4 Chain of Custody Models in Supply Chain Transparency

In today’s global supply chains, chain of custody has become a critical focus for ensuring the authenticity and integrity of products. As industries face growing demands for transparency from both consumers and regulators, businesses often struggle with inadequate tracking systems and limited visibility across their suppliers. This lack of clarity can lead to risks such as counterfeiting, fraud, and regulatory non-compliance. 

The presence of a Chain of Custody solution is of immeasurable value. It serves a dual purpose by enhancing supply chain transparency and fostering increased accountability among trading partners. 

Implementing robust chain of custody models is key to overcoming these challenges. These models provide a structured framework to track the movement of goods through every stage of production, processing, and distribution. By adopting the right chain of custody approach, companies can improve traceability, build consumer trust, and ensure compliance while mitigating risks throughout their supply chains. 

 In this blog, we will explore four key chain of custody models: Single Certification, Segregation, Mass Balance, and Book and Claim. Each model offers unique advantages and considerations, making it essential for businesses to choose the right one to align with their transparency and sustainability goals 

Key Takeaways 

• What is Chain of Custody? 

• Chain of Custody Models 

• TraceX Traceability Platform 

What is Chain of Custody? 

A chain of custody is a crucial system used to track and document the movement and handling of products and materials at various points within a supply chain. It serves as a comprehensive record-keeping method, ensuring that the origin, quality, and compliance of these products are accurately preserved and validated as they move from one stage to another. 

The primary purpose of a chain of custody in supply chain traceability is to establish a transparent and unbroken trail of accountability. It enables businesses to confidently trace the lineage of their products and materials, from their source to their final destination. This documentation process involves recording key information such as when and where the products were obtained, who handled them, and how they were processed or transformed throughout their journey. 

What is the significance of Chain of Custody in Supply Chain Management? 

Having precise knowledge of the products’ location, the parties responsible, and maintaining a comprehensive audit trail holds immeasurable value in supply chains. It not only allows for improved overall supply chain management but also amplifies the capabilities of managers to make more informed and efficient decisions. With this level of clarity, they can proactively detect potential issues at an early stage and take prompt corrective actions. Product traceability is the ability to track and verify the journey of a product from its origin to the end consumer, ensuring transparency, quality, and compliance at every stage of the supply chain. 

Benefits 

• To begin, it introduces an unparalleled degree of transparency into the supply chain, acting as a deterrent to theft and improper handling while promoting adherence to established protocols. 

• Moreover, in the event of a significant issue impacting customers, it frequently plays a pivotal role in identifying the origin of the problem and diagnosing its fundamental causes. 

• Furthermore, in the event that a recall becomes imperative, it empowers businesses to conduct highly precise recalls, minimizing customer inconvenience and expediting the efficient retrieval of affected products. 

By adopting a chain of custody approach, supply chain stakeholders can significantly enhance their ability to monitor and verify the authenticity and sustainability of their products. This level of transparency is invaluable in ensuring that ethical and environmental standards are met, which, in turn, builds trust among consumers and partners. 

The Importance of Tracking and Documenting the Flow of Products and Materials 

The importance of material traceability and documenting the flow of products and materials cannot be overstated in today’s complex and interconnected supply chains. Several key factors highlight its significance: 

Quality Assurance: Tracking the movement of products helps ensure that quality standards are maintained. Any deviations from specified conditions or requirements can be quickly identified and rectified. 

Verification of Ethical Sourcing: In an era where responsible and sustainable sourcing is a priority, tracking the chain of custody enables organizations to confirm that their products are sourced from reputable and sustainable origins. 

Environmental Responsibility: Documenting the flow of materials allows for monitoring of environmental impacts, such as carbon emissions or deforestation, 

which is crucial for sustainable and environmentally conscious practices. 

Compliance and Legal Obligations: Many industries are subject to regulatory requirements and standards. A chain of custody helps companies prove supply chain compliance with these standards and regulations. 

Consumer Trust: Transparent supply chains build consumer trust. When companies can provide clear documentation of a product’s journey, it reassures consumers about the quality and ethical considerations associated with their purchases. 

Conflict Resolution: In cases of disputes or recalls, having a well-maintained chain of custody can expedite the process of identifying and resolving issues. 

In conclusion, tracking and documenting the flow of products and materials through a chain of custody is an essential practice for ensuring accountability, transparency, and compliance in supply chains. It plays a pivotal role in meeting sustainability goals, ethical sourcing standards, and the quality assurance expectations of modern businesses and consumers alike.

Chain of Custody Models 

1. Identity Preservation 

The Identity Preservation (IP) model is one of the four primary Chain of Custody models used in supply chains to ensure the traceability and accountability of products. It is particularly important in industries where the integrity of a product’s identity is paramount, such as in organic agriculture, non-GMO (genetically modified organism) foods, 

• The Identity Preservation model, as the name suggests, focuses on preserving the identity of a product from its source or production through its entire supply chain journey. It’s all about maintaining the unique characteristics or attributes of a product, such as its genetic purity, organic certification, or other specific qualities that set it apart from other similar products. 

• In the Identity Preservation model, the emphasis is on products with distinctive attributes that need to be safeguarded. These attributes might include organic certification, non-GMO status, fair trade labeling, or specific geographical indications 

• To ensure identity preservation, meticulous documentation and record-keeping are essential. At each step of the supply chain, from production or sourcing to distribution, parties involved must maintain detailed records about the product’s identity. This includes information on its origin, processing, handling, and any changes it undergoes. 

• The Identity Preservation model often involves strict segregation measures. Products with distinct identities must be physically separated from other similar products at all times to prevent mixing or contamination. For example, in organic farming, organic crops must be segregated from conventionally grown crops to prevent cross-contamination. 

• External verification and certification from credible third-party organizations are integral to the Identity Preservation model. These organizations confirm that the product meets the specific criteria for identity preservation, whether it’s organic, non-GMO, or any other unique attribute. 

• Products subject to identity preservation are typically labeled to reflect their unique attributes. These labels may include certifications, logos, and specific information about the product’s origin and characteristics. Traceability is maintained to ensure that each product can be traced back to its source and verified at every stage of the supply chain. 

• To ensure the model’s effectiveness, regular audits are conducted to confirm that all parties in the supply chain are compliant with identity preservation requirements. Non-compliance can result in the loss of the product’s unique identity. 

2. Segregation Model 

The Segregation model is one of the key Chain of Custody models used in supply chains to ensure the traceability and accountability of products, especially those with distinct characteristics or certifications. It is used when maintaining the physical separation of products is essential to prevent mixing or contamination. 

This model is primarily applied to products with unique attributes that need to be preserved. These attributes could include organic certification, non-GMO status, fair trade labelling, geographical indications, or any other characteristic that sets a product apart. 

The core principle of the Segregation model is the physical separation of products at all stages of the supply chain. This means that products with unique attributes are kept separate from other similar products from the point of production or sourcing through processing and distribution. 

Products subject to the Segregation model are typically labelled with information about their unique attributes. This could include certifications, logos, or specific information about the product’s origin and characteristics. Certification is often required to confirm that the product meets the specified criteria for its unique attributes. 

Meticulous documentation and record-keeping are crucial in the Segregation model. At each stage of the supply chain, parties involved must maintain detailed records about the product’s identity, its origin, the handling procedures it undergoes, and any changes. 

External verification and regular audits by credible third-party organizations are integral to the Segregation model. These audits ensure that the physical separation of products is maintained and that products meet the criteria for their unique attributes. 

3. Mass Balance Model 

The Mass Balance model involves the mixing of certified or uniquely attributed products with non-certified products, but the quantity and proportion of the certified or special attributes are maintained throughout the supply chain. It is used when physical segregation is challenging or costly. 

This model is primarily applied to products with special attributes, certifications, or labels that must be preserved, but complete physical separation is impractical. Such attributes could include organic certification, non-GMO status, or other unique qualities. 

Under the Mass Balance model, certified or uniquely attributed products are mixed with non-certified products. The key is that the proportion of certified or uniquely attributed products remains constant and is tracked throughout the supply chain. 

Meticulous documentation and record-keeping are still crucial in the Mass Balance model. At each stage of the supply chain, parties involved must maintain detailed records about the quantity and proportion of certified or uniquely attributed products, their origin, handling, and any changes. 

External verification and regular audits by credible third-party organizations are integral to the Mass Balance model. These audits ensure that the quantity and proportion of certified or uniquely attributed products remain consistent and meet the specified criteria. 

Products subject to the Mass Balance model are typically labelled with information about their unique attributes and certification. This can include logos, specific details about the product’s origin, and the specific criteria they meet.  

Under the EUDR, the EU requires direct traceability of commodities to their source, ensuring that products entering the European market are not linked to deforestation or forest degradation. The regulation mandates that businesses prove their products were sourced sustainably and comply with strict due diligence obligations. 

Mass balancing is not allowed under EU Deforestation Regulation (EUDR) because it can create ambiguity and undermine the transparency required for proving deforestation-free supply chains. Mass balancing would make it difficult to track and verify the exact origin of a product, creating a risk of mixing sustainable and non-sustainable goods, which undermines the core objective of the EUDR: to prevent the importation of products linked to illegal deforestation. Therefore, only direct traceability is acceptable, where the journey of each individual product can be verified, ensuring that it meets EUDR’s deforestation-free standards. 

A strong chain of custody system underpins the ability to meet EUDR requirements by ensuring that businesses can demonstrate that their products are deforestation-free, thus protecting the environment and avoiding penalties associated with non-compliance. 

4. Book & Claim Model 

The Book and Claim model involves the trade of certificates representing certified or uniquely attributed products independently from the physical products themselves. It allows companies to support and invest in the production of such products without the need for direct physical segregation. 

• This model is applied to products with special attributes, certifications, or labels, such as organic certification, non-GMO status, fair trade labels, or other unique qualities, which companies want to support or promote. 

• In the Book and Claim model, companies purchase certificates that represent a specific quantity of certified or uniquely attributed products. These certificates can be traded on dedicated platforms, and the certificate holders can claim the associated attributes without physically handling the products. 

• Meticulous documentation and record-keeping are still important in the Book and Claim model. Companies involved must maintain detailed records about the certificates they own and the products they represent. 

• External verification and certification for the products are still necessary. These external organizations ensure that the certified or uniquely attributed products meet the specified criteria and produce the certificates that can be traded. 

• The Book and Claim model is often used to support and invest in sustainable practices or to encourage the production of certified products, even when it’s not feasible to directly source them.

TraceX Traceability Platform 

TraceX’s traceability platform is designed to support both mass balancing and segregation models of chain of custody, providing flexible solutions for different supply chain needs, while ensuring compliance with various regulations, including the EU Deforestation Regulation (EUDR). 

1. Mass Balancing Model 

The mass balancing model involves tracking the total volume of commodities flowing through the supply chain, allowing for the mixing of sustainable and non-sustainable products. While the EU Deforestation Regulation (EUDR) does not permit mass balancing for certain deforestation-sensitive commodities (due to the need for direct traceability), TraceX enables this model in industries where it is still allowed, such as in certified sustainable products where the focus is more on aggregate reporting rather than strict individual product tracking. The platform ensures that businesses can keep track of the total inflows and outflows of goods, maintaining the overall sustainability credentials of their supply chain while offering an efficient way to manage large volumes of commodities. 

2. Segregation Model 

In the segregation model, products are tracked individually, ensuring that sustainable and non-sustainable goods are kept completely separate throughout the supply chain. This model is crucial for EUDR compliance, where companies need to guarantee that products entering the EU market are deforestation-free and traceable to their origin. TraceX supports this model by providing precise, real-time traceability of each individual product through its platform, using advanced technologies like blockchain and satellite monitoring. This ensures that every product’s origin, journey, and sustainability credentials can be verified, which is essential for meeting the EUDR’s due diligence requirements. 

How TraceX Supports Compliance 

• Real-time Tracking: Whether using the mass balancing or segregation model, TraceX provides continuous, transparent tracking of products throughout the entire supply chain, ensuring accurate data for compliance reporting. 

• Data Integrity: Using blockchain technology, TraceX ensures that all data recorded on the platform is tamper-proof, giving businesses confidence in their reporting and traceability processes. 

• Flexibility and Adaptability: The platform’s ability to support both models allows businesses to implement the traceability solution that best fits their operational needs while staying compliant with local and international regulations.

Choosing the Right Chain of Custody Model for Transparent and Sustainable Supply Chains 

In conclusion, the four Chain of Custody (CoC) models are powerful tools in the pursuit of enhanced supply chain transparency. By choosing the right model to align with specific product attributes, logistical constraints, and sustainability goals, businesses can not only meet consumer demands for authentic, sustainable, and ethically sourced products but also streamline their operations. Whether it’s the Identity Preservation model for clear attribution, the Segregation model for physical separation, the Mass Balance model for proportional tracking, or the Book and Claim model for flexible support, these CoC models empower businesses to achieve their transparency and sustainability objectives. The evolving landscape of ethical sourcing and environmental responsibility further underscores the importance of adopting these models, ensuring that supply chains of the future are characterized by accountability, integrity, and trust. 

Frequently Asked Questions ( FAQ”s )

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