These challenges were revealed recently after Daniel R. Levinson, inspector general of the Office of the Inspector General (OIG), U.S. Department of Health and Human Services, disclosed some bleak findings on the protection of the U.S. food supply. According to the agency’s study:
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Explore This IssueDecember/January 2010
Only five of the 40 products purchased could be traced through each stage of the food supply chain back to the farm or border.
Thirty-one of the 40 products purchased could not be traced through each stage of the food supply chain; OIG was only able to identify facilities that likely handled the products.
For the remaining four of the 40 products, the OIG could not identify the facilities that likely handled these products.
The common thread for untraceable products was the lack of lot-specific information necessary for complete end-to-end traceability.
Increasing Pressure on Suppliers
In addition to the increasing regulatory requirements, many retailers have stepped up the requirements placed on their suppliers. One of the increasingly common ways retailers test food processors to ensure brand protection is through food safety audits and mock recalls, which require rapid access to accurate summary product lot information, with detailed supporting results. At the behest of retailers, many food processors that supply national retail chains are conducting as many as four mock recalls a month. Additionally, as part of comprehensive food safety audits, external audit firms are validating some mock recalls.
For a food processor, the cost of a failed mock recall can be catastrophic. An existing customer is not required to provide any warnings before dropping a supplier who fails even one mock recall, as compared to initial warnings that might be the only FDA-imposed sanctions. The risk of a losing a new or existing customer due to a failed mock recall is most pronounced when the customer’s investment—and risk—in brand value are highest. For example, as food processors seek to supply more products to the growing private-label industry, they are under increasing scrutiny by brand marketers seeking to minimize risk. For a private-label manufacturer supplying products to national brand marketers, a failed mock recall can be devastating.
With an automated traceability program, at any point in the supply chain, a food processor is able to trace back to the source of all ingredients and trace forward to the disposition of all food products made and sold.
To address these requirements, food processors and distribution warehouses up and down the supply chain now find that automated traceability systems are a virtual necessity. Just as business accounting systems act as financial systems of record, enterprise resource planning and supply chain planning systems serve food companies as traceability and operational systems of record.
The advantages of automated traceability based on an operational system of record that also contains operating standards and activity reporting results can be significant, based on timely, thorough access to chain of custody quantity, quality, product, and process information. At any point in the supply chain, a food processor can trace back to the source of all ingredients and trace forward to the disposition of all food products made and sold. The increased confidence this provides, along with proof of “in control status” for customers, auditors, and regulatory inspectors, allows food processors to establish a competitive advantage that can add measurable business value—and potentially save thousands of dollars.
When product lot traceability sits on top of an integrated operational system of record, food processors also gain the ability to improve bottom-line financial performance. Transparency and timely access to product and process standards and detailed activity information on production and exception-variance costs, as well as product profitability, manufacturing efficiency, warehouse spoilage, and other operational metrics can expose hidden opportunities for business improvement.