How to transform your supply chain in the era of smarter food safety

The food safety and quality function must be involved in any change that has a potential impact on food safety. Research and development teams must consider the food safety and quality impacts of their project work. All new employees must have appropriate training to enable adherence to robust food safety and quality expectations.

Food safety and quality plays a critical role in supplier vetting and supplier management which is required by regulations including the FDA’s Food Safety Modernization Act. Supplier food safety and quality issues can and do result in recalls. Recall costs vary widely given the specific nature of the recall and company controls to limit impact. A Grocery Manufacturing Association report, prepared in collaboration with EY research, shows that 23% of respondents estimate a recall’s full economic impact is above $30 million, with 5% estimating $100 million or more.¹

Changes to equipment, people and suppliers must consider food safety and quality risks and use that to establish controls. Government regulators and external certification bodies audit food safety supply chain controls for compliance, including food safety plans, hazard analysis, supplier preventive controls and management control records. These programs seek to mitigate food safety and quality risk from suppliers of materials (e.g., ingredients, packaging, chemicals) and services (e.g., external manufacturing, maintenance, sanitation, pest control, logistics).

Food safety and quality supply chain programs require a firm understanding of risks and associated controls. Businesses must contemplate control costs alongside the impacts of a potential recall. Frequent testing can reduce the magnitude of recalls by narrowing the issue window resulting in smaller recalls. Business risk escalates, for instance, for bulk ingredients or when multiple plants use the same ingredient from the same supplier facility. In such cases, a recall is far-reaching and expensive.

Supplier risk assessments cover three criteria: inherent product risk, individual supplier risk (for each farm/location) and the intended use of the product. The aggregated risk directs verification activities, such as a certificate of analysis for each shipment, conformance with the Global Food Safety Initiative, annual audits, sampling and laboratory testing.

Food businesses should enable their food safety and quality functions to move rapidly and support business-critical activities, such as the need to onboard new suppliers for supply chain resiliency. Common food safety and quality program issues which render businesses vulnerable are:

• Lack of/limited up-front investments
• Lack of/limited knowledgeable resources
• Inefficient, ineffective and manual risk management processes that burden experienced food safety and quality resources
• Unscalable resource models that cannot support future management
• Increasing expectations from regulators to manage third-party risks
• Lack of visibility and compatibility with supplier systems

Supply chains are not equipped to cope with disruptions at the magnitude recently experienced. Some “leading-class” supply chain practices, such as carrying less product on hand and utilizing the cheapest sources, no longer work. “Leading-class” must now embrace building strategic reserves and enabling diversity in food-safe sourcing.

Many food safety and quality groups do not have the available staffing and technology to be a proactive partner. Companies should engage in a concerted effort to explore, identify and implement the right balance of bold strategic choices to sustain business today and transform for relevance tomorrow.

Here are five key investment areas:

1. Begin with the end

Consumer expectations that drive purchases should be the first priority. Trends that have met the test of time include organic, gluten-free, peanut-free, fair trade and non-GMO products. These trends require compliant suppliers. Supplier vetting must also fundamentally validate food safety and quality expectations. Inputs from different suppliers are not interchangeable.

Conduct scenario planning to holistically assess supplier vulnerabilities. Expand scenarios beyond tier 1 suppliers. Leverage existing relationships within the supply chain, such as procurement, to identify external factors that increase supplier vulnerabilities such as COVID-19-related shutdowns or bankruptcy. Recognize the value of redundancy and geographic diversity over time to match risk tolerance. Invest in food safety and quality resources to meet the increased demands of supplier vetting, monitoring and assessment on a redundant and diversified supply chain.

2. Know the data

Although companies have a wealth of data, it is spread across divergent systems, spreadsheets, databases and even paper. Comprehending and managing the universe of data is the price of admission to both smart food safety and a smart supply chain.

Key data sources include recall history, inherent product risk, external supplier audits, company audits, quality checks, quality complaints, corrective action response times, certificate of analysis results and raw product microbial test results. Analysis of these sources provides insights into what is going on with suppliers.

By leveraging this operational data, the food safety and quality function can prevent incidents and anticipate undesirable states. Additionally, the food safety function can provide data-backed recommendations on supplier diversity, supplier requirements and supply-related investments.

3. Realize the potential of data

Businesses must be nimble to overcome contemporary hurdles. Decision-making and risk management are needed at lightning speed. Food businesses must enable their food safety and quality teams with integrated data to facilitate business fluidity.

While it may be common to work with disaggregated and antiquated systems, the implicit inefficiency slows procurement, supplier audits, product specification, nutrition and sustainability work streams relative to competitors with integrated solutions.

Integrated systems can embed various data sources and supplier management modules into a parent/child relationship where data sources automatically trigger notifications to key stakeholders and feed corrective and preventative action (CAPA) management. For example, digital temperature readings can be used to monitor and alert management to temperature abuse. The key is to recognize what is possible and choose efficient investments that provide the greatest long-term value to the business.

4. Challenge current processes and structures

Empower resources to use their advanced skill sets and eliminate wasted or misdirected efforts. Challenge current process design and execution. Encourage uniform data collection, scalable solutions and continual improvement on safety as well as efficiency. Differentiate activities that could be completed by machines or less-experienced personnel.

Consider the potential value of third-party outsourcing for activities such as aggregating and managing supplier information, conducting initial supplier evaluations, planning audits and training auditors to drive consistency and conducting audits on behalf of the company.

Logical and technology-enabled processes foster trust in the supplier relationship. An adversarial relationship with suppliers is often counterproductive. Better processes drive meaningful communication and collaboration toward resolving issues.

5. Innovative audit verification

Collaboration does not mean blind trust — verification is critical. Auditing will remain an essential tool in driving improvement and gaining assurance. In a socially distant and increasingly digital world, companies have begun to incorporate remote audits into their audit plans. Supplier assessment questionnaires and checklists can be digitized to be executed remotely with the auditee. Virtual tours provide a certain degree of process and control evaluation.

Although many audit activities such as interviews and paperwork assessments may be easier to accomplish in person, they are increasingly possible to conduct remotely. Given the advantages and disadvantages of the remote audit, consider risk-based pilots to explore what is possible without compromising audit quality.

Summary

Building a stable, safe and trusted supply chain requires rethinking supply chain management and supplier relationships.