Value of Information in a Whole-Chain Traceability System for Beef Cattle: Application to Meat Tenderness

Implementing a Whole-Chain Traceability System (WCTS) in the beef supply chain may bring many benefits. For a sufficiently large number of individual producers to voluntarily adopt whole-chain traceability so that these benefits can be realized, though, benefits must exceed costs for individuals, not just for the industry. Recently developed technology in the form of a Proprietary Centralized Data WCTS (PCD-WCTS) can help increase the individual benefits. A key feature of the PCD-WCTS is that those who put the information in the system can choose which participants in the supply chain have access to that information. Thus, once producers choose to participate in the PCD-WCTS, they can choose whether or not to share information with any specific participant. This removes a major potential obstacle to adoption of whole-chain traceability in a fragmented supply chain, losing confidentiality of information. It also facilitates value creation in the supply chain. Even if a producer is separated by several supply chain stages from a buyer who is willing to pay extra for animals with certain characteristics, the information about those characteristics can go directly from the producer to those who value the information, without being seen by intermediaries in the supply chain. Correspondingly, those who value that information can pay those who provide it, even if they are several steps away in the supply chain. The economic problem is that those who benefit from the information must choose how much of the added profitability to reimburse to upstream firms who provide the information (and value-added characteristics), so that they have sufficient incentive to provide the information. This research estimates the value of information in a fragmented beef supply chain and its optimal allocation, focusing on the improvement of beef tenderness. The value is compared to costs of participating in a PCD-WCT and providing the information of an individual firm. Traceability has the potential to reduce information asymmetry in the supply chain, improving the allocation of economic value. However, the benefits cannot be fully realized without substantial participation by industry firms. Value-added benefits can provide substantial incentive for individuals to participate in a traceability system. This research will help to quantify the net benefits for individual firms to participate in a PCD-WCTS, and provide a method for evaluating other value-added opportunities. It will also provide guidance for firms to use in allocating the increased value among supply chain participants.