“Establishing Trust Through Traceability”

1. “Establishing Trust Through Traceability” ECR Asia-Pacific Conference Bangkok, October, 2008

2. Contaminations and recalls are changing consumer perceptions and purchasing behaviors, and eroding consumer trust • 42% of consumers buy different brands today versus 2 years ago … because they are looking for safer products • 47% are more concerned today about food safety than they were 2 years ago Mushrooms E. Coli Chicken Listeria Snack food Salmonella Dog treats Melamine Tomatoes►Jalapeños Salmonella Chicken Bird Flu Cantaloupe Salmonella Gr. Beef E. Coli Toothpaste Diethylene Glycol Cantaloupe Salmonella Toys Lead Formula Melamine Rice GMO Lettuce E. Coli Chocolate Salmonella Gr. Beef E. Coli Beef E. Coli Pork LIsteria Chocolate Salmonella Spinach E. Coli Chocolate Nuts Onions E. Coli Peanut Butter Salmonella Baby Food Botulism Pet Food Melamine? Canned Chili Botulism 2006 2007 2008 Source: IBM research, IBM survey of U.S. and UK consumers; Fortune, July 16, 2008 Establishing Trust Through Traceability | June 15th, 2007

3. Consumer confusion around the efficacy of new product health and wellness claims have also eroded consumer trust • 73% are skeptical at some level that branded food products deliver the health and wellness benefits advertised Calorie burning energy drink Cereal with probiotics and fiber for digestion Antioxidant fortified cereal • 82% ‘agreed’ that “claims made by food and drink products often exaggerated or unproven” • 52% felt that ‘health boosting claims by food and drinks players were untrustworthy’ 2006 survey of consumer skepticism Yogurt with probiotics for digestive health Spread with Omega-3 oils for heart health Omega-3 fortified peanut butter 2007 survey of health and wellness Consumers confused by conflicting science “The health and wellness market needs to focus on avoiding consumer confusion as a result of an abundance of scientific information…” Heart healthy chocolate Protein, fiber and Omega-3 fortified pasta Melatonin rich milk to aid sleep Source: “Coke Says Things Go Better with Green Tea:”, Financial Review, 10/23/06; www.cocoavia.com; www.smartbalance.com; www.kashi.com Source: “How To Exploit New Wellness Trends in Food”, Datamonitor, 09/06; “Consumer Skepticism of Healthy Food Claims – Another Report”, Nutraingredientsusa.com, 12/6/05; “Confusing Claims Harm Consumer Trust”, Food & Drink – Europe, 07/16/04; “2005 Consumer Attitudes Toward Functional Foods/ Foods For Health”, International Food Information Council, 07/06 Establishing Trust Through Traceability | June 15th, 2007

4. … however a proliferation of corporate responsibility claims is only adding to the confusion and fostering distrust "Ethical" coffee is being produced in Peru, the world's top exporter of Fairtrade coffee, by labourers paid less than the legal minimum wage. Socially Responsible H20 Carbon Footprint Crisps Carbon Neutral Beer • 40% of consumers are negative or ambivalent about media attention regarding our impact on environment • Only 13% of consumers believe companies adopt environmentally friendly practices because they care about the environment WWF alleges tens of thousands of hectares of rainforest in Indonesian National Parks cleared to grow coffee Advocacy group claims retailer is misleading its customers by labeling non-organic foods as ‘organic’ Source: Brandweek, July 15, 2008; Financial Times, September 9 2006; Financial Times, January 17, 2007; www.CNNMoney.com Establishing Trust Through Traceability | June 15th, 2007

5. Traceability systems can serve as that source of trusted information allowing CP companies to connect with concerned consumers, and realize other benefits Brand Empowerment Become trusted source of information to the ‘Omni Consumer’. Empower brands to make new claims. Supply Chain Efficiency Accelerate product flows and reduce inventory levels through increased visibility to inventory and movements Risk Mitigation Protection of brand through identification of risks and isolation of contaminated product Compliance Ensure compliance with both individual retailer mandates and government regulations Trusted information Fertilizers Antibiotics Ingredients Packaging Ingredients Track and trace products and risks within own four walls to isolate and prevent issues Logistics Logistics Logistics Logistics Corn Farmer Cattle Rancher Beef Processor CP Manufacturer Distribution Center Grocery Retailer Logistics Logistics Logistics Logistics Logistics Trace Track Source: Economic Research Service, United States Department of Agriculture Establishing Trust Through Traceability | June 15th, 2007

6. Typically associated with food safety, most traceability systems today fall short of either protecting brands from recalls, or empowering them to make new claims Traceability systems capture, store, access, aggregate and communicate product, supplier, customer, handling and processing information to: • Credibly support new marketing claims, and • Prevent, identify and isolate product contamination issues Establishing Trust Through Traceability | June 15th, 2007

7. To realize the Full Value Traceability opportunity CP companies need to move forward on four imperatives, starting by aligning their Traceability capabilities with the requirements of the brand Leverage Traceability to Protect and Empower the Brand • Develop deep understanding of target ‘Omni Consumers’ • Establish fact-based understanding of product/brand attribute risk elements • Prioritize traceability requirements within existing product portfolio • Define traceability requirements within new product development pipeline • Ensure traceability investments deliver capabilities that support the brand 1 Define Traceability vision, and create an roadmap • Recognize that Traceability is complex, strategic undertaking • Adopt an evolutionary path for of process, capability and tool development • Establish clear executive level and functional responsibility and sponsorship • Prioritize desired/required functionality leveraging assessment of current IT and Supply Chain capabilities, and product/brand risks and opportunities 2 • Leverage distributed, standards based architecture for data management • CP companies need to effectively and efficiently move product, and capture, manage and communicate data about product(s) and their movements • Establish one version of the truth for customer, product and supplier data • Automate collection, analysis, and communication of data Integrate the physical and informational supply chain 3 • Embrace whole supply chain perspective • Identify stakeholders, define their Traceability related stake and develop engagement plans that drive alignment with company vision • Create a shared Traceability vision and development roadmap with vendors and suppliers Proactively engage with Traceability stakeholders 4 Establishing Trust Through Traceability | June 15th, 2007

8. Full Value Traceability systems capture, a) product movements, b) attribute changes, and c) processing activities across and within the supply chain Each company maintains its own product information and record of transactions, making that information available on a permission basis to stakeholders Fertilizers Antibiotics Ingredients Packaging Ingredients Track and trace products and risks within the four walls to isolate and prevent issues Logistics Logistics Logistics Logistics Corn Farmer Cattle Rancher Beef Processor CP Manufacturer Distribution Center Grocery Retailer Logistics Logistics Logistics Logistics Logistics Data Data Data Data Data Data Firewall Transaction & Historical Data Firewall Firewall Firewall Firewall Firewall Firewall Virtual Traceability System Rapid communication of essential data facilitated through open-standard software and adoption of industry ID standards Data security maintained via encryption, restricted password access, etc… Establishing Trust Through Traceability | June 15th, 2007

9. Creation of a virtual Traceability ‘ecosystem’ will accelerate realization of the Full Value Traceability opportunity Each stakeholder of the Virtual Traceability ‘Ecosystem’ plays a role empowering and protecting the brand Virtual Traceability ‘Ecosystem’ Direct Supply Chain Corn Farmer Cattle Rancher Beef Processor Distribution Center Grocery Retailer CP Manufacturer Consumers Protect & Empower Brand Insurers Creditors Auditors Equity Analysts Shoppers Non-Profits and NGOs Regulatory Agencies Trade Associations Local Communities Influencers IT Service Providers Logistics Service Providers (LSP) Advertising Agency Packaging Suppliers Media Co-Packers Food Brokers Government Common Data Standards Ecosystem Enablers Distributed IT Infrastructure Executive Sponsorship & Support Stakeholders with critical role protecting or empowering the brand Establishing Trust Through Traceability | June 15th, 2007

10. IBM is working with partners such as FXA to create a complete traceability solution FXA IBM Scope of Work Request Traceability Data Customer Send Traceability Data EPCIS Websphere RFIDInformation Center Request TraceabilityData Send TraceabilityData Send production Dataand Quality Data Send Production Dataand Master Data ERP / MRP Manual input and/or IBMFood safety manager Websphere PremisesServer Send Data from RFID Capture device RFIDData CaptureDevice Establishing Trust Through Traceability | June 15th, 2007

11. Product Overview Electronic Data Exchange Secure data Storage Web enabled Configurable User Interface • Trace with • Flexible search parameters • Bi-directional • Drill Down • Permitted Access Multi Domain Permitted Data Access Establishing Trust Through Traceability | June 15th, 2007

12. Build User Interface Establishing Trust Through Traceability | June 15th, 2007

13. Trace Icon is OpsSmart’sData Entry Form Establishing Trust Through Traceability | June 15th, 2007

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19. FXA References • Betagro • Biotec – Black Tiger Shrimp Broodstock • Cameron farm – Hatchery and Nursery • Surajthani Shrimp Farm Cooperative • Tacheen Shrimp Farm Cooperative • Thathong Shrimp Farm Cooperative • Pakfood – 3rd largest manufacture • Grampian Foods • River Kwai • Taniyama • CPF • Chantaburi Frozen Food – Part of Rubicon group • Department of Fisheries • Department of Livestock Development • Department of Agriculture • National Bureau of Agricultural Commodity and Food Standards Establishing Trust Through Traceability | June 15th, 2007

20. Change management • Management of processes in compliance with best practices • Commitment to Quality and safety processes • Transparency • Willing to adopt new technology • Management Commitment • Tightly integration with suppliers and authorities • Utilization of the information to productivity and efficiency Establishing Trust Through Traceability | June 15th, 2007

21. EPCIS: Enabling exchange of traceability information through global standards • System defined by GS1 for exchanging information on serialized items • Developed for RDIF technology, can be used to exchange associated information • Does not require RFID tagging. Can store the serial number in a SGTIN on a bar code • Serialization can be at the item, case, pallet or container level • IBM’s RFID Information Center supports all the EPCIS standard protocols • Supported by leading companies such as Carrefour, Henkel, Kraft International, Metro Group, Nestlé, Procter & Gamble, Rewe Group Establishing Trust Through Traceability | June 15th, 2007

22. Where to go for help • Visit the IBM stand in the exhibition area • Download the GS1 guides from • http://www.gs1.org/productssolutions/traceability/ • Download the “European EPC Guide for Retailers and Manufacturers” • http://www.gs1.eu/index.php?page=&tudasbazis=60&lister=47 • E-mail • chris.cave.jones@sg.ibm.com • chattau@fxagroup.com Establishing Trust Through Traceability | June 15th, 2007