The tobacco industry is a demanding one, and with production lines operating almost continuously, coding and marking systems need to be able to operate reliably at speeds of up to 1,000 packs per minute.
It is also a highly regulated industry, and demand for coding and marking solutions that can also help manufacturers to achieve compliance is increasing. At present there are two major initiatives in the industry – the Tobacco Product Directive 2 (TPD2) from the European Union, and the Framework Convention of Tobacco Control (FCTC) from the World Health Organisation, both of which require tobacco companies to track and trace products throughout the supply chain in order to try and avoid illicit products entering the market.
A challenging environment
In order to comply with track and trace requirements, manufacturers have to ensure that every single product they supply to the market carries a unique code or number.
There are two ways in which the industry can achieve this. One is by utilising serialized tax stamps, provided by approved authorities. The other is to perform direct serialization marking on the product. Some direct serialization marking can offer authorities features similar to tax stamps (digital fiscal marking).
Aggregation is a key technical step to implement effective tracking and tracing of products throughout the supply chain. To date, aggregation based on tax stamps has failed to be successfully demonstrated on all manufacturing equipment. On the contrary, aggregation has been implemented based on direct marking on all type of machines.
Tax stamps are also causing manufacturers some difficulties, as they can cause significant decreases in production efficiency. This is an unwelcome issue for any manufacturing business to deal with, and many believe that if they move to online coding (with digital fiscal marking), which can ensure the same level of security as a typical tax stamp, then line speeds would not be affected. Tax stamps, although sophisticated in terms of the information they carry, are also becoming more widely counterfeited. The industry believe that these counterfeited tax stamps are not only causing problems for the producers, but also for the security element that they are obliged to provide.
Countries in the EU, for example, have to develop a system which complies with TPD2 – which requires a track and trace system to be in place that gives each individual package a unique identifier containing machine, date and time references. Serialized tax stamps are not able to comply with this requirement. In addition, the unique identifier must be non-removable and must be clearly visible on the pack, so whenever a customs authority scans the product they can ensure the product is intended for that specific market. The number should be visible at pack level as it is the lowest unit size sold on the market. The issue is that tax stamps can be removed, and therefore the track record of a pack can be lost entirely. This creates a big problem, as governments are looking to have a clear understanding of how many products are being entered into the market, as every product will generate a specific amount of tax income for that government. If they can’t track the products they will see the widespread problem of illicitly traded products being shipped into markets where they were not intended to be used.
The price variations across Europe are significant, and are a main driver of illicit trade. If a truck full of illicit cigarettes is diverted to the UK from a nation where that product is far cheaper, the government will not see any tax revenue and the supplier company will not see any kind of revenue if they are successfully smuggled in – as they could theoretically sell these products at a much higher price. This is why the industry is fighting hard to stamp out illicitly traded and counterfeit tobacco products.
Counterfeiting and illicit trade will cost approximately 60bn dollars in losses this year alone and there are several reports from KPMG, PWC and many official authorities who are highlighting this subject. This is why the EU and the World Health Organisation (WHO) have introduced the requirement for end to end track and tracing of tobacco products, as it allows them to ensure that individual packs, bundles and cases can be fully aggregated and synchronised with what is expected to be available on the market.
How can Videojet technologies help manufacturers to remain compliant?
Track and trace is a challenging requirement for the tobacco industry. Today the tobacco industry is responding to this challenge by promoting direct marking solutions such as Codentify. To date, the tobacco industry has tracked millions of packs around the world over a period of more than 10 years. Videojet has successfully demonstrated its commitment with the tobacco industry and has developed an interface to the tobacco solution that not only provides integration flexibility into multiple points on the line, but is also flexible enough to be used with the majority of coding equipment (Continuous Inkjet (CIJ), laser, Thermal Inkjet (TIJ) or label applicator) and track and trace software. This allows manufacturers to remain compliant.
For example, in the case of digital fiscal marking, individual packs are marked with unique identifiers that have been authorised and accounted for by the government of the country in which the products are intended for sale. In addition, by employing serialization on the higher packaging levels, aggregation can be recorded.
Tracking of the product through the supply chain can then be recorded by scanning the higher packaging level and information can be retrieved by all relevant stakeholders.
Now, when products that have undergone this process reach the border of the country they are shipped to, customs at that point can read the code and can tell immediately if the products present are entitled to be allowed into the country. If the codes present are not within the acceptable range issued by the government, they will either be shipped back to point of origin, or destroyed at the manufacturer’s expense. At the same time, any products that arrive without a code are instantly recognized to be out of place and will receive the same treatment.
This comprehensive approach also allows governments and manufacturers to tackle diversion, as if a shipment goes missing it will be evident at which point in the process the products disappeared – allowing investigative action to be taken in order to prevent further occurrences.
Videojet coding and marking technologies offer a solution to manufacturers with regard to traceability and digital fiscal marking, helping manufacturers to meet regulations while keeping production efficiency at maximum levels. Products can be coded at speeds of up to 1,000 packs per minute, meaning production schedules are not affected.
Looking to the future
Serialization and track and trace initiatives can be successfully implemented through the use of coding and marking systems. Their ability to operate in conjunction with serialization enables manufacturers to remain compliant, at the same time protecting profit margins as well as brand reputation.
Videojet, thanks to its successful partnerships with a number of specialist suppliers, is able to deliver turnkey solutions to manufacturers for track and trace, providing aggregation and line management solutions and ultimately helping to stamp out counterfeiting and illicit trade.