Risk in the food supply chain

Risk in the Food Supply Chain

Non-adherence to Management systems

What is in common with the

pictures?

• Three biggest recent food safety outbreaks.

• Death

• Loss of revenue.

• Why?

• Non-adherence to management systems.

Presentation Outline

• Management Systems

– Top down approach

– Customer Demands vs Honesty & Integrity

– Does size matter

– The buck stops with you

– Continual Improvement

• When things go wrong

– Local

– International

Religion, Politics, Race and Sex

• Systems, Management, Leadership – Defined Agenda

• All religions (Marry their own; specific rules)

• Political parties (Specific promises to voters)

– A Leader • The pope.

• Donald Trump/Hillary Clinton

– Defined member identity • Racism (One thinks they better than the other)

• Gender Identity (Trans-gender & gay/lesbian movement)


• Differences in Agenda’s cause separation

– Denominations within religious groups

– Political parties splitting (ANC, COPE, EFF)

– Coups in government (Leadership change)

– Removal of members who do not conform to

the ideology of the group


• The Point?

– All systems require momentum

– A leader

– An agenda

– A commitment

– A group of dedicated followers for

implementation. (Believe in the cause)

Defined by the Company culture!!

Top Down Approach

• ISO demands

– Senior management commitment

– Provision of resources

• Business pans to drive the process

Defines the direction of the organisation.

Provides the scope of the organisation.

Allows the allocation of resources to meet business requirements.

Conundrum

• Cost vs Quality?

– At what point is the cost of quality too high.

Quality is:

Right Product (specification conformance + order fulfilment)

+ Right Quantity

+ Right Time

Food Industry

• Product specification built to:

– Produce a tasty product

– Packaged to be appealing

– Be safe to consume throughout shelf-life

• Management Systems designed to:

– Control all inputs

– Control processes

– Assure customer satisfaction/high quality.

Risk of Non-Compliance:

Unpleasant Experience

Illness

Death

Food Industry

• Cost implications

– Cheaper food (food security)

– Higher margins (Retailers)

– Increased agriculture costs

– Effect of exchange rate

Food for thought: Where can we cut costs? Can quality and the safety of the product be compromised on?

Food Industry

• Legislation

– CPA requires due diligence

• Ultimate responsibility

– Mandatory (Legal) and Voluntarily (ISO)

– Lies on the shoulders of the top management

to ensure system compliance

Customer Requirements vs

Honesty and Integrity

Greater Sales = Greater Production = Greater Profits

• Customer requirements differ.

• Export requirements differ.

• Demands from individual customers

– Specific audits

– Specific system requirements

– Product testing

– Rebates

Requirements: To meet the needs of all customers, one needs to: 1. Provide system adjustments per client. 2. Complicate the systematic process at the whim of clients

to retain their business. Leading to: Increase in Costs

Customer Requirements vs

Honesty and Integrity

• Demand for cost reduction

– Minimises resources

– Reduces system implementation ability

– Lends itself to not implementing the systems

correctly.

Question to be asked: At what point should we implement the systems correctly to provide a complete system or can we get by with a shoestring budget often requiring system fabrication.

Does Size Matter

• Corner baker vs Coca cola.

• Equal

– Food safety risks

– Commitment from management

– Training

Scenario

Homemade sauce by

housewife

• Small client base

• 5 product lines

• Management is hands

on

Batch production of 2000 L per batch.

• Retail and restaurant trade

• 305 product lines

• Often silo management with many levels Ingredients:

Both use the same ingredients.

Contaminated with peanuts.

Allergic clients consume undeclared allergens and end up in hospital or die.

Scenario

• In both cases, manufacturers suffer:

– Brand damage

– Potential litigation

– Recall costs

– Could be shut down

– Huge financial implications

No Matter the size of the Organisation.

The Buck Stops With You!

• Trust is required between consumers, customers and manufacturers.

• Management responsibility to develop this trust.

• Honestly implementing the systems creates a system which ensures safety.

• 3rd party audits confirm the status of the system.

• Certifications thus provides trust with clients.

Continual Improvement

• Correctly managed systems reduce

possible risk to products and organisations.

• Systems do break down!

• Non-conformance and corrective action

systems in place to address systematic

breakdowns.

• Critical to identify the ROOT CAUSE of the

issues.

Continual Improvement

• Attention to detail when addressing the

root causes leads to a robust system.

• Honesty, integrity and resources assists to

address the root causes in their entirety.

• Successful system improvement.

• Continual assurance of safety.

THINGS GO WRONG!!

When Things Go Wrong.

• Systems do break.

• There is ALWAYS a reason.

• For the most part, reasons pertain to

senior management overlooking elements

within their systems.

Incidents

• Local

– Tiger brands (Tastic rice)

– Irish Cheese producer (Import cheese)

– WW Ice cream recall (Allergens)

• International

– Jensen Farms (Cantaloupe)

– Chipotle (Norovirus, E.coli)

– German bean sprouts (E.coli)

Local

• No legal requirement to record or publicise

outbreaks and recalls.

• Result = can protect brand but not making

it known.

• No mandatory medical records of further

investigation of food borne illness.

• Merely remove products off shelves to

minimise risk to consumers.

Tiger Brands October 2014


• 17000 Units

• Banned colourants (Methyl Yellow & Sudan Red)

• Known carcinogens

• Supplied from an approved supplier in India

• Have been using particular supplier for the past

20 years.

• Ingredients shipped post approval.


• Cause

– Assumption that this batch was the same as previous.

– Batch released prior to testing.

• Root Cause

– Not adhering to system requiring batch testing prior to

use of the product.

• Correction

– Management decided to recall the batches affected.


• Implications

– Cost of withdrawal.

– Cost of product.

– Lost manufacturing time.

– Logistic costs. (Safe return and disposal)

– Reputational Damage.

• Share price dropped 0,82% on day of recall

announcement.


• How could recall have been avoided?

– Assessed ingredients prior to use.

– Reject consignment based on contamination.

– Regular assessment of suppliers particularly on higher

risk issues like carcinogens.

– Management insisting on proper SQA protocols.

– Consider the cost vs quality conundrum.

Irish Cheese Producer

Durban Port 2011

• 22 tons Cheddar cheese prevented to enter the

South African market.

• Ports authorities dumped cheese.

• @ 45 R/kg = ~ R1 000 000,00 Cost price.

• Cause

– E.coli O157:H7 contamination

Irish Cheese Producer

Durban Port 2011

• Correct decision by the Port Authorities

• Effect on Supply Chain – Calls to suspend all dairy import from Ireland.

• Root Cause – Food Product QC and release of product not robust to

pick up issues.

– Cold chain maintenance.

– Potential dumping of inferior stock.

– Product process control. (Was the pH correct during manufacture)

Woolworths Ice Cream

October 2015


October 2015

• Voluntarily recalled 12 ice-cream and sorbet.

• Labelling incorrect.

• Labelling did not indicate product was

manufactured in a factory which processed

peanuts.

• Actual volumes were not quantified.


October 2015

• Costs

– Actual products lost.

– Logistics of returns.

– Dumping excess packaging.

– Redesigning of new labels.

– Non-availability of product of the shelves (Lost

potential sales)


October 2015

• Root Cause

– Communication between manufacturer and retailer.

– Oversite in allergen management program.

– Oversite in product development process

– Misapplication of regulations.

Management did not ensure that the labelling regulations including the approach to allergens as well as the label approval process were in place correctly.

International

• European and American authorities are more

ridged

• AGOA designed to stimulated trade.

• Global trade encouraging export.

• Need to comply to regulatory requirements of

exporting requirements.

• Required to publicise outbreaks and recalls.

• Governments investigate and manage recall

process much more closely.

International

• Legislation and programs require tight

control.

• Things still go wrong…

Jensen Farms July 2011

• Biggest outbreak since 1927

• Cantaloupe Fruit

• Listeria monocytogenes

• 143 hospitalised

• 33 deaths

• 300 000 fruits across 9 states.


• Costs.

– 66 lawsuits

– Filed for bankruptcy after litigation value

reached US$50 million.

– Owners were criminally prosecuted.

– Concern of fruit safety influenced demand of

fruit.


• Root Cause

– Poor facility hygiene

– Old equipment

– Stagnant water in processing facility

– Not following cleaning protocol

– Not using chemicals

– Direct violations of best practises set by FDA

– Did not execute recommendations by the 3rd

party auditors


• Litigation is focussing its efforts on the

auditing body which approved the facility.

• Auditing body is called into question as 3rd

party audits don’t have a mandate to close

facilities.

Honesty and integrity when applying food safety principles would have mitigated all food safety rirsk experienced at Jensen farms. Balance Costs: Production vs Quality

Chipotle August 2015 – January 2016

• In the period stocks decreased by 46%

– US$754.00 - US$404.00

• Group of various isolated food safety

incidents.

• Norovirus 151 students in Boston

– Employee infected with a virus.

– Virus transferred to food.

– Root cause: miss informed by the health

status of the employees.

Chipotle August 2015 – January 2016

• 55 sick, 20 hospitalised due to E.coli O26

– Across 9 states.

– Source unidentified.

– This is particularly related to hygiene of

facilities of raw materials.

– Speculation suggests raw materials were the

cause.

– Systems pertaining to managing ingredients

to be improved on.

Germany Bean Sprouts

• May 2011

• Biggest European outbreak to date.

• E.coli O157:H7

• 3 950 people infected

• 53 died


• Sickness initially started in Germany.

• The Germany blamed it on Spanish cucumbers.

• Cost Spanish exporters US$ 200 million per week.

• Russia banned all imports of European cucumbers.

• Consumers in EU warned against eating cucumbers


• EU farmers claimed losses of €417 million per week.

• By 8th June 2011 (within 1 month)

– US$ 2.84 billion was assigned to industrial human losses (Sick leave, etc)

– Cost of waste product was not quantified.

• Germany issued warning to EU not to eat any cucumbers, tomatoes and lettuce.

• EU salad sales declined sharply.


• Final values were not calculated.

• Runs into 10s if not 100s of Billions of

Dollars.

• EU farming in its entirety needed to be

stimulated by government funding.

Concluding Remarks

• Non compliance typically stems from senior management not managing the system.

• Systems require Honesty, Integrity and resources to implement them correctly.

• Balance required between costs to implement system vs costs of failure.

• Breaks in the system, in our global network, could be disastrous.