As food safety regulations have been modified, so too have consumer expectations related to safe and healthy eating. While track & trace systems are not new, processors are showing these can do more than satisfy regulators; they can improve products, operations and processors’ relationships with customers and consumers.
Consumers are paying closer attention to food and changing how they shop. According to Chris Peterson, director of the Product Center at Michigan State University, “Nearly half of the consumers we surveyed expressed a change in shopping patterns because of food safety.” The good news is that while most consumers report low prices as the main reason why they purchase a product, 60 percent of respondents say they are willing to pay up to 10 percent more for food that promises to be healthier, safer or produced to higher ethical standards.
The Food Safety Modernization Act, signed into law on January 4, 2011, contains many new and altered regulations and specifically covers enhanced track & trace and recordkeeping requirements. A major impact to processors is the provision that requires all members in the food supply chain to maintain “one step forward, one step back” traceability information in digital form. The requirement for a “digital form” means paper and pencil efforts will no longer meet the regulations, and some level of computerization is now mandated.
While some of the regulations are already in place, the new law will result in other changes over the next two years. The legislation requires FDA to conduct product tracing pilots within nine months of enactment. Within 18 months, FDA must provide Congress with a report on recommendations for establishing more effective product tracing, including consideration of costs and benefits, feasibility of technologies for different sectors, existing practices and international efforts. Using the information, FDA is directed to create, as appropriate, a product tracing system. Within two years, FDA must begin developing regulations for additional recordkeeping requirements for high-risk food.
According to Mike Hader, director of information technologies at Odom’s Tennessee Pride Sausage, “The ever-changing status of food safety regulation requires companies to comply with strict standards and controls, and the marketplace rewards those who can embrace a culture of driving quality throughout the entire supply chain.”
For a system to be great, Hader states, “It not only needs to do everything you need, it also must be rock-solid reliable and extendable. We can be assured that we can always trace the pedigree of everything that goes into our products and where our products were sold. While there is no ROI that can be measured for this ability, it is priceless if and when you need it.” The processor of breakfast foods uses Infor Global’s Adage ERP system.
Changed motivationLate in 2010, The Aberdeen Group, a research organization based in Boston, MA, produced a study titled . Aberdeen has produced studies on this topic for the past five years. Reviewing past reports, it’s clear the industry’s motivation for improving food safety and traceability has changed. In 2009, the top motivator focused on the reduction of in-compliance events and recalls, a proactive effort to minimize the impact of quality issues. However, the 2010 study shows the industry has become less focused on prevention and more focused on meeting government requirements, a reactive effort. The study also shows an increased interest in using food safety and track & trace for competitive advantage and cost reduction.
Although the Aberdeen study shows a major change in market pressures, the strategic actions being deployed have not changed; building compliance and traceability into production systems remains the most frequent strategy, with 62 percent of food companies employing this option. The study also shows 75 percent of food companies utilize ERP systems to capture trace & track information.
Most food and beverage manufacturers have adopted ERP as the major system of record and for managing end-to-end business processes. ERP collects, organizes, analyzes and presents the vast majority of the operational information available to food processors. From supplier receipts to production to inventory to customer shipments, data is collected as part of ERP’s role in company management and accounting. When properly implemented, ERP builds in traceability information with no incremental cost of collecting this data.
However, out of the many ERP products available, only a few are focused on food processing, offering track & trace functions; most include mature functionality that has been proven in numerous food implementations. The collection of track & trace information is built in, but little difference exists across the various vendors. The vendors compete on how data is made available in case of an incident.
Standards evolveAs the industry focuses on the extended supply chain, there has been a growth in standards. For example, GS1 US, along with other industry associations such as United Fresh, has focused on best practices and standards for traceability and the extended supply chain. These organizations have developed initiatives, like the Produce Traceability Initiative (PTI), to help companies better manage the flow of data within and between organizations. The initiatives also promote the adoption of Global Trade Item Number (GTIN) and Global Location Number (GLN), with the ultimate goal of achieving whole-chain case-level electronic traceability by 2012.
In addition, PTI is being used as a template for adoption across a number of categories outside of produce, including seafood, meat, dairy, baked goods and more. According to Matthew Littlefield, senior research analyst, manufacturing, at Aberdeen, “The best-in-class companies are again leading the charge in the adoption of these standards, with the best-in-class being over three times more likely than laggards to be leveraging these standards in their business processes.
“GS1standards are making major strides,” Littlefield adds, “specifically in the food and beverage industry, for sharing information between partners.”
Other technologies also play a role. In response to the increased focus on food safety and traceability, a wave of software, hardware, consulting and systems vendors have emerged over the last few years to offer a range of traceability solutions and tools. Radio frequency identification (RFID) and barcodes are two common technology methods used to deliver traceability.
Barcoding is a common and cost-effective method used to implement traceability at both the item- and case-level. Variable data in a barcode can include the lot number and can be applied to the packaging or label. Handheld or fixed barcode readers can be used to record traceability data at all phases from receiving ingredients to customer shipments.
Currently, RFID is more expensive than barcoding and not widely used. However, RFID costs are going down, and usage is now increasing.
ROI on your investmentWhile ERP allows processors to satisfy regulations, it often does not extend to more advanced functions that can produce additional ROI. “I think the real issues are how granular companies are getting on traceability and the level of complexity in the manufacturing operations,” states Littlefield. “If companies just want to comply with one-up, one-down and lot-level traceability to a 24-48 hour response time, I think ERP can work. If companies want to do end-to-end, item-level, real-time traceability, they need ERP plus extended applications from the ERP vendors or third-party, best-of-breed applications, such as quality management systems, manufacturing operations management, product lifecycle management and supply chain management.”
“ERP provides for the low-cost collection of traceability information,” says Jack Payne, vice president, enterprise software, CDC Software (formerly Ross Systems). “But the key issues are how easy and effective the system is in reacting to an incident, and how the traceability data can be leveraged to improve the business.” This also has the effect of improving product formulation, quality, cost, supplier performance and other areas.
Product improvements can be identified by connecting quality information with trace & track data. This allows the quality department to look at cause-and-effect relationships between the actual specs of incoming ingredients and the resulting characteristics of a produced batch.
A vice president of supply chain for a mid-sized “secret sauce” processor states his solution from TraceGains focuses on ingredient suppliers, capturing information from their certificates of analysis (CoAs). When this processor started comparing CoA information to its specifications, a significant number were flagged as red (out of spec) or yellow (trending towards out of spec). The vice president talks about the practical reality of validating inbound ingredients: “Before this system, we were only checking a small percentage of CoAs against our specs, critical ingredients and suppliers with known quality issues. Therefore, we simply did not know if ingredients were meeting our specs. Now, everything is checked 24/7.” Since a CoA is typically reviewed before the supplier actually ships the ingredient, the supplier can be notified of any non-compliance before the ingredient is shipped.
Improve relationships with consumersConsumers have a growing interest in the food they eat. This interest presents an opportunity for processors to increase the quality of their relationships with consumers. The traceability system and the vast amounts of information that can be generated about the product have value for curious consumers. For example, consumers in some stores can wave their Smartphone above an apple or orange and learn instantly where it was grown, who grew it and whether it has been recalled. They can even contact the farmer.
That is the case with Kroger’s new Fresh Selections line of fresh salads. “Food safety is a top priority at Kroger,” says Joe Grieshaber, Kroger’s group vice president of meat, seafood, deli and produce departments. Part of grocery chain’s “Quality You Can Trace” program includes new technology on packaging that enables customers to learn where the produce was grown. Leveraging technology from HarvestMark packaging for Kroger’s Fresh Selections line includes a unique 16-digit code to enable shoppers, using a Smartphone or website, to learn more about the salad’s origin, packing location, ingredients, date and time of packing, and provide feedback online.
For more information:
Matthew Littlefield, Aberdeen Group, 617-854-5204, firstname.lastname@example.org
Jack Payne, CDC Software, 770-844-0595, email@example.com
Marc Simony, TraceGains, 303-450-9009, firstname.lastname@example.org
Elliott Grant; HarvestMark; 866-768-7878; email@example.com