When it comes to food safety, risk management, not ROI, is the metric of choice for America's leading food brands when evaluating track and trace systems.
America's Bioterrorism Act and the Food Allergen Labeling and Consumer Protection Act raised the standards for food companies' ability to account for raw materials, processing activities and finished goods shipments. And while enforcement agencies such as the Food and Drug Administration are careful not to require electronic records to account for all that movement, the sheer volume of data involved and a desire to improve accountability is driving major food and beverage companies to install enterprise resource planning (ERP) and other automation building blocks of track and trace.
What was received and where it was sent is all that is required by the Bioterrorism Act, points out John Helferich, vice president of university research for Hackettstown, NJ-based Masterfoods USA. One-up, one-down tracking and tracing and the ability to provide pallet-level records within 24 hours of a recall will satisfy the authorities.
That's not enough, however. Speaking at Food Engineering's 2006 Food Automation and Manufacturing Conference, Helferich noted that consumers and retailers increasingly are demanding to know, "Where did this come from? The whole natural products channel is built on this," and that's the fastest growing segment of food. The goal at Masterfoods is to migrate to best practices: real-time internet accessibility to all records, from farm to fork, down to the item level. Achieving that goal won't be cheap, but it will be a bargain.
"M&Ms is probably worth close to $10 billion globally as a brand," Helferich pointed out. "What is some record keeping compared to the value of that brand? The value far outstrips the cost of implementation, and the brand can be shattered by an inability to track and trace."
Label him enlightened, but Helferich's view is not shared by many in the industry. After all, there aren't many billion-dollar brands in food and beverage; for the growing number of manufacturing specialists, brands are someone else's property. For these companies, the cost of implementing an electronic records system is weighed against simply retrieving as many finished goods as possible. Liability rather than food safety is the issue, and Excel spreadsheets and paper records are often the tools of choice.
If lost sales and destroyed products are the only price of a recall, the return on electronic-record investments isn't very attractive. Let Starbucks and Horizon Organic play the social responsibility card, they reason: reputation is an abstraction, not a financial calculation.
This attitude has been duly noted by technology suppliers, the companies that thought FALCPA and the Bioterrorism Act would finally push manufacturers to invest in data-collection systems. Having initially promoted the regulatory compliance aspect of track and trace records, some are de-emphasizing that aspect and focusing instead on the hard benefits of electronic data collection.
At the farm level, efforts to establish a national animal identification program are grinding to a halt, even as fears about avian influenza and other communicable livestock diseases heat up. Faced with a cattlemen's revolt, Congress recently froze a $33 million allocation meant to kick-start a USDA pilot involving RFID tags on individual animals. Agriculture Secretary Mike Johanns had proposed mandatory tagging by 2009, but cattlemen fear they will bear the entire cost, pegged at $5 to $15 per animal.
Failure to automate data capture at the farm level could compromise the entire supply chain, warns Alf Reime, manager of Lawson Software's livestock center of excellence in Norway. "The farmer link is where things happen," says Reime. "Was a vaccine given? What effect did feed have on finished goods? Was housekeeping performed in the barn?" Until data is exchanged up and down the supply chain, quality improvements will be difficult to effect, he believes.
Tracking tracing's ROIOnce a tracking database is established, the financial benefits come into focus. Rockwell Automation's Paul Moylan cites an unnamed plant manager who calculated reductions in raw-material variation and yield improvements totaling $70,000 per week after an automated record-keeping system was instituted.
But quantifying savings usually is difficult. "The day-to-day pressure of mock recalls and audits performed for major customers overwhelmingly are a greater concern than an actual recall," maintains Marketing Chief Scot McLeod of Ross Systems. If they are slow to respond or produce inaccurate data, "they run the risk of losing that account," he points out.
Fiorucci Foods, the Colonial Heights, VA, division of an Italian specialty meats company, implemented Ross's ERP solution to meet federal, as well as customer mandates, two years ago. Time spent on traceability audits was slashed, but tracking and tracing efficiencies also mean better inventory control. Fiorucci's Chris Maze offers anecdotal evidence, such as the worker who was prevented from filling an order for standard-grade salami from a premium-grade bin, or the "shelf violation" message that appeared on a scanner when a customer negotiated extra days worth of shelf life that the pick bin's product couldn't deliver.
A new management team at 70-year-old Lawrence Foods in suburban Chicago began its automation initiative with scheduling software from JRG Software, which was acquired earlier this year by CDC Software, the automation parent of Ross. The package slashed scheduling time and error rates but didn't address management concerns, including traceability. The Elk Grove Village, IL-based bakery ingredients supplier recently decided to scrap the program and install a full-blown ERP system from Microsoft called Navision. "Until we throw the (Navision) switch, we'll be living with an Excel database system that is adequate but not efficient," reports Andy Balafas, vice president-operations.
Balafas and Vice President Marc Lawrence came on board a year ago with an ambitious agenda to shake the family-owned company out of complacency and reshape it as a modern manufacturer. "An ERP system requires a huge amount of work up front, and members of the staff are taking work home and coming in on weekends to get data ready for the new database," Balafas says. "But there should be some very significant benefits, including the way we conduct mock recalls and manage from a liability standpoint by providing information quickly to customers in the event of a real recall."
The existing scheduling package was cobbled to a legacy material resource planning system that posed significant upgrade challenges. "It was almost too difficult to upgrade," sighs Phil Brun, a partner with VerticalSoft, the integrator installing Lawrence's ERP solution. The Weymouth, MA, firm modified Navision to deal with lot traceability, expiration dates, food regulations and other requirements of food manufacture. "If you're going to do complete lot traceability, which is pretty much the requirement today in the food industry, you need ERP," says Brun.
Undeclared allergens have emerged as the leading cause of recalls. Two allergen-related recalls involving almost 600,000 lbs. of finished goods from Unilever were announced in March. Most of the product was a frozen entrée manufactured by a California copacker over a four-month period. A better electronic record system might have saved the copacker millions of dollars and spared its client a public black eye.
Contrast that experience with Amy's Kitchen, the nation's leading supplier of frozen natural foods. Santa Rosa, CA-based Amy's voluntarily recalled a lot of cheese enchilada meals in April. The company, which earlier implemented the Intentia Trace Engine, pinpointed the mislabeling to fewer than 160 meals. As a precaution, it recalled 4,320 of the 9-oz. meals distributed to the Eastern time zone, a fraction of a single day's production.
Amy's is one of a handful of US users of Intentia, though that will change with April's merger of Intentia into Lawson Software. While the trace engine is used widely in Europe, where tracking and tracing mandates became effective in January 2005, the software developers have more ambitious goals than accounting for raw material receiving and finished goods shipment. Records from throughout the supply chain and within the organization need to be integrated if food companies are to realize "value-added traceability," points out Lawson's Reime. "Companies will not invest in electronic systems because of a mandate; they will do it when they see a benefit," he says. Instant access to data from the farm level to the consumer's plate moves the supply chain from regulatory compliance to continuous improvement in food quality and safety.
Lawson's most ambitious program in traceability data-linking is being developed in partnership with Skretting AS, the world's largest fishfeed supplier. Initially launched four years ago as a component of Skretting's ERP system, NuTrace has progressed to a web-based records system providing data transparency for each batch produced at Skretting's 20 plants worldwide. The only difference in the information available internally and to customers and their clients is that customers can access all documents pertaining to their feed, while Skretting employees have visibility to the entire customer base, according to Nina Flem, food safety and quality assurance manager at the Stavanger, Norway-based firm.
Last year, Skretting produced 1 million metric tons of feed for salmon, trout and other fish species. Quality and safety data reside in a laboratory information management system (LIMS), HACCP and ISO 5001 record-keeping system, risk-management system and certified quality program. Tying them all together under NuTrace permits rapid information dissemination and continuous improvement.
"We sell feed, but we also sell documentation and trust," says Flem. The ability to quickly produce daily records, not simply crisis reports, enhances trust.
Trust everyone, but auditWhile the value of trust is difficult to quantify, the cost of third-party audits and mock recalls can be fixed. As the frequency and level of detail demanded in those drills escalates, the case for better records organization, whether manual or electronic, becomes clearer. The newest aid for records structure is ISO 22000, an auditable food safety standard approved last fall.
The intent of ISO 22000 is to create an auditable system of records of both HACCP and prerequisite programs: sanitation practices, employee hygiene training, pest and rodent control and other good manufacturing practices, as well as traceability programs. "Occasional failure isn't a crisis, but little problems left uncorrected lead to a food safety crisis," notes John G. Surak, a food scientist and statistician who recently retired from Clemson University. Now an industry consultant, Surak was one of three US delegates to the ISO 22000 organizing committee.
"ISO 22000 is a review tool that tells management if the food safety program is working," explains Surak. It's a tool even the largest food companies can use: in June, the Chicago Public Health Department took the rare step of shuttering Masterfoods' M&M Mars candy bar plant on Oak Park Avenue when the plant failed to correct a fruit fly infestation and plug door gaps blamed for mouse feces in the processing area cited in a June 21 inspection.
That's the kind of kind of management failure systems like ISO 22000 are designed to address. Standards and government regulations are careful to avoid mandating electronic records, given the huge number of small processors worldwide. As a practical matter, "I don't see how you can ensure data accuracy and manage all the issues of traceability without an automated system," says Surak. Adds Tatiana Lorca, food technology specialist with BSI Management Systems, "The tide is turning, and companies are recognizing this is the way to catch up to the rest of the world." Reston, VA-based BSI recently was accredited to certify companies for ISO 22000 compliance.
ISO 22000 joins a lengthening list of standards for the global food industry, and whether it is embraced by manufacturers and retailers remains to be seen, acknowledges Jeff Cawley, vice president at Northwest Analytical Inc., a Portland, OR, supplier of statistical process control software. Nonetheless, industry needs a common language for food safety and information exchange. "If standards aren't in place, there is going to be a Tower of Babel for worldwide trade," he cautions.
"The driving factor in traceability is brand protection, and the companies with the biggest brands are motivated to implement systems first," suggests Ross Systems' McLeod. But the global network extends beyond the companies trading internationally. Small and mid-sized companies that lack well-organized records risk being frozen out of that network. And while jumping from a paper-based system to a state-of-the-art tracking and tracing program is a prescription for disaster, food manufacturers who intend to be long term players are at least beginning the transition to automated records.
For more information:
Tatiana Lorca, BSI Management Inc., 703-464-1933, email@example.com
Alf Reime, Lawson Software, 011-47 95 89 52 03, firstname.lastname@example.org
Jeff Cawley, Northwest Analytical Inc., 503-224-7727, email@example.com
Paul Moylan, Rockwell Automation, 414-212-5200, firstname.lastname@example.org
Scot McLeod, Ross Systems, 678-259-8625
John G. Surak, Surak and Associates, 864-654-8743, email@example.com
Phil Brun, VerticalSoft, 781-682-7557