January 2003

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With new regs about to take effect, food distribution managers had better know where it is, where it’s been, and what’s happened to it along the way.

LOG ON TO THE U.S. DEPARTMENT OF AGRICULTURE’S FOOD SAFETY AND Inspection Service’s Web site, and it’s impossible to ignore the headlines: “Florida Firm Recalls Pork Sausage,” or “Georgia Firm Recalls Chicken for Possible Contamination with Plastic” or “Virginia Firm Recalls Pork Products.”

Go over to the Food and Drug Administration’s site and there’s more: One company recalls dried mangoes due to undeclared sulfites, another recalls its green tea and energy drinks that might be contaminated with a cough medicine ingredient. Another recalls cartons of soymilk that may contain dairy products.

A white paper prepared last year by Irista, a supply chain software and services provider, reports, “This year alone, there have been recalls of hot dogs contaminated with Listeria monocytogenes, dinner buns produced with eggs not listed as ingredients causing allergic reactions, pizzas made with milk not listed on the product’s label, and most recently, another large recall of E. coli contaminated hamburger.”

According to numbers compiled by RedPrairie, also a supply chain software producer, the FDA issued more than 400 food product recalls between January and August of last year. And the pace of food recalls is g rowing.

It’s not that the food industry is becoming less safe: Food producers have made enormous investments in food safety. But in the aftermath of food contamination incidents in recent years, the government is paying more attention than ever to food safety. As a result, food distributors are under greater pressure than ever to keep track of where their products have been and where they are now.

And distributors have to know their shipment history in greater detail than ever. Tracking where the goods are and where they’ve been is important not only for complying with the law, but also for protecting the company and its brands.On those occasions when something does go wrong, the ability to act quickly, to know where all the affected goods are, and to know that they have been recovered depends in large part on complete information on every inbound and outbound shipment.

Crackdown on the food chain
Now the need to know is likely to become even more urgent.Under a new federal law aimed at combating terrorists’ attempts to launch attacks through the food system, distributors will face stricter requirements for gathering and keeping accurate information on the where abouts of food products through out their supply chains. The law requires food manufacturers and distributors to have the information needed “to trace the source and the chain of distribution of food, its components and ingredients, and its packing ….”

Over the course of this year, the Food and Drug Administration will be forging new rules to implement the new law, known as the Public Health Security and Bio terrorism Preparedness and Response Act. Specifically, the FDA will be required to issue regulations in the following four areas that affect food businesses:

• Administrative detention. This provision expands the government’s authority to detain food for up to 30 days if it has credible evidence that the food presents a threat of serious adverse health consequences

• Registration of food and animal feed facilities. Every factory, warehouse, DC or other facility that makes, packs or holds food—domestic or foreign—has to register with the FDA by Dec. 12, whether or not the regulations are in place. Farms, restaurants and retail food establishments are exempt.

• Record keeping. The law requires manufacturers, distributors and others to maintain records that would show the immediate previous sources and immediate subsequent recipients of food and food packaging. Nearly every entity in the food supply chain outside off arms and restaurants must comply.

• Prior notice of imported food shipments. The law calls for food importers to give the FDA prior notice of all food shipments, including a description of the food,the manufacturer and shipper, the country of origin, the country from which it is shipped and the inbound port. The notice must be provided between eight hours and five days before the food reaches the U.S. port.

The FDA intended to publish proposed regulations by the end of last year and accept comment on the proposals for at least 60 days. Though it’s too early to guess at the specifics of the final version, what is certain is the combination of the new law with stricter oversight of food shipments will place a greater onus on those involved in food distribution for accurate and reliable record keeping.

Technical challenge
Detailed record keeping across the supply chain will impose a serious burden on many companie —particularly those for which even internal communication poses a challenge. Scott Rishel, vice president of business development for Irista, says, “A lot of times the manufacturing world and the distribution world don’t talk to each other. ”An Irista white paper, Material Control in the Food & Beverage Industry, comments, “Technical silos only compound the problem . … More of ten than not, companies do not have in place a comprehensive technical solution that spans … both manufacturing and distribution.”

The problem is only compounded as companies are forced to extend their systems to include their suppliers and carriers.“We’re seeing a need for much more sophisticated information systems in logistics,” says Dwight Klappich, a senior program director at the IT research and consulting firm Meta Group. “Many organizations don’t have the technical infrastructure to do that effectively,” he says.“This will force them to adopt new systems.”

Basically, the problem is one of visibility. Rishel believes many companies in the food industry do not have systems that are well enough integrated to provide the supply chain visibility and control needed to meet the upcoming demands. “Visibility starts today at the distribution center,” he says. “If we have more visibility in manufacturing, that can extend to distribution, and distribution can extend to the retailers.”The problem, he says, is that although manufacturing may have the information that distribution needs, technology in place may make it difficult to share. “If it’s in an old techn ology stack, it makes collaboration difficult,” he says . “And mid-tier companies—I don’t think they have the techn ology in place.”

The challenge only intensifies once a shipment leaves the plant or DC. Although enterprise resource planning (ERP) systems have reasonably good lot-control tools for product under a company’s immediate control, the emerging requirements will almost certainly demand more robust capabilities, Klappich says. Businesses will have to be able to trace by lot and sub-lot both forward and backward in the supply chain,he says. “You want to see if you can identify at what point something occurred.”

That tracking process has become even more difficult as more food businesses outsource processes to co-packers, third-party logistics providers and others.“It even extends out to the carrier,” says Klappich. And that can be a problem. As Dan Gilmore, who heads up marketing for RedPrairie, points out, co-packers and other outsourced parts of the business can vary widely in sophistication,from small “mom-and-pop” co-packers to large contract manufacturers and downstream distributors.

Fortunately, the technology to overcome those barriers is available and evolving rapidly. “The technology exists to solve some of the problems here,” says Gilmore. “A few companies have started to adopt it. Others may need a shove either because of the recall problem or because of increased regulatory scrutiny.”

Getting serious
The technology issues aside, some question whether food industry managers fully compreh end the challenge they face. Gilmore reports, “We see vast differences in the ability of companies to understand that the food and beverage industry has stringent requirements for managing inventory.”

But comply they must. The information is needed to protect the company both legally and financially.“You need the ability to make quality control and recall decisions from anywhere across the network,” Gilmore says.

And while new government regulations may have pushed food businesses to pay greater attention to supply chain controls, there are good business reasons— such as brand protection— to look at such systems as well. As Gilmore puts it, “You’ve got to deal with a lot of inventory issues such as expiration dates and temperature attributes. … In the food and beverage industry, it’s an issue of rea -time control. You’ve got to be able to take action on the information.”

Without good tracking systems in place, however, companies risk overreaction. Gilmore says many companies actually recall more goods than necessary because they cannot track shipments by lot or sub-lot. “So they recall all of an SKU. Rather than recall a couple of million units, they recall 10 million.”

Klappich offers another example of the perils of inadequate tracking: “Say you’re shipping ground beef and a carrier running a reefer finds out the refrigeration unit is bad,” he says. “You don’t want to have to wipe out that entire line, just what was on that truck.”

The good news is that the technology needed to enable cross-enterprise inventory visibility and management is becoming more accessible. Rishel says that while much of the food industry is not yet prep a red to meet the new requirements, “there’s a lot of low-hanging fruit,”particularly for improving inventory information visibility between manufacturing and distribution within a company. Gilmore adds that newer technologies and protocols “clearly have the promise of making system-to-system conversion [of information] more readily available.”Internet-based tools allow even small businesses to move information through hubs without major systems integration issues.

For the food industry, those developments are good news.They’re also, to borrow an aging supply chain phrase, just in time.

Peter Bradley, Chief Editor

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