Some things never change. In the food industry, the need to ensure the safety of all products is one of those things. With the rising number of large-scale food recalls, diminishing consumer confidence, and increasing scrutiny from regulators and the food industry marketplace itself, the need to ensure the safety of the domestic and global food supply, coupled with demands for brand-protection assurance, have never been greater.
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Explore This IssueDecember/January 2010
The costs associated with large-scale recalls, both human and financial, can be staggering. In 2008, Maple Leaf Foods, Inc., incurred a direct cost of about $19 million from a recall of contaminated meat linked to a food poisoning outbreak that killed four people in Canada. Earlier this year, Peanut Corporation of America filed for Chapter 7 bankruptcy after peanut products produced in their plants led to nine deaths, a massive recall, and mounting lawsuits. Many industry experts believe the total costs associated with this recall may exceed $1 billion.
These recalls, and many others, have left consumers seriously questioning the safety of the foods they consume. According to a recent IBM study, less than 20% of consumers trust food companies to develop and sell foods that are safe and healthy. The study also revealed that 60% of consumers are concerned about the safety of food they purchase, and a strong majority of respondents, 83%, were able to name a food product that was recalled in the past two years due to contamination or other safety concerns. Nearly half of survey respondents—46 percent—named peanut butter, the staple of school lunches for children nationwide, as the most recognizable recall. This study further validated what many industry experts have asserted: Consumer confidence in food safety has plummeted.
According to a recent IBM study, less than 20% of consumers trust food companies to develop and sell foods that are safe and healthy.
Many industry experts have attributed the growing number of large-scale food recalls to the expanding size and complexity of the food industry supply chain. From growers and harvesters through ingredient manufacturers, intermediates, and packaging food processors—including storage and delivery by warehouses and transporters—each supply chain link actively contributes to the ultimate delivery and consumption of food products worldwide. Efficiency improvements in lean manufacturing, faster inventory turns, increased product offerings, and the sheer volume of fresh and processed food product quantities manufactured, stored, and transported, have become complicating factors in food safety incidents. Automated traceability systems have become a necessity to ensure the safety and quality of the products being stocked on the shelves.
In addition to the ever-expanding food industry supply chain, food processors must also contend with government and customer-driven compliance mandates. Since the Bioterrorism Act passed in 2002, government-imposed regulations have been increasing for food processors in major economies worldwide. Previously voluntary practices in food safety and traceability are now mandated. New policies regarding food safety continue to be enacted, as evidenced by the FDA’s Food Protection Plan, rolled out in 2008. The plan targets proactive food safety and food defense through effective prevention and intervention, as well as rapid response. It focuses on greater information sharing, increased access to production facilities, and assurance for registration and certification systems.
One-Up, One-Back Traceability
A common requirement at the core of these regulations is often called “one-up, one-back traceability.” The food processor must meet two basic expectations:
- Trace-back: For all manufactured and warehoused products intended for human consumption, the processor must maintain the source identity of all ingredients contained in every individual product lot.
- Trace-forward: For all ingredients received, the processor must be able to identify the disposition of the ingredients into all intermediate and food products for sale.
While these requirements are well placed, they pose significant challenges for food processors with multiple steps in their production processes, steps that often involve mixing and blending multiple batches, reusing incidental scrap and reworked ingredients, and managing the reality that one processing step often results in not just one, but multiple, output products. For many food processors, there is nothing “simple” about the one-up, one-back requirement.
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:
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.
Cahn is the vice president of corporate product strategy and oversees product strategy of food industry programs and enterprise resource planning at CDC Software. Reach him at email@example.com or (770) 351-9600.