Is Your Supply Chain Broken? 5 Questions CEOs Should Ask

Is your supply chain broken or about to break?

Is your supply chain broken or about to break?

A recent story in Industry Week reiterates the importance that C-level executives need to monitor and manage their supply chains.  The story, written by two supply chain experts at Wipro Consulting, details five questions that CEOs should be asking about the condition and status of their supply chains – especially in light of recent news items such as the “horsegate” problem in Europe relating to horsemeat being included in beef products. The authors raise the question of whether or not the scale of the supply chain might in and of itself have been a contributing factor in quality control failures.

One key point they make: if you think quality in a supply chain is just having the right materials in the right place at the right time, you’re not thinking broadly enough. Supply chain management must also focus on the quality of the materials, the accuracy and content value in the information shared between supplier and customer, and the accuracy and timeliness in the financial transactions.

They suggest that it makes financial sense to proactively manage your supply chain to make sure it is designed to be successful and propose five questions that every CEO should ask:

1. Is quality built into your supply chain, or do inspection and correction occur after the fact?

2. Is supply chain management a strategic senior level position in your organization or is it a part of an operations activity?

3. Is the movement of information and money as critical in your supply chain as the movement of materials? In other words, does it take longer to create paperwork and process payments than it takes to deliver the goods?

4. Do you have a built-in change management process that constantly reviews the elements of your supply chain and looks for opportunities to improve quality and operational efficiency—or do your systems, policies and procedures block improvement?

5. Does your supply chain minimize the amount of touches and the touch time in supply chain transactions, so as to reduce the number of potential failure points?

All too often, we at Intelleflex see supply chains (especially cold chains) that are primarily reactive. Information about the condition of a product that has spoiled or been exposed to adverse conditions is available only after-the-fact when it is too late to take corrective action. Additionally, information is not typically easily shared between supply chain partners and too much of the record keeping is paper-based which slows down supply chain operations and can introduce costly errors.

The article proposes some answers to these questions stating that the issues relate to culture, capability, flexibility, capacity and technology, systems and processes, repeatability and reliability, and collaboration.

Solutions that provide the ability to automatically capture and collect information electronically about products as they move through the supply chain is essential.  But, equally important is the ability to access, share and act upon that data. RFID and cloud-based data services (such as ZEST Data Services) can help make this happen and not only improve supply chain operations but provide valuable information to supply chain executives that provides the ability to proactively manage an intelligent supply chain.

The article concludes with some wise advice: It shouldn’t take a high-profile quality control failure for CEOs to take a fresh look at what’s happening in their own organization since a supply chain failure of any kind could devastate or destroy profitability. Start being proactive by asking the five key questions and ensuring that your supply chain organization has a culture of collaboration, responsiveness and constant improvement.

You can read the entire Industry Week article here.

Kevin Payne
Senior Director of Marketing

Big Data in the Supply Chain? Why?

There's big benefits associated with Big Data

There’s big benefits associated with Big Data

Big Data is one of the hottest topics in business today. Companies in the financial, insurance, retail and a host of other industries are quickly realizing that the vast amounts of data being captured and collected can be of incredible strategic value to their business operations. The same holds true in the cold supply chain where literally hundreds of thousands of temperature, condition, waypoint and production data points can be collected for a single shipment.

But what can you do with this data and how do you make sense of it?

Making sense of it requires the ability to sift through the data to identify areas that require specific (and occasionally) immediate attention and essentially archiving and analyzing the rest of the data later to spot macro trends. Fortunately that technology exists to do this. When you identify events or issues that require immediate attention you can focus supply chain personnel’s attention directly on addressing those issues and event. For example, if a pallet of fruit or meat was left sitting on a loading dock, a temperature monitor can identify the issue and, via a reader connected to a cloud-based data service, can then notify a dock worker to collect that pallet and re-chill it immediately resulting in less waste, better quality and cost savings.

Where does the supply chain stand on Big Data?

EyeForTransport, a UK-based provider of business intelligence and C-level networking for the transport, logistics and supply chain industry, recently published their Supply Chain Big Data Report for 2013 (you can get a copy by filling out a form here), along with an accompanying infographic. The report, based on their survey done in February of this year with companies worldwide, reveals some interesting insights.

  • 84% of supply chain executives that think big data will have an impact on their company’s performance.
  • Over 61% of the supply chain executives said they were currently implementing 27.4% or considering (33.7%) implementing a big data analytics project.
  • When asked to rank leaders in the field, nearly 45% cited retailers and over 22% cited consumer goods manufacturers.

Why do so many supply chain executives think so much of Big Data? The top answer: to increase supply chain visibility.  Supply chain visibility means reducing costs (and improving efficiencies).  Respondents also said that they want to move away from making decisions using historical data and move towards real-time decision making.

One last interesting take-away: According to the EyeForTransport survey, of those executives currently implementing Big Data solutions, two thirds of those surveyed expect to see ROI on the project within 12 months.  That’s impressive. There’s that much value in the data and having the ability to improve supply chain visibility and real-time decision making.

Kevin Payne
Senior Director of Marketing

FSMA: The Movie

Leavitt Partners' Jennifer McEntire explains the recent FDA report on FSMA pilots in a short video...well worth the watch!

Leavitt Partners’ Jennifer McEntire explains the recent FDA report on FSMA pilots in a short video

Yesterday I blogged about the FDA’s new 334 page Food Safety Modernization Act Pilot Study Report that was written by the Institute of Food Technologists and Leavitt Partners.  After I published the blog post, I was corresponding with the very helpful Jennifer McEntire of Leavitt Partners who co-authored this report.  I was complimenting her on the report but said I would probably wait “until the movie version came out” (parroting the modern student’s refrain of “why read ‘Gone with the Wind’ when you can watch the movie much more quickly).

Much to my surprise, Jennifer immediately sent me back a link to a three and a half minute video she recorded explaining the report.  Sure, it doesn’t have all of the detail covered in the 334 page document but, for most of us, it’s a great “Cliff Notes” version.  You can watch the video here.

Thanks to Jennifer and Leavitt Partners for sharing this information with all of us.

PS: On March 7, Jennifer McEntire published another excellent newsletter/article on this topic which can be found here.  It also includes a link to an upcoming webinar on the topic.

Kevin Payne
Senior Director of Marketing

FDA Publishes Report on Product Traceability Pilots

Earlier today, the FDA issued a report on two product traceability pilot projects that were undertaken as a part of the Food Safety Modernization Act (FSMA), signed into law in January, 2011.  This milestone demonstrates further progress in moving FSMA forward.

Report on Pilot Studies

Report on Pilot Studies

You can download the entire 334 page document titled Pilot Projects for Improving Product Tracing along the Food Supply System – Final Report here. It was prepared by Jennifer McEntire of Leavitt Partners and Tejas Bhatt of the Institute of Food Technologists. According to the executive summary of the report (which is three pages long):

In September 2011, the U.S. Food and Drug Administration (FDA) asked the Institute of Food Technologists (IFT) to execute product tracing pilots as described in Section 204 of the FDA Food Safety Modernization Act (FSMA). IFT collaborated with representatives from more than 100 organizations—including the U.S. Department of Agriculture, state departments of agriculture and public health, industry, consumer groups, and not-for-profit organizations—to implement the pilots. To complete the task, IFT conducted two product tracing pilots of foods (including ingredients) that had been implicated in food-borne illness outbreaks between 2005 and 2010, assessed the costs and benefits of efficient and effective methods for tracking the designated foods, and determined the feasibility of such methodologies (including the use of technology) being adopted by different sectors of the food industry. One food pilot focused on the tracing of chicken, peanuts, and spices in processed foods; the other pilot focused on the tracing of tomatoes.

The objectives of the pilot projects were 1) to identify and gather information on methods to improve product tracing of foods in the supply chain, and 2) to explore and evaluate methods to rapidly and effectively identify the recipient of food to prevent or mitigate a food-borne illness outbreak and to address credible threats of serious adverse health consequences or death to humans or animals as a result of such food being adulterated or mis-branded.

The recommendations that the report makes are as follows:

  1. From an overarching perspective, IFT recommends that FDA establish a uniform set of record keeping requirements for all FDA-regulated foods and not permit exemptions to record keeping requirements based on risk classification.
  2. FDA should require firms that manufacture, process, pack, transport, distribute, receive, hold, or import food to identify and maintain records of CTEs and KDEs as determined by FDA.
  3. Each member of the food supply chain should be required to develop, document, and exercise a product tracing plan.
  4. FDA should encourage current industry-led initiatives and issue an Advance Notice of Proposed Rulemaking or use other similar mechanisms to seek stakeholder input.
  5. FDA should clearly and more consistently articulate and communicate to industry the information it needs to conduct product tracing investigations.
  6. FDA should develop standardized electronic mechanisms for the reporting and acquiring of CTEs and KDEs during product tracing investigations.
  7. FDA should accept summarized CTE and KDE data that are submitted through standardized reporting mechanisms and initiate investigations based on such data.
  8. If available, FDA should request more than one level of tracing data.
  9. FDA should consider adopting a technology platform that would allow efficient aggregation and analysis of data submitted in response to a request from regulatory officials. The technology platform should be accessible to other regulatory entities
  10. FDA should coordinate trace-back investigations and develop response protocols between state and local health and regulatory agencies, using existing commissioning and credentialing processes. In addition, FDA should formalize the use of industry subject matter experts in product tracing investigations.

Conclusion
In summary, IFT found that there are several areas (such as uniformity and standardization, improved record keeping, enhanced planning and preparedness, better coordination and communication, and the use of technology) in which industry improvements and enhancements to FDA’s processes would enable trace-backs and trace-forwards to occur more rapidly. There was a range of costs associated with improving product tracing capabilities for certain sectors of the industry based on the specific technologies used to achieve the data capture and communication objectives. Case studies demonstrated the range of public health benefits from reduction in illnesses from improved product tracing. The recommendations outlined in this final report will enable FDA to conduct more rapid and effective investigations during food-borne illness outbreaks and other product tracing investigations, significantly enhancing protection of public health.

No doubt, it will take some time for the industry to digest the entire document but it’s good progress that the FDA, under FSMA guidelines, is moving the process forward and that track-and-trace will now get more focus and attention.

Kevin Payne
Senior Director of Marketing

Monetizing the Risks of Food Safety and Traceability

Before you eat that...

Before you eat that…

Yum! Brands, owners of KFC, Taco Bell and Pizza Hut is suffering a significant brand hit due to issues associated with chicken suppliers in China who delivered product to local KFC restaurants that was apparently tainted with too much antibiotics. According to Yum! Brands, it has terminated its relationship with the supplier (Liuhe Group) and will work with others to phase out smaller suppliers and put a more stringent emphasis on food safety. The damage, however, was done…to the bottom line.

We’ve talked frequently with prospective customers, journalists and analysts about the potential costs of a food safety/recall issue on a major global brand.  This story that appeared on the Bloomberg website on February 25 documents some of those costs:

  • Sales at locations in China open at least 12 months fell 6% in the fourth quarter, the first quarterly drop in three years.
  • Comparable store sales in China may decline 25% in the first quarter.
  • Yum stock on the New York Stock Exchange fell after the news from  $66.32 to $64.35 before rebounding slightly.
  • The stock value has dropped 2.5% this year while the S&P Restaurants index gained 4.2%.

It’s hard to say what the long term impact will be for KFC in China and the Yum! Brands family of companies worldwide but the point is clear: Sure, this happened in China but the news is now global. Would you think twice about going into a KFC in California or New York? I admit, I would wonder. If you’re a global, national or even regional brand, you simply must think about this because it could happen to you.

This is yet another example of the critical importance of being able to monitor and manage the cold supply chain. In this case, the product was apparently adulterated with antibiotics. What if it had been salmonella? Listeria?  There are simply too many suppliers, too many linkages from production to retail to rely on antiquated monitoring systems and an incomplete view of your supply chain. You need the data to protect yourself, your reputation and your customers.  Electronic data records captured by tracking the product from the supplier through every leg of the supply chain provides not only information about the supplier but also about proper handling that helps ensure food safety.

It will be interested to see what the long term impacts are…not only on Yum but for the other major global brands who, hopefully, look at this news and take measures to ensure that the next story isn’t about them.

PS: On February 27, World Poultry announced that KFC has cut more than 1,000 farms from its supplier network in China in a measure to ensure food safety following the recent tainted chicken scandal.

Kevin Payne
Senior Director of Marketing

 

Recalls, Grocers, FSMA and the Guilty Parties

Earlier this week, several publications including The USA Today and The Wall Street Journal reported on findings from the Centers for Disease Control relating to food safety which detailed that leafy greens such as lettuce, spinach and kale accounted are the guiltiest parties a caused the most food-borne illnesses nationwide from 1998 through 2008. Dairy products accounted for the most hospitalizations. The most deaths were linked to poultry. The study looked at 4,887 outbreaks that caused 128,269 illnesses, hospitalizations and deaths when the food that caused them was known or suspected.

Sure, shopping for lettuce can be fun, but is it safe?

Sure, shopping for lettuce can be fun,
but is it safe?

According to Patricia Griffin a food-borne disease expert at the CDC who was the senior author of the report the “The study isn’t meant to be a “risk of illness per serving” list for consumers. The statistics are meant to help regulators and the food industry target efforts to improve the safety of food.” She adds that “The vast majority of meals are safe, so don’t let the numbers for leafy greens keep you from eating vegetables.”

What does this have to do with retail grocers and the pending Food Safety Modernization Act (FSMA) regulations?

Well, most of us purchase these products at our favorite grocery store. Simply put, we trust that our local grocer has taken good care to ensure that the food he or she is selling to us has been properly washed, dried, packaged, handled and stored and that it is safe to eat and of good quality. We, as consumers, have no way of ensuring this ourselves. This trust relationship is critical.  It’s why we chose a grocery store.

But retail grocers, according to Deloitte, executed an average of 117 recalls PER YEAR!

In addition to complying with the 2005 Bioterrorism Act which relates to recalls, grocers need to understand the potential impacts of the FSMA as well. On January 24, I blogged about a white paper from Food Safety expert Dr. John Ryan about what grocers should be doing today with regards to the FSMA.  You can find his article here.  I subsequently came across this excellent, brief Retail Impact of the FSMA summary by Leavitt Partners. It’s well worth the five minutes or less it takes to read.

I asked Jennifer McEntire, Senior Director, Food and Import Safety, how she would summarize what retailers should be thinking about the FSMA at this point.  She said, “From a practical standpoint, knowing who is in your supply chain, in this case, looking forward toward retail, and having confidence that they are following the rules is paramount.”As consumers, we want to maintain that trust relationship with our food providers. There are new tools and methodologies available to the industry to help further the cause of food safety and quality.  And, while the FSMA may not be primarily directed to retailers, as Jennifer points out, from a practical standpoint it’s essential for grocers to have complete confidence in their suppliers and confirm that they’re following the rules.As grocers are the captains of the cold chain, let’s encourage them to lead the way in addressing and implementing the rules.Kevin Payne
Senior Director of Marketing

Does the FSMA Have a Direct Impact on Retail Grocers?

Will the Food Safety Modernization Act (FSMA) have direct impact on the retail grocery industry? According to industry food safety expert Dr. John Ryan, the answer is an emphatic YES!  The FDA published the first two sets of proposed rules under the FSMA on January 4 of this year and the rules are available for public and industry review for 120 days.  At first glance, the two proposed rules would appear to focus on the grower and the supply chain, sparing the retail grocery industry the task of having to do anything.

FSMA Retail Ryan Thumbnail

But, in his new whitepaper, Dr. Ryan points out that there are three things that retail grocery executives should consider:

  1. Changes to one end of the food supply chain impacts the entire supply chain.
  2. The model the FDA will follow for subsequent rules has been established.
  3. Retailers have vicarious liability.

Because traceability and food safety are connected throughout the cold chain, what impacts one segment has implications for all of the other segments and vicarious liability represents a potentially huge risk for major brands. Dr. Ryan concludes his paper by making three recommendations that retailers should consider today:

  1. Be proactive.  Preventive planning is the name of the game.
  2. Consult with inspection agencies to determine how FSMA changes will impact retail inspection procedures.
  3. Consider there may be additional benefits, such as insurance reductions, that can result from addressing FSMA regulations.

FSMA is sure to be a complicated beast and, while it may take 1-3 years or more for it to be implemented in entirety, there are actions that retailers should take now.  You can download Dr. Ryan’s white paper here.

I would also add that the one step forward, one step back traceability requirements are part of FSMA. This is not a simple task and many retailers may find that their current monitoring and paper traceability tools aren’t up to the task.  Getting a holistic view of your cold chain as it relates to all of these issues sooner rather than later can provide the ability to turn potential liabilities into potential opportunities and advantages.

You can learn more about what Intelleflex can offer retail grocers and food service providers by clicking here.

Kevin Payne
Senior Director of Marketing

FORBES: Interested in Food + Technology? Five Opportunities You Shouldn’t Miss

I devote a log of our blog ink to issues relating to food safety, quality and reducing the amount of food wasted. A recent article in Forbes talks about five areas where technology can make a difference including temperature monitoring to enable First Expired, First Out inventory to help ensure that more food is delivered fresh.  It’s nice when the business press starts to pick up on ideas that are too often stuck within the food industry.

We All Need to Get on the Bus to Improve Food Safety and Quality

We All Need to Get on the Bus to Improve Food Safety and Quality

For us to make improvements in the food cold chain, everyone’s going to have to get on the bus: producers, packers, shippers, retailers, consumers and government.  I’m hopeful that the attention currently being given to the FSMA in the mainstream media will translate into more attention about what we can collectively do to improve the cold chain.

Kevin Payne
Senior Director of Marketing

FSMA Makes the Front Page

We’ve been waiting and wondering if the Food Safety Modernization Act was ever going to make it out of the gates.  Now, two years to the day after President Obama signed the FSMA into law, the FDA has announced the release of the proposed rules for the law.  Heck, it even made the front page of our local paper over the weekend!  Those of us in the industry have certainly been aware of the implications of the law but, by and large, the public hasn’t heard much about it. The fact that this is front page news is significant as increased public awareness will also put pressure in the industry to take action.

Front Page News for the FSMA

Front Page News for the FSMA

According to United Fresh, two proposed rules will be released:

The Preventive Controls for Human Food rule would require food companies—whether they manufacture, process, pack or store food—to put in place better controls to minimize and reduce the risk of contamination.

The Produce Safety rule would require farms that grow, harvest, pack or hold fruits and vegetables to follow standards that are aimed at preventing contamination.

FDA Commissioner Margaret A. Hamburg said that “The FDA knows that food safety, from farm to fork, requires partnership with industry, consumers, local, state and tribal governments, and our international trading partners. Our proposed rules reflect the input we have received from these stakeholders and we look forward to working with the public as they review the proposed rules.”

The FSMA should motivate the food industry to fundamentally rethink their cold chains.  It’s not a simple feat to move from a reactive methodology that’s been in place for decades to a proactive one but the benefits to consumers – and to the industry – can be immense. It’s important to note that Hamburg specifically mentioned “farm to fork” and “international trading partners”.

Also interesting is commentary (Fresh Plaza and elsewhere) that the expected cost to large farms is estimated by the FDA to be roughly $30,000, and the cost for small farms is expected to reach $13,000. But, when traceability is done in conjunction with temperature monitoring to reduce waste, enough savings can be found to more than pay for the cost of traceability. In effect, the additional revenues by being able to sell more of the produce cover the cost of implementing traceability and then some!

Much has changed in the industry over the years due to globalized and elongated cold chains.  I expect retailer grocers will take the lead on this and begin to mandate electronic temperature and traceability solutions for their suppliers starting in the field, whether that field is in California or Chile.

(You can learn how Intelleflex can help address FSMA requirements here.)

It’s a nice way to start what should be a very interesting – and busy – year.

Kevin Payne

Senior Director of Marketing

Peanut Butter Recall: FDA Shows Teeth Under the FSMA

You know it’s a big thing when our local newspaper finds space amongst all of the ads to print a story about food safety.  But there it was in yesterday’s morning paper: the FDA used new authority under the Food Safety Modernization Act (FSMA) to suspended the registration of a peanut butter production facility.  The details of the story relating to salmonella contaminated peanuts can be found here. The tainted products were sold through a number of retailers including  Trader Joe’s, Whole Foods, Kilwins Quality Confections, and Target.  It’s a tragedy and its great that the FDA stepped in and shut the place down until issues are resolved.

FDA Shuts Down Peanut Butter Factory Using FSMA Powers

There are two key take-aways:

  1. Because of the FSMA, the FDA now actually has the authority to shut the violator down as opposed to recommending voluntary recalls (which was it’s limitation of authority prior to the FSMA).
  2. Retailers should be as supportive as possible to do anything they can to improve food safety and managing recalls. It’s their brand on the line when customers get sick from eating foods purchased at their store. (You’ll remember the names Trader Joes, Whole Foods and Target a lot longer than SunLand (the peanut butter company) after you’ve read this article.) We need to trust our grocers and we need to know that they’re taking all possible measures to protect our safety.

This is a good sign that progress is being made on implementing the FSMA, which was signed into law in January of 2011. It’s a law which will benefit consumers and, we believe, also will improve business across the industry.  According to an article in Food Safety News, “The White House Office of Management and Budget (OMB) is still working “expeditiously” to implement major portions of the Food Safety Modernization Act.  We are working as expeditiously as possible to implement the food safety legislation we fought so hard for. When it comes to rules with this degree of importance and complexity, it is critical that we get it right.”

It is a complex law and it will take time to implement but many feel that, with the 2012 Presidential Election now behind us, things will pick up speed and producers, growers, shippers and retailers will need to focus more aggressively on addressing new traceability and food safety requirements.

The Food Safety News article explains that: The five major pillars of the FSMA will help pivot the nation’s food system from taking a more reactive to a more preventative approach to food safety. If they [the FDA] reduce foodborne illness rates by even a fraction, they have the potential to save Americans billions of dollars in healthcare costs every year.

Those five pillars — all still awaiting implementation — consist of the following:

– Preventive controls: FDA will require science-based preventive controls throughout the food system. This includes requiring food facilities to write preventive control plans, establishing minimum standards for safe production of fruits and vegetables and introducing regulation to help prevent intentional adulteration of food at vulnerable points in the food chain.

– Inspection and compliance: FDA has new authority to conduct inspections. FDA will inspect all high-risk domestic facilities every three years, have access to facility records and will establish a laboratory accreditation process for third-party testing laboratories.

– Response to violations: FDA will now have the authority to order food recalls – as opposed to recommending voluntary recalls as it does now – in cases of contamination. Farms will also be required to track their product and develop plans for how to issue recalls, though small farms that sell the majority of their product locally (within 275 miles) and sell less than $500,000 a year in product are exempt.

– Oversight of imports: Food importers must now verify that their facilities and preventive controls meet U.S. standards. FDA can now deny food from foreign facilities entry to the U.S. if the facility does not allow access to inspectors.

– Collaborative partnerships: Health agencies, both foreign and domestic, will work collaboratively to improve public health goals. FSMA provides FDA with a grant to develop state and local health agencies’ ability to improve food safety at a localized level. FDA will also develop a plan to help improve foreign industries’ ability to meet U.S. food safety requirements.

Addressing food safety regulations and traceability doesn’t have to be viewed as a cost of doing business but rather viewed as an opportunity. By combining a proactive approach to managing the supply chain – using pallet-level temperature monitoring – the industry can significantly reduce waste and generate more revenues and effectively get traceability for free.

If we work together, it can be a win-win. You can learn more about our solution for improving quality and traceability here.

Kevin Payne

Senior Director of Marketing

PS: If you’re interested in reading more about the FSMA, there’s a good summary here.