“We know in healthcare that a critical part of our world is not only whether people have access to healthcare but whether they follow their clinical instructions,” says O’Bara.
O’Bara offers the example of a home nebulizer, a device used to deliver medicine to improve respiratory symptoms. By equipping a nebulizer with an RFID chip, she says, “a patient can keep track of whether they are following the prescribed treatment. For instance, if there’s a filter with that nebulizer, when it gets locked into the device, the chip sends a signal, and the nebulizer can display for the patient at the correct time that the filter has been consumed. This mechanism can also convey to healthcare practitioners whether the patient is following the protocol properly.” The result is not only a lower risk of patient miscommunication but improved patient care.
Retail: Data about an item’s origins can prevent business losses and enhance public safety. For example, a grocery store that has a product recall on spinach due to a bacterial outbreak must be able to trace the origin of batches, or must destroy its entire inventory. A unique identifier can improve the speed, accuracy, and traceability of recalls for public safety, precision, and cost effectiveness.
Consumer goods: A 2D barcode on a bottle of hand lotion can reveal a vast amount of data for consumers, including its origin, ingredients, organic certification, and packaging materials. For industry, unique identifications can tell warehouse workers where a product is located, inform distributors whether a product contains potentially dangerous ingredients, and warn retailers if a product has age restrictions. “Data delivers value in all directions of the supply chain,” says O’Bara. “Data standards are the only way to accurately and consistently—with confidence—obtain and rely on these data points to complete your business operations,” she says.
Manufacturing: Achieving ESG compliance hinges on an organization’s supply chain visibility, says O’Bara. “You always have to have data to support your ESG claims, and the only way to get that data is by tracking it through a consistent and calculated method, no matter where it’s consumed.” Standards provide access to structured sustainability information that can be measured to ensure compliance with ESG regulations, and shared with supply chain partners.
The next frontier
Standards empower organizations to identify, capture, and share information seamlessly, creating a common language that can support business processes. Savvy organizations are going a step further, providing customers with direct access to supply chain and other valuable data. According to 2023 research by Gartner, customers who are “enabled” with visibility into the supply chain are twice as likely to return; however, only 23% of supply chains currently enable customers this way.
O’Bara points to digital labeling as a perfect example of the supply chain future. Digital labels accessed through 2D barcodes by smart devices could provide consumers with information about hundreds of product attributes, such as nutrition, as well as facts that go beyond the label such as environmental, lifestyle, and sustainability factors. This future-forward approach to an increasingly phygital world could drive long-term consumer engagement, and open the door for increased business growth.
“Once you have unlocked value from unique identifiers, there are so many more ways that you can think creatively and cross-functionally about how unifying standards along a supply chain can enable commercial functions and consumer engagement with potential to drive substantial top- and bottom-line revenue,” says O’Bara.
This content was produced by Insights, the custom content arm of MIT Technology Review. It was not written by MIT Technology Review’s editorial staff.
About The Author
