opportunities, and some relationship specific investments that needs to be undertaken.
Cost of traceability can be presumed to increase with the number of suppliers and
variability over the supply base as in the case of spot-market. Identifying the pre-
designated suppliers as in contracting for traceability should be less costly. Also,
producers have incentive to do better due diligence to obtain repeat business as
contracting facilitate reputation effects better. Muth et al. (2005) report traceability as one
of the reasons for adopting alternative marketing arrangements such as marketing
agreements and forward contracting. On the other hand, Giraud-Heraud, Hammoudi, and
Soler (2005) hypothesizes that implementation of generic standards common to several
retailers such as EurepGAP instead of private standard of each individual retailer can
herald return back to spot markets instead of contractual relationships or vertical alliances
between retailers and producers.
For hypothesis 5); the easier it is to establish liability against the previous segment in the
chain in case of food safety failure, the higher the incentive is to establish a more
stringent traceability level. This can help to pass at least a part of the cost of food safety
failure to other segments (Sumner and Pouliot, 2006). However, the damage to the
reputation or brand is typically incurred by the end of supply chain, such as restaurants,
or processors (see Stearns, 2004 for two high profile examples). Because, customers
often identify the product with the restaurants they are dining. Therefore, franchises and
restaurants have strong incentive to implement traceability to the rest of their supply
chain. Of course, the influence of these customers is directly related to the significance of
their share in a given plant’s sales. For example, McDonald’s had targeted at least 10% of
its U.S. beef purchases to be traceable from farm to table at the end of 2004 and at no
distant future all products would be based on animals under animal ID program.
Moreover, having an experience of product recall and/or lawsuit for food safety failure in
the past may lead to more stringent traceability requirements with the suppliers, and some
brand lines or products may have been discontinued by processors. Finally, the riskiness
of meat products could also be a factor. Some product categories are more prone to food
safety problem than others as found in FSIS-RTI survey of experts’ elicitation on the
relative riskiness of meat and poultry products (FSIS, 2005).
For hypothesis 6); possible synergies between quality assurance programs and
traceability are investigated here. Mora and Menozzi (2005) report that cost of
traceability is lower if there are already a quality assurance scheme in place, such as ISO
9001: 2000 standards. Traceability appears to be complementary to quality assurance
systems to differentiate products. HACCP and ISO 9001: 2000 require data collection
and verification that the necessary actions are taken, and the inputs stage is a critical point
under both systems. Pathogen Reduction/HACCP Rule Part 417. 2(a) states that plants
must conduct hazard analysis “to determine the food safety hazards reasonably likely to
occur before, during and after entry into the establishments”. An implication of that is
meat slaughtering plants may need more information (such as quality assurance program
certification, animal/premise supplier identification, treatment and disease records) on
incoming animals for their HACCP plan, which in turn should affect animal producers
(FSIS, 2001).
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