High-profile cases of contaminated food products, as well as an increasing number of recalls, have stimulated an ongoing awareness of — and concern about — the foods that reach America’s tables. As a result, food safety has become a growing concern for consumers and industry leaders. It is also a major focus of reform for the U.S. government.
With budgetary increases of as much as 30 percent in 2011, the U.S. Food & Drug Administration will soon have the authority to carry out and enforce core elements of President Obama’s new Food Safety Working Group. And despite numerous setbacks in Congress, the Food Safety Modernization Act (S. 510) was signed into law by President Obama on January 4.
According to Food Safety News, the law will “expand the Food and Drug Administration’s (FDA) authority to access records and require food facilities to evaluate hazards and implement preventative controls and food safety plans.” The act will increase the number of FDA inspections by setting mandatory inspection frequencies. Facilities deemed high-risk will be inspected once within five years of the bill’s signing date and no less than once every three years thereafter. Non-high-risk facilities will be inspected within seven years of the bill’s signing date and no less than once every five years thereafter.
The bill also grants the FDA mandatory recall authority and gives the agency the ability to mandate certification for high-risk imported goods, allowing for penalties for firms not in compliance with standards. And the FDA is authorized to collect fees for facility re-inspections and recalls.
A “Game Changer” for Retailers
But perhaps the most important outcome is that for the first time in history, the food chain is facing more than a “one-up/one-down” responsibility. At no point prior has a member of the food supply chain been held responsible for an upstream action. Previous legislation, such as the Bioterrorism Preparedness and Response Act of 2002, only required that each member of the supply chain know the immediate upstream supplier of the ingredients and the immediate downstream consumer of the product.
The newly enacted legislation really changes the game. Growers and manufacturers will be required to implement food safety plans, and foreign facilities importing food to the U.S. will have to meet the same requirements. The FDA will also have expanded access to food safety records, and electronic records are the ones that will matter most, as these must be immediately available in the event of an investigation.
These demands mean it’s time for retailers to take a close look at how their systems and software can help them comply with the pending legislation and how they can make a track-and-trace system pay for itself by enabling additional efficiencies.
Global Retailers Lead the Charge
To date, traceability systems have gained more traction in Europe, where they have been mandated since the enactment of the General Food Law in 2005. There, traceability systems are now viewed as both a tool to comply with the law and a means to gain customer loyalty and trust by having the ability to rapidly respond to a serious situation. Global retailers are now increasingly leveraging this capability to distinguish themselves from competitors.
In fact, large global retailers have been aggressively rolling out RFID mandates to track product movements at the pallet level to all their suppliers over the last few years. By injecting these measures into their supply chains, they are in essence letting their customers know that in the event of an outbreak, the problem will be contained fast and without loss of retailer credibility.
Within their traceability strategy, a number of global food retailers have also adopted events-monitoring functionality that, within minutes of a safety warning’s receipt at the company’s headquarters, enables them to prevent further sales of affected product across all stores. Alerts can automatically be triggered via e-mail, SMS or text messaging to all managers’ cell phones, even if the items in question are not part of their current assortment (just in case an affected product was mistakenly sent to the wrong store). These systems can also push out the change to the stores’ point-of-sale system, preventing any further sales of the product.
U.S. Retailers See Increased Benefits
Here in the U.S., retailers also are tapping into technology to manage recalls. Retailers must look upstream at their own systems and those of their suppliers to be sure they know what to recall and when – and that they can do it quickly.
According to AMR Research, the key to successfully deploying a traceability strategy will rely on two things: technology and collaboration. This means:
(1) Retailers should collaborate with their suppliers to be sure they have the systems and software in place that allow forward and backward lot tracking and the ability to easily link these lot numbers to recalled ingredients.
This means that suppliers should be able to determine when a lot was received into inventory and when and where the lot was consumed in the manufacturing process. From there, suppliers should be able to link the lot to the barcode label on the finished goods. This way, in the event of a product recall, the supplier could use its systems and software to identify all the finished goods that were produced with a contaminated ingredient lot and notify all its customers who received these goods.
(2) Retailers should have systems and software in place to track lots throughout their supply chain. When a retailer is notified that a recall for a particular lot has been initiated, the company can use the system to pinpoint exactly where these products are within its supply chain.
For products still in inventory, the retailer needs to have the ability to freeze the inventory, whether it’s in the store, the warehouse or in transit. This requires advanced events-monitoring functionality that can enable a company to stop sales of an affected product within minutes of receiving a safety warning. As previously mentioned, alerts should automatically be triggered to managers across the retailer’s supply chain via e-mail, SMS or text messaging. These alerts should also link to the stores’ point-of-sale system to prevent any further sales of the product.
For products no longer in inventory (i.e., those purchased by consumers), it’s critical for retailers to build mechanisms that can auto-alert customers of product recalls. This includes the ability to e-mail, text message and deploy recorded phone messages.
For grocers and food retailers, the message is all too clear: The ability to react quickly to a recall or a safety warning is just as much about adhering to legislation and industry standards as it is about protecting brand equity and shareholder value. In fact, a study commissioned by Deloitte LLP in 2008, indicates that 58 percent of respondents who heard about product safety and/or quality problems altered their buying habits and that the majority of these consumers did not purchase the products in question for over nine months, making it less likely that they would purchase those products or brands ever again. The ability to track and trace product is a boardroom issue that is imperative in minimizing or possibly avoiding damages to consumer loyalty, costly litigation and declining stock prices.
Deploying the Right Technology
The key in deploying and implementing a successful traceability solution is finding the right provider with the right technology — an industry-focused partner that can help you deploy the right technology and walk side-by-side with you until your objectives have been achieved.
Regardless of whether or not you choose to deploy RFID, events-monitoring functionality or barcode labels with advanced tracking intelligence as part of your traceability strategy, you should ensure that your traceability solution:
- Tracks the movement of products through the entire supply chain;
- Offers lot tracing capabilities;
- Provides real-time visibility and control of product movement throughout the process;
- Enables detailed recall notices to be rapidly delivered to the proper locations;
- Integrates with existing systems and applications through industry-standard protocols and interfaces;
- Conforms to global standards, such as GS1, ensuring application and system interoperability and preventing vendor lock-in; and,
- Offers concrete systems and processes for instantaneous traceability.
Food-related recalls have always been bad for business. But with new legislation now signed into law, failure to efficiently react to recalls will also carry steep legal consequences. Traceability solutions are rising in strategic importance as they become both a necessity and a source of competitive advantage and improved business performance.
Fortunately, many retailers have found that adding these capabilities to their current systems doesn’t have to involve a complex and costly implementation. A number of the systems available today can be deployed quickly and affordably and can even deliver additional, often unexpected benefits such as improved inventory management, standardization of warehouse functions and improved supply chain efficiencies.
About the Author: Brendan Lowe is Aldata President of USA Business. He joined Aldata in 2005 and has assumed responsibility for the global professional services organization and supporting operational growth in Aldata’s North American subsidiary. Lowe was appointed as the country manager of Aldata USA in 2007 and has been a member of the Management Council since 2007.