Besides the ongoing (seemingly never-ending) presidential campaign and celebrity scandals/gossip, food safety is very much in the news. Indeed, incidents of outbreaks, contamination, product recalls and whatnot flood TV channels as breaking news every now and then. Consumers, governments and the various members of the food supply chain are rightly concerned about food safety, and there has been increasing pressure for food and consumer product goods (CPG) supply chain traceability, in a pervasive manner.
Consumers and governments (both becoming ever-more educated and informed on one side, but still confused on the other side) are concerned about the safety of the food supply and protecting the public. While demanding more product choice and delivery speed, consumers have been voicing fears over food safety in the wake of recent salmonella outbreaks (remember the contaminated spinach or major chocolate recall cases?), cases of pet deaths due to poisonous imported pet food, lead-tainted imported children’s toys, anti-freeze tainted imported toothpaste, and so on…
The ever-longer and global food supply chain (often called “from farm to fork”) includes crop farmers/growers (utilizing fertilizers and pesticides), feed processors, livestock farmers (that might feed and treat animals accordingly [or not]), manufacturers (primary and value-add food processors), packaging and labeling sites, distributors, retailers, and food service companies (restaurants and cafeterias).
These supply chain member companies have to be concerned about the consumer safety issues, plus the potential negative and even fatal impact on their brands and businesses. For instance, high-and-mighty retailers customarily want ever higher service levels from suppliers (without any negative publicity), while the overall industry itself wants to protect “brand” value and reduce recall costs.
Olin Thompson, a former regular TEC contributor (e.g., see the Food Safety, Government Regulations, and Brand Protection article), editor at Food Engineering Magazine and currently Vice President (VP) of Industry Strategy at Lawson Software, tells us that all this media attention on food safety has had a real effect on any potential impact of a food safety incident. Increased public awareness actually helps minimize any potential negative impact on the consumer. People are more aware of the danger and the attention of the media helps communicate and alert the public. For the food supply chain, that is good news.
However, the media has also increased the negative impact on the reputation of supplier companies and brands that have a problem. One food safety incident, communicated through the media, can have a fatal impact on a brand or even a company. Food industry executives are painfully aware of their obligations to the public and to their shareholders when it comes to food safety.
Under European Union (EU) Regulation 178/2002 – Article 18, “traceability” is defined as the ability to trace and follow a food, feed, and food producing animal substance through all stages of production, processing and distribution. This has imposed major challenges on the food and beverage (F&B) industries, impacting all food and feed business operators including primary producers.
The regulation relies on a “one up, one down” approach, meaning systems and procedures must be in place to identify from whom and to whom these products have been supplied. Both EU food law and the Anti Bioterrorism Act in the United States (US) from 2002 consider traceability as being able to trace a product one step backwards and one step forwards.
Further, the revised General Product Safety Directive (GPSD) (2001/95/EC) ensures that food products can be traced all the way to their point of production. Last but not least, International Standards Organization (ISO) Regulation no. 8402 defines it as the ability to trace the history, application or location of an entity by means of recorded identifications.
Thompson suggests that the food supply chain needs to be concerned about the following “Four P’s”:
In this uncertain world, even the best of automated traceability systems will not eliminate problems caused by food contamination, outbreaks of disease or even accidental mishandling of food products. Accurate transparent traceability, however, effectively reduces risk exposure by enabling food producers to identify, isolate and correct the problem quickly and efficiently. As a result, public health is protected, consumers are reassured, and the financial impact of such incidents can be minimized.
But who gets the blame when a food safety incident occurs? All members of the food supply chain are not treated equally. No matter where in the food supply chain an incident occurs, the media attention will be focused on any consumer brand or retailer associated with the problem. Companies who have branded products are especially at risk: the stronger the brand, the more negative the impact. The media will write more about a well-known brand, people will remember the incident longer with a renowned brand.
These companies are more at risk when it comes to an impact on their business and shareholder values than others. Since the impact can be so great, these companies should consider preparing for problems anywhere in the supply chain, taking responsibility for the tracking and tracing data needed to proactively respond to a problem. Anywhere in the supply chain, from farm to fork, a food safety incident can have a major impact on a company’s brand and even its very existence.
Are all food companies and types of food at equal risk? No, some types of products are naturally more vulnerable than others. Meats (beef, poultry, pork, etc.) including seafood (fish and aquaculture) are most prone to problems due to extreme perishability, contamination and disease spreading risk, followed by fruits and vegetables (including animal feed) and dairy products.
An interesting (and likely lesser-known) fact: as a percentage of incident per servings, bean sprouts are the most dangerous food we eat, since they are grown in a warm and damp environment, just like a petri dish.
Some highly processed foods are of course less vulnerable. To be fair, there are many CPG companies that already have traceability systems in place, and moreover, there are lots of paper-based systems that may be adequate here.
Opportunity (Besides Costs) for Visionary Companies
One school of thought is that food traceability regulations could bring about opportunity besides costs (and a pain in the neck), especially since early 2007, when the EU legislation started requiring traceability of food and beverage (F&B) products. Sure, consumers will not pay for traceability costs, but the legislation does provide opportunities for manufacturers generally to address end-to-end supply chain visibility, plant data collection and so on, and get better real-time performance measurements in place. F&B manufacturers have a choice: doing nothing, doing the minimum to comply, or exploiting traceability legislation to address many supply chain issues.
For one, accessing emerging market entries such as China and a number of developing countries highlight new challenges and risks for food safety for exports and imports. As seen by the abovementioned negative examples, the Chinese food and CPG industries and industry regulators are not yet able to keep up with the requirements and standards of other countries and their retailers, especially in the US and EU.
Lack of proven traceability in the food value chain can be used to put up trade barriers and deny market access. The banning of Norwegian salmon in Russia, British beef in continental Europe (and elsewhere), Indian grapes in the EU market, and American beef in Japan are just a few examples. GrapeNet, a governmental initiative in India, was set up in response to the ban to assure access to the EU market.
A few years ago, the American beef industry – reportedly a two billion US dollar industry – was shut down practically overnight for two years because of Japan’s refusal to accept imported beef products from the US due to health fears. Arguably, with no mechanism for proving to the Japanese authorities that its product was safe, and with no solution to
do so, the trade route was shut-off.
But other countries like New Zealand and South Africa benefited from the situation when the price of beef rocketed. Not only did they deliver the right information (assurances) to the market, they also took advantage of the opportunity and increased their market share.
Therefore, growing consumer demand for information and accompanying brand differentiation makes tracing capability a golden opportunity to build business differentiators. If a company can utilize value-added traceability capabilities to demonstrate its role in the product lifecycle and back up premium product claims (e.g., origin, organic, fair trade, free from, etc.), it will be in a position to offer value-added information about the product and enhance brand equity, reputation and margins.
Moreover, if a food incident does occur, the companies involved who are in possession of a traceability system can much more quickly take responsibility or prove their innocence, thereby saving money and face. Some forward thinking companies use traceability to create evidence or require their approved suppliers to prove that certain things happened in the production process.
One example could be a farmer that is able to document that no hormones, pesticides or antibiotics were used in their product. The ability to prove these attributes builds trust and consumer confidence in the brand. Smart F&B manufacturers will use product safety as competitive advantage to promote their abilities to retailers.
As a recap, there are basically three key requirements for traceability systems, whereby manufacturers must be able to:
There are numerous existing and emerging supply chain management (SCM) solutions, at several levels, which F&B (and other manufacturers for that matter) can apply without reinventing the wheel. Radio Frequency Identification (RFID) technology, for instance, has undergone considerable testing, and constantly improved support software from the major enterprise resource planning (ERP) and SCM vendors will assure its use. It is also the case that issues around traceability have been publicized and resolved for years, e.g., in the pharmaceuticals and aerospace and defense (A&D) sectors.
In fact, it might be strange that the food and beverage (F&B) segment is only now catching up with traceability, considering the “we are what we eat” adage. One reason thereof could lie in the fact that inside even the most modern food companies we will still find several information technology (IT) systems supporting the needs of different parts of the organization. Many will be using an ERP solution like Lawson M3 (formerly Intentia Movex) to manage most of the needs of the business.
Still, many other disparate systems are required such as product lifecycle management (PLM), enterprise asset management (EAM), manufacturing execution systems (MES)/laboratory information management systems (LIMS), warehousing management systems (WMS), supplier specifications, Hazard Analysis and Critical Control Point (HACCP) systems or other departmental solutions.
All these point solutions might be doing a terrific job, but probably with a minimal level of integration, and little transparency of information or easy access to all related information on a lot or batch from the complete set of information held inside the company. As a worst case scenario, some companies still using basic paperwork for key pieces of traceability information.
That’s to say that, in the past, food manufacturers, processors, distributors and retailers had to typically turn to a variety of point IT solutions to solve specific, and usually localized, business problems. Businesses have since become more complex and data more voluminous, and companies are thus increasingly turning to integrated enterprise software systems to tie together their main business processes and transactions.
But, as said earlier on, in most companies and certainly at the supply chain (or partial supply chain) level, islands of key information still exist, including details from the LIMS system, data from the MES area, and information from the transporter. The back-office ERP system could never possibly hold all of this information.
Also, much energy has been invested in technology for “capturing” data (e.g., RFID, bar coding, and LIMS) rather than a method for “sharing” information. However, a new generation of Web browser-based traceability applications are being developed that enable this detailed interrogation of the data supplied by “capture” systems.
Part II of this blog post will introduce the Lawson M3 Trace Engine as one such stand-alone solution. Your views, comments, opinions, etc. about the abovementioned food safety issues are welcome in the meantime.
[…] Part I of this blog post introduced the burning issues of food safety and the ensuing need for trace…. To the end of providing entire food supply chain traceability and information visibility, mid-March, during its CUE 2008 annual user conference, Lawson Software announced the availability of Lawson M3 Trace Engine 3.0, the first version offered within the US market. […]