Every year about one in six Americans is affected by foodborne illnesses, resulting in 128,000 hospitalizations and 3,000 deaths.[i]
Food safety is a serious matter with serious consequences. Besides the human costs, the financial losses from a food recall can be disastrous. The costs associated with the 2009 recall of peanut products from Peanut Corporation of America are believed to have topped $1 billion. More important, nine people died and hundreds became sick from eating contaminated peanut products.[ii]
As a result of these highly publicized safety alerts, consumers have become increasingly concerned about the safety of the food they eat. A study by IBM found that fewer than 20 percent of consumers trust food companies to develop and sell foods that are safe and healthy.
The study also revealed that 60 percent of consumers are concerned about the safety of food they purchase. And a strong majority (83 percent) of respondents were able to name a food product that was recalled in the past two years due to contamination or other safety concerns.[iii]
Food safety has clearly reached a tipping point in America. After going more than 70 years without a major overhaul, U.S. food safety laws were significantly amended in January of last year through the passage of the Food Safety Modernization Act (FSMA).
Effect on Smaller Food Companies
One of the positive aspects of FSMA is its heavy emphasis on the prevention of food safety incidents, including food recalls. The new law actually mirrors much of the same language found in the Hazard Analysis & Critical Control Points (HACCP) guidelines and other long-held standards such as the Global Food Safety Initiative (GFSI).
By following many of the guidelines established by these industry bodies, the government appears to be trying to catch up to methods and processes the food and beverage industry has recognized and largely followed for more than a decade.
GFSI is a collaboration among some of the world’s leading food safety experts from retailers, manufacturers and food service companies, as well as service providers associated with the food supply chain. HACCP, on the other hand, is a management system in which food safety is addressed through the analysis and control of biological, chemical and physical hazards—from raw material production, procurement and handling to manufacturing, distribution and consumption of the finished product.
Until recently, the only food companies that had to comply with HACCP protocols were USDA-regulated companies producing meat, poultry and eggs, and FDA-regulated dairy, juice and seafood producers.[iv]
Additionally, many food and beverage firms that sell to large retailers had also voluntarily implemented HACCP protocols in order to meet customer requirements or create competitive differentiation.
But with the passage of the FSMA, all FDA-registered food companies except very small businesses will be required to develop and implement HACCP-like protocols by this summer—a potentially daunting task for small and midsize regional food companies.[v]
For example, starting later this year food processors will be required to:
• Evaluate hazards that could impact food safety;
• Specify and implement prevention controls around those hazards;
• Validate that these controls will mitigate risk;
• Monitor preventive controls to ensure they are effective; and
• Maintain accurate records of the company's preventive food safety strategy[vi].
For the food manufacturing facilities that are either certified to a GFSI-recognized standard or are in the process of certification, these requirements will have minimal impact. Many of the requirements for certification are compatible with the new regulations.
Similarly, for companies that have adopted and implemented HACCP, the new requirements will probably have minimal impact in regard to the prevention of food safety problems. Most large and midsize food facilities today quite likely grew to their current size by distributing their products to one or more of the larger retailers that already require GFSI standards certification.
However, for the food facilities that are neither participating in the GFSI standards certification nor are required to participate in HACCP, the new record-keeping and track-and-trace requirements will be much more of a challenge—especially if the processor is still using a manual tracking system based on paper records and spreadsheets.
Without an automated tracking system, finding receipts, purchase orders, bills of lading and other paperwork becomes a daunting process. In fact, for any processor that has multiple steps in its production processes, a manual system makes it nearly impossible to produce the necessary information within the four-hour window the FDA already mandates.
A number of food companies will still try to do their best with their current systems and processes. This may have worked in the past and may very well continue to work in the short run. But considering the tidal wave of requirements that is about to hit the industry, status quo is no longer a viable option.
Some companies simply will not be able to weather this regulatory storm. Others will undoubtedly suffer significant losses as they struggle to pass mock recalls required by their retail customers—a practice that is becoming increasingly common.
And yet other processors will be swept up by larger companies that already have the systems, infrastructure and processes to manage the long list of growing requirements.
Supply-Chain-Wide Lot Tracing
By replacing their manual tracking systems with enterprise resource planning (ERP) technology tailored for the food and beverage industry, a number of regional small and midsize processors are already preparing for the new regulatory requirements, while also improving operational performance.
An ERP system that incorporates lot-tracing capabilities allows manufacturers to automate and integrate traceability across their supply chains, improving reaction times, reducing costs and providing a greater measure of brand protection. These systems trace all ingredients back to their source and trace forward to the distribution of all food products made and sold.
If a safety alert arises, the manufacturer can access information about the grower, supplier and date range associated with the affected lots. This can not only help prevent illness but can also keep the manufacturer from having to recall product that is perfectly safe and salable.
"No food company wants to have a food recall, but if you did get into a recall situation, obviously response time is essential," says Tony Grove, CIO of Berner Food and Beverage (www.bernerfoods.com), a midsize processor of cheeses and soy beverages.
"The quicker we can bring back, locate or find the source of the problem, the quicker we'll be able to resolve it and the greater the likelihood that costs are reduced and our brand image is protected."
Fast Information Access
It's not all about automation, however. In recall situations, the ERP system should go beyond report generation and provide the manufacturer with fast access to essential information.
"ERP systems that provide tracking and tracing can result in a wealth of traceability data," says Michael Viglas, systems administrator, Illes Seasonings & Flavors (www.illesfoods.com), a midsize processor of glazes, marinades, rubs, sauces, sauce bases and flavors.
"For example, we often have a batch of a common ingredient that is used in many different products. A detailed traceability report on these batches can typically be 400 pages or longer. If we had to sort through a report of that size to find the traceability information we're looking for, that could take hours. By having a specific traceability and recall tool as part of our ERP system, we can ‘zero in’ on what we need in only a matter of minutes. That's a critical benefit when you need accurate lot traceability at a moment's notice.”
Besides the obvious safety benefits, there is also a brand protection element at play. Retailers are increasingly requiring processors to undergo food safety audits and mock recalls that require rapid access to accurate summary product lot information with detailed supporting results.
In the event of a mock recall or a real food safety situation, the right technology enables the manufacturer to perform bidirectional lot traceability within minutes instead of hours. Producing the necessary detailed information quickly can make all the difference between earning the business and losing the account. Plus, it can engender confidence in auditors, regulators and inspectors.
"The ability to always know where our product is located and where it's going has earned us compliments by our USDA inspector," says Allyson Maurer, business systems manager, Rochester Meat Company (www.rochestermeat.com), a regional food processor serving food service companies. "He has continually been impressed by how effectively we've done our mock recalls."
For Litehouse, Inc. (www.litehousefoods.com), a regional manufacturer of refrigerated dressings, dips and sauces, tighter controls and bidirectional tracing capabilities have boosted customer confidence and competitive advantage.
"The number of retrievals and recalls that have happened over the years have caused companies to go out of business," says John F. Shaw, director of operations for Litehouse. "Our ERP system enables us to go to our customers and very quickly show them that we have the ability to do bidirectional retrievals and bidirectional recalls, if necessary."
No Longer a Luxury
ERP systems with integrated tracking and tracing technology are no longer a luxury for small and midsize food and beverage manufacturers. In an environment of tougher regulations, greater risks and increased retailer expectations, this industry-focused technology can help build customer trust and loyalty.
Jack Payne is vice president of CDC Software (www.cdcsoftware.com/en), enterprise software consultants and providers.
[ii] Peanut industry: Recall price tag $1 billion. http://www.msnbc.msn.com/id/29634279/ns/business-going_green/t/peanut-industry-recall-price-tag-billion/#.T0UV8MpXQ7s
[iii] Less Than 20% Of Consumers Trust Food They Buy Is Safe and Healthy, IBM Survey Reveals. http://www-03.ibm.com/press/us/en/pressrelease/27817.wss
[iv] Frequently Asked Questions about the FSMA. http://www.fda.gov/Food/FoodSafety/FSMA/ucm247559.htm
[v] Stevens, Shawn. "What Does The New Food Safety Modernization Act Mean To Your Business?" http://www.defendingfoodsafety.com/2011/01/articles/food-safety-news/what-does-the-new-food-safety-modernization-act-mean-to-your-business/
[vi] Acheson, David. "FSMA and Preventive Controls: Implications for Industry Part 1." http://www.leavittpartnersblog.com/fsma-and-preventive-controls-implications-for-industry-part-1-10002968