Definition:
Product Traceability system helps isolate and prevent contaminated products reaching consumers in the event of a product recall. Traceability is the capability to trace something, an ability to verify the history, location or application of an item by means of documented recorded identification. In other words, capability of keeping track of a given set or type of information to a given degree or the ability to chronologically interrelate uniquely identifiable entities in a way that is verifiable. Traceability is applicable to measurement, supply chain, software development, healthcare and security.
A company aware of their product being defective but is unable to trace the product is exposed to significant product liability risk like financial loss, consumer injuries, property damage etc. In these situations they don’t have option but to recall the batch of product regardless of them being defective or not. Product traceability provides the ability to identify and track a product or a component to its point of origin.
Product traceability is very important to reliability, a means to identifying the units.
Further Reading:
https://en.wikipedia.org/wiki/Traceability
https://www.zurich.com.au/content/risk_features_home/liability/products_liability/product_distribution_post_sale_management/product_traceability.html
https://blog.matthews.com.au/product-traceability-what-your-business-needs-to-know/