Supply Chain Safety

Companies used to think that that their ERP application could provide track and trace capabilities to enable them to manage recall situations. However, the reality is very few companies have a standard ERP and even fewer have standard manufacturing systems, and they simply can't track the characteristics and sources of individual lots of raw materials. With the prevalence of global procurement and sourcing from multiple providers and the pressure to practice so-called "lean business," there are so many variables touching the supply chain, it's no wonder there have been so many highly publicized recalls of late.

 

Recalls on consumer products are nothing new. In fact, "The FDA Enforcement Report" is published weekly by the Food and Drug Administration and Department of Health and Human Services, and contains information on actions taken in connection with agency regulatory activities. It is hard to say with certainty that incidences of contamination are on the rise, but according to AMR Research spending to prevent supply chain disruption is.

 

"SUPPLY CHAIN RISK MANAGEMENT"
In its survey, "Managing The Risk in the Supply Chain -- A Quantitative Study," from January 2007, analysts Mark Hillman and Heather Keltz say "supply chain risk management (SCRM)" is emerging as a new discipline and no single solution exists as yet. Forty-six percent of those surveyed plan to implement or evaluate SCRM technology over the next couple of years. Hillman and Keltz see "three basic elements of building and SCRM strategy."

• Visualize and understand risk
• Measure the impact and likelihood
• Prioritize and take action

 

The survey reveals a primary concern for CG companies is the "increasing encroachment of regulation, such as FDA regulation for food manufacturers." But according to a report from The Associated Press, the FDA is actually conducting half the food safety inspections it did three years ago, and safety tests for U.S.-produced food is down nearly 75 percent in same period. This translates to 9,748 in 2003 to 2,455 last year. There are also 12 percent fewer FDA employees in field offices who concentrate on food issues. After 9-11, the FDA increased the number of food inspectors and inspections fearing the supply chain was vulnerable to terrorists, but as fear has waned so has vigilance.

 

A chief complaint from food experts, agencies and lobbyists is funding. The administration's budget request for 2008 includes an additional $10.6 million for food safety at the FDA, but most say 10 times that is needed. Bureaucracy piles on the problem with responsibility for food safety in the hands of the FDA, USDA and almost a dozen other agencies. The Star-Ledger illustrated it this way in a recent article. "All across the federal system, such regulatory complexities are as common as pepperoni pizza, which, by the way, is regulated by the USDA. Plain cheese pizza goes to the FDA." There is legislation in currently on the table that will create a single agency with more encompassing power.

 

RECALL REACTIONS
It all started with spinach and e.coli -- of which no definitive source has ever been identified. A March 23, 2007 article in the LA Times points out that this recall only lasted two weeks in September 2006, but has left the industry at 50 percent of demand prior to the recall.

 

One company, Fresh Express, whose products were never even culprit in this case, has since invested $2 million to research the bacteria. The company convened a panel of experts from federal and state agencies, as well as academia and they have been studying how produce can come to be contaminated. So far the study is been called "most promising," and it also focuses on identifying new strategies and technologies for safety. Fresh Express plans to share results with the industry.

 

Other notable recalls on peanut butter, chicken, beef and water, still remain open ended. Some of them were mandated recalls, others voluntary. At press time, we are about a week out of the pet food debacle. The suspected cause was concluded to be wheat gluten, but then changed to rat poison.

 

This is a precise example of how the supply chain can be disrupted, effecting and likely damaging countless brands of companies that for all intents and purposes are not at fault. There will be much more to come in each of these cases, as the lawsuits have just begun. Will the courts decide who is ultimately responsible? The assumption can be made that CG companies do not want this to happen and as noted, are taking active steps towards remedies.

 

THOUGHTS ON TECHNOLOGY
We solicited and received thought leadership from Guy Blissett, senior managing consultant, IBM Global Business Services, Institute for Business Value, Consumer Products Lead and Rory Granros, director of process industries vertical marketing, Infor, as well as ideas on how a CG company can build supply chain safety into the RFP from Ariba Consulting.

 

Unfortunately space constraints prevented publishing here. However this commentary is included on our home page as "Featured Content." Please visit, www.consumergoods.com to read the complete report. CG