In June 2002, national manufacturer ConAgra Beef Co. voluntarily recalled more than 354,000 pounds of ground beef – 177 tons – that may have been contaminated with the E. coli bacteria. Within 20 days, USDA requested that the company further expand its recall to include 19 million pounds of product. Since ConAgra could not readily trace and identify the stores that bought the meat or the brands under which it was sold, it took days to pull all of the recalled product. Public awareness quickly grew of ConAgra’s inability to track its products, commensurately decreasing the company’s profits and eventually driving the brand to exit the meat manufacturing business.
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The result of ConAgra’s shortcomings is becoming more of a reality in the marketplace as manufacturers continually battle the possibilities of product concerns such as mad cow disease or terrorism threats like those of July 2005’s milk bioterrorism scare. Manufacturers are continually forced to the line by their suppliers, customers and industry regulators to ensure that their offerings are both high-quality and safe.
To address these concerns up and down the supply chain, the food processing industry is increasingly finding answers with automated traceability systems. Automated traceability solutions are used to track product, streamline schedules, reduce operating costs and improve customer service. For forward-thinking companies, automated traceability technology is an integral part of end-to-end operations, from suppliers to customers.
Using traceability as a business tool, food processors can effectively position themselves to answer some of the industry’s toughest challenges and support their brands throughout the marketplace.
Throughout the past few years, automated traceability has started to make its name in the food processing industry. With regulatory and customer demands becoming more stringent, traceability solutions offer tremendous benefits, including:
Regulatory Compliance: As a result of the Sept. 11th terrorist attacks , government-imposed regulations set forth by organizations such as FDA and European Union are more stringent than ever. While the primary intent of these regulations is to enable rapid containment in the event of an intentional contamination of the food supply, they apply equally in the case of accidental contamination. A common requirement at the core of these regulations is often stated as “one-up, one-back traceability.” This embodies two basic expectations of the food processor: Tracking the source identity of all the ingredients contained in a product and identifying the disposition of the ingredients in all intermediate and finished products.
Brand Protection: While retailers, food service organizations and marketers of branded products invest time and money to promote brands in the marketplace, they are also becoming increasingly demanding of their suppliers. Suppliers are now expected to prove that they can consistently deliver high-quality products to ensure they do not put their customers’ brands at risk. In light of recent high-profile food contamination events in the news, many food processors now find themselves measured on their ability to help their customers protect their brands and reputations. In general, the demands for brand protection begin at points closest to consumers in the food chain and cascade back to the food source. Every supplier in the food chain ultimately feels the ripple-effect of the need for brand protection originating at the point of sale to the consumer. That is because every participant in the supply chain assumes the risks of poor quality control, regardless of which partner in the supply chain may cause a problem.
Mock Recalls: One of the increasingly common ways that food processors are being tested for brand protection is through food safety audits and mock recalls. Many processors that supply the national retail chains are now conducting mock recalls on a quarterly basis at the request of the retailers. For a food processor, the cost of a failed mock recall can be catastrophic. Compared to the initial warnings that might be imposed by FDA, a customer is not required to provide any warnings of dissatisfaction. A customer may switch to another supplier based on the failure of even one mock recall. For food processors, the risk of losing a customer due to a failed mock recall is most pronounced when the customer’s investment in brand value is highest.
Traceability Options and Solutions
For many food processors, their current challenge in choosing a traceability solution is to identify an automated approach that is both cost-effective and a good fit for their current business operations.
The most widely used “systems” for traceability in the food industry are low-cost and relatively simple. Conversely, they are also high in risk, affording the least amount of protection. These systems are essentially manual, relying on paper records and spreadsheets. These systems are also largely based on financial data such as purchase receipts for raw materials and invoices for finished safety margins in retrieval will be increased. The direct and indirect costs will be higher for all parties involved.
Confidence: Without the necessary speed and accuracy, food processors cannot gain the confidence of their customers, auditors or regulatory inspectors. This confidence is necessary to maintain prices and a competitive advantage.
Many processors rely on their process line control (PLC) systems and manufacturing execution systems (MES) to support detailed traceability requirements. These systems generally provide a wealth of detailed operational data for the manufacturing process. While this data can be an important component in a mock recall scenario, it is limited in scope and therefore limited in its ability to support one-up/one-back traceability requirements. Critical information not addressed by these systems includes purchasing and receiving, inventory management, transportation and customer records. The inherent risk is obvious: Records provided during a mock recall or a regulatory audit must be complete. Any gaps not filled by detailed records in the one-up/one-back chain, will result in exposure to risk for both the processor and their customers. As with manual systems, customer confidence will be compromised.
An Operational System of Record
A new concept is becoming popular with food processors of all sizes and at all positions in the food chain. Much like they already use their accounting systems as their financial system of record, industry-leading food processors are utilizing enterprise resource planning (ERP) systems as their operational system of record. Serving as an operational system of record, incoming materials, manufacturing operations, inventory management and customer shipments are all traced in a manner similar to that of financial systems. The system can also be used to standardize and streamline food safety audits and mock recalls. With an operational system of record, the advantages over other approaches can be significant:
Instant, Thorough Traceability: An operational system of record provides end-to-end traceability for every action that can impact food, starting with the orders placed with suppliers and ending with receipt of finished goods by customers. 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 finished products. For instance, if a processor receives a notice about possible contamination of an ingredient, it should be able to immediately identify all customer orders that included that ingredient.
Confidence: With the instant, thorough traceability made possible with an operational system of record, food processors can gain the confidence of their customers, auditors and regulatory inspectors. By establishing the confidence of these constituents, processors can establish a competitive advantage that can add real, measurable value to the business.
Improved Bottom-line Performance: With an integrated operational system of record, food processors also have the ability to improve financial performance. Detailed visibility into product-line costs and profitability, manufacturing efficiency, inventory spoilage and many other operational metrics can expose hidden opportunities for improvement. Additionally, improvements in forecasting, scheduling and order fulfillment can have a positive impact on customer service. The same operational system of record that addresses the requirement of traceability can also be used to improve bottom-line profitability and competitiveness.
Over the past few years, automated traceability has become a virtual necessity to reduce industry, regulatory and customer pressures. By selecting a traceability solution with proven success in your market, you can turn implementation into a valuable tool, not an arduous part of the company’s overhead.
Beth Berndt is director of industry solutions for consumer products for Ross Systems. Reach her at 770-351-9600 or firstname.lastname@example.org.