The volume and severity of food recalls in recent years are enough to scare any consumer away from grocery aisles and frighten any food manufacturer into thinking its product might be next.
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Explore this issueOctober/November 2009
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The industry got a taste of that reality this year with the massive recall of Salmonella-contaminated peanut products made from foods manufactured by Peanut Corporation of America (PCA). By March, the recall included more than 3,200 peanut products, with the number rising daily. Then, just as the dust seemed to settle, a separate recall of Salmonella-tainted pistachio products began.
Of course, recalls aren’t unique to the nut industry. In the last quarter of 2008, the U.S. Food and Drug Administration’s Web site listed 33 Class I food recalls and safety alerts—those posing the most serious health risks to consumers—and the U.S. Department of Agriculture reported 18 recalls related to meat and poultry. Some of those highly publicized recalls included cocoa with possible melamine contamination, tomato sauce with labels that did not declare milk ingredients, and several beef products with possible Escherichia coli contamination.
These cases should set off an internal warning alarm for any food industry executive. Indeed, AMR Research’s 2008 survey of 251 food and beverage supply chain decision makers in the United States and Europe showed that more than half participated in a health and safety recall in 2007. And these incidents came at a high cost: More than half the recalls resulted in write-offs exceeding $10 million.
On top of that, companies face a risk of lingering consumer backlash from recalls. According to separate surveys conducted by Deloitte Consulting LLP and Gallup Inc. in 2008, about 60% of Americans have avoided certain foods or brands because of a recall. By February 2009, sales of peanut butter were down 25% for all brands, even those not involved with the recall. Contributing to consumer and industry unrest is the fact that many recalls are slow to get started, take a long time to perform, and produce incomplete results: AMR’s respondents said it takes an average of 14 days to discover the need for a recall and 20 more days to enact it. That kind of recall lag time, and the genesis of some food recalls, can often be associated with the technology used in the manufacture of food products. Manufacturers using multiple software solutions to manage their business may be at the greatest risk for inefficient recalls. This article explains the recall dangers related to that technology setting, and it explores a strategy for solving those problems—so your company won’t be part of the latest recall statistics.
House of Cards
Many recall problems stem from the use of multiple software systems and/or manual processes for managing a food manufacturing business. When you have one program that handles recipes, one for sales, another for accounting, and paper-based systems for inventory and production, you have no way to establish and maintain the process controls essential to product safety and traceability.
Take production, for example. A worker goes into your warehouse—we’ll call this person Mike—and pulls the inventory items listed on the batch ticket. He writes the lot numbers on the ticket and sends the items to production. The problem is, Mike is only human, and he’s bound to make mistakes now and again. And, with this system, you can’t stop him from pulling lot 510 when he’s supposed to pull lot 501. Unfortunately, if his slipup goes unnoticed, it could lead to a major recall.
Lacking effective ways to generate labels and manage expiration dates also puts you at risk for recalls. With non-integrated systems, Mike has to look up quality control values and batch information in one system before turning to a separate program to create labels, which means he could make transcription errors or omissions. Similarly, Mike has to search several systems to cross-reference customer, product, and inventory data for managing expiration dates, particularly if different customers have different expiration requirements for the same products. If Mike makes even one mistake, you could be stuck with spoiled inventory or returned and recalled products.
In the event you can’t avoid a recall—like many of the companies who received PCA peanut products that they thought were safe—non-integrated systems can slow and complicate the process. For example, let’s say Mike always pulls all the correct lots for production but sometimes writes down the wrong lot numbers. When your supplier calls and says you have to recall certain lots, your records are muddled by Mike’s mistakes. And if Mike lets your inventory go negative—by shipping products before he enters the materials into your software—he’s shipping from l ots that don’t even exist. He’d have to pull several months of recorded batch tickets around the shipment date to find all the affected products, wasting time that’s needed to communicate the recall to customers and end users.
Mike can avoid these and other mistakes that cause or protract product recalls if all your company’s business processes—including lot tracking, quality control, labeling, recipe management, purchasing, sales, production, and accounting—are integrated into one food-specific system.
Point A to B to C
One of the most important ingredients for achieving product safety and traceability is a strict lot control and tracking process. Combined with an integrated food manufacturing software system, it can help you prevent the common errors that cause product recalls, and, in the event a recall is unavoidable, help you trace items with surprising speed. For one food manufacturer, La Tortilla Factory in Santa Rosa, Calif., an integrated ERP system with built-in lot tracking reduced by half the amount of time the company spent tracing raw materials. “In a matter of hours we were able to trace back to the source of ingredients,” said Stan Mead, CEO of La Tortilla Factory.
Barcode-based technology, as part of a fully integrated software system, allows food manufacturers like La Tortilla Factory to achieve that level of lot control and tracking efficiency. This kind of system lets Mike generate barcode labels as soon as he receives purchase orders. Then, using hand-held scanners, he enters lot data into the system and traces items as they move through every part of your operation, including inventory, production, and shipment. This way, he can’t make transcription or data entry errors that might complicate lot tracking during a recall. Barcoded pick lists and batch tickets also help him prevent accidental substitutions that could ruin or taint a batch: The scanners will alert him if he scans the bar code on lot 510 when he was supposed to pull lot 501.
The software also allows you to establish process controls to keep Mike from allowing negative inventory—by preventing him from filling an order that includes items not listed in inventory, he is forced to follow the process of receiving, using, and shipping materials to ensure he creates traceable, electronic lot histories.
In the event that you still need to trace or recall a lot, you can view up-to-date lot histories at any moment. You can pull a lot tracking report that shows you everywhere a lot is or has been, stamped by date, time, and signature. This report should include everything from the original purchase order to jobs that include the lot, products made from it, shipments that contain it, and any amount of that item still on hand.
The best part is that pulling that report takes only a few clicks in an integrated system, as opposed to the several days or weeks of research you would have to invest with disjoined systems and manual processes.
Best if Used By
To ensure product safety, an effective expiration date management system is also essential. The more products, ingredients, and customers you have, the more difficult it is for Mike to keep track of shelf life, particularly if you have customers with different requirements for the same products.
With an integrated system that uses barcodes, you can automate your lot selection process based on picking rules, such as LIFO (last in, first out), FIFO (first in, first out), or FEFO (first expire, first out). You should be able to configure the system to your needs so that it prompts Mike to pull the appropriate lots for each production job based on item shelf life and any customer-specific requirements you’ve entered.
Configuring refers to adapting the system to your business without altering the software’s basic programming code. Configurability is preferable to customization when it comes to expiration date management—and all other business processes—because it requires less time, labor, and cost, both for initial system implementation and testing, and for managing updates throughout the software’s lifecycle as operating systems and business requirements evolve.
Configuration options should let you establish alerts for lots that are nearing expiration so that the appropriate action can be taken. Also, if Mike tries to pull an expired lot from inventory, the barcode scanners will alert him so that he avoids ruining a batch.
The last key element to improving product safety and minimizing your recall risk is label generation. Incorrect labeling, such as the tomato sauce that fails to mention the inclusion of milk on the label, is a frequent source of recalls for otherwise high-quality products. According to data analyses by industry consultancy Reading Scientific Services Limited in the United Kingdom, about half the food recalls in the U.S. and U.K. in 2008 were due to packaging that failed to mention the presence of allergens.
Labeling mistakes are minimized in a fully integrated system. To start, the software should allow you to configure labels to your specifications. By arranging data fields, logos, and other characters to your design requirements, you establish label templates without software customization. Then, because the system already stores all your recipe, lot, expiration date, batch, and quality control data, it can automatically populate the proper label template with the proper data. Mike simply clicks the “print labels” button. And, with all the label data stored in one spot, making an adjustment to a calculation or an ingredient in your formula automatically drives through to your label. Your customers can clearly see that a new batch of sauce contains an allergen, for example, whereas the original version of the formula did not.
The last thing you want is your company’s name plastered all over the news because your product caused consumer illnesses. It hurts your customers, your brand, and your bottom line. Fortunately, you don’t have to become a recall statistic. Implementing business software that’s designed for the food industry and integrates quality control, lot tracking, and labeling requirements with the rest of your business processes in a single system can help you respond to tainted batches with speed and effectiveness—or avoid recalls all together.
Deakins is the President of Deacom Inc., the producer of an integrated accounting and ERP software system for food and beverage manufacturers. Reach him at email@example.com or visit http://www.deacom.net