By Jack Payne, VP, Product Management & Solutions Consulting
Implementing an ERP calls for careful governance and change management. The ERP you select won’t be a perfect match to your business requirements; 90-95 percent is considered ideal. So how do you close that gap? Do you adapt to your new system, or do you change it? If you do make changes, how much of the code do you alter?
GS1 Standards: A Better Trail of Breadcrumbs for Supply Chain Management
By Jack Payne, VP, Product Management & Solutions Consulting
Those who remember the tale of Hansel and Gretel probably recall that they left a trail of breadcrumbs through the woods to help them find their way home. But do you remember what happened to those breadcrumbs? That’s right: Birds ate them and the brother and sister ended up lost.
By Jack Payne, VP, Product Management & Solutions Consulting, Aptean
Widespread distrust has increased the need for food and drink manufacturers to be more forthcoming about their ingredients, production processes, and supply chains, according Mintel’s 2018 Global Food & Drink Trends report. A growing consumer demand for improved traceability and transparency will undoubtedly influence positive and immediate changes. With that in mind, food and beverage manufacturers should take stock of opportunities and challenges facing their organizations and the industry this year.
Seven rules have been issued under the Food Safety Modernization Act (FSMA), and the compliance dates for the Preventive Controls for Human Food guideline has passed. FSMA requires that a written record be kept of the entire Hazard Analysis and Risk-based Preventive Controls (HARPC) plan. These records must be maintained for no less than two years, and evaluated whenever there is a significant change at the facility that might increase a known hazard or introduce a new one, or every three years if no significant changes occur.
Most companies have identified what needs to be done in order to comply, but for many the challenge of documenting those efforts remains. Typically there is no consistent format or approach for records maintenance, and too often key information on the same topic or issue is different at different locations. Information should be easily accessible and usable across the organization to identify trends and to remind to follow up on corrective actions and/or audits.
Three key points are the focus for FSMA documentation: the supplier, the facility, and the shipper.
Know who you’re buying from
For most food manufacturers, in-depth knowledge of suppliers is crucial to ensure the quality of the product; now it is also a critical step of your HARPC plan. You must document not only the hazard your supplier is responsible for controlling, but also the action they have taken to prevent or control that issue. For example, an ice cream company would want to ensure that the peanut butter entering their facility is not contaminated with salmonella. Working with certified suppliers would provide assurance that the ingredients meet quality and safety standards. Certificates of analysis from the supplier offer one form of documentation that the product is within limits; in-house testing prior to use would verify those findings. Annual audits would also be necessary to evaluate the supplier’s effectiveness in controlling the hazard.
“Trust, but verify” is the mantra for this stage of documentation. A thorough, written program that details your verification process is necessary to meet FSMA requirements. There is still time to ensure compliance; the supplier verification requirements take effect March 2017. A fully integrated Enterprise Resource Planning (ERP) system would track supplier audits and link the documentation to supplier records. Proactive controls within an alert management system would prevent ingredients from advancing to the manufacturing floor until acceptable test results had been received. When you are fully aware of your suppliers and their capabilities, you can better execute when there is a quality or safety issue.
Many businesses already have preventive controls programs in place; however the challenge now becomes validating and documenting those processes and procedures. Some businesses may have been following Hazard Analysis and Critical Control Points (HACCP) guidelines, but may not have adequate documentation to prove it. Companies with GFSI certifications tend to have more complete documentation, but the format can vary from sophisticated technology to manual logs. Continuing with our example of the ice cream company, sanitation records would be necessary to prove the processing environment would not allow listeria to contaminate the finished product. Listeria is found is soil and water, and can be introduced into a manufacturing facility a number of ways. Floor drains are common sites of contamination as they can be neglected by cleaning staff. Once introduced into a cold environment, it can be difficult to contain, partly because the bacteria grows well at refrigerator temperatures, as low as 40°F. A thorough cleaning and sanitation program is required to keep listeria out of the processing environment. Tests should be run on the finished product to ensure there has been no microbial contamination. A shipping hold would prevent the product from being distributed prior to receipt of clean test results. Shipping documentation must be maintained that would reflect such a hold.
“If it’s not documented, it didn’t happen” is the call to action at this phase. A written analysis of both the identifications of the hazards and the controls to prevent or minimize the issue is required. Verification steps must also be designed and implemented to ensure the HARPC plans are operating correctly. A manufacturing execution system (MES) can record quality assurance tests, as well as cleaning and maintenance protocols, while the alert management system can warn when control checks have not occurred or when conditions are out of tolerance so that immediate action can be taken. A detailed record of the full scope of the plan, including the process, the proof, and the problem, must be kept.
Know who you’re shipping with
The third area of documentation is for shipment of the finished product. The Sanitary Transportation of Human and Animal Food rule requires that entities engaged in the shipping of food and food ingredients ensure that contamination and adulteration are avoided en route. In order to ensure the quality of the product, the ice cream company in our example would want to verify that temperatures are maintained throughout shipment. In addition, a properly maintained transport is necessary to prevent cross-contamination.
“Ignorance is not bliss” resonates for this point. Many food manufacturers already follow most of the requirements of the Sanitary Transportation rule; the focus going forward will be on documentation, training, and validation systems. As with supplier verification, it is your responsibility to document that you provided the shipper with detailed specifications for transport, such as temperature and cross-contamination controls. All written procedures, agreements, and training programs must be maintained for a year after use. While the compliance date for this rule is April 2017, these preventive controls should be put in place as soon as possible.
FSMA states that documentation must be accurate, detailed, and legible; it must be created at the same time as the activity being recorded; and it must be provided within 24 hours of the request for review. An integrated ERP system serving as a single source of truth for the company satisfies all of these provisions, gathering documentation from an MES and an alert management solution. A robust ERP will give a food manufacturer visibility and management of materials, quality, scheduling, and inventory management in order to track specific orders. At each step in the process, if a food safety risk is uncovered, immediate action must be taken to recall the affected product. The traceability feature of ERP allows the company to track a single ingredient or lot of finished product back to the supplier, through the inbound carrier, and forward to the outbound carrier and ultimately the distributor.
The FDA has stated their philosophy is to “educate before and while they regulate.” In keeping with this mindset, expect continuous improvement as these regulations continue to evolve. Implementing FSMA documentation provides an opportunity to encourage greater collaboration, instill a broader business perspective, and build stronger relationships that improve productivity and ensure food safety.
Human beings have been keeping on eye on their food supply since the dawn of time. Livestock has been identified in some form and monitored for centuries, particularly during outbreaks of disease. Ancient Romans had provisions to protect citizens from adulterated food. Early colonial America implemented inspection laws for the export of food to Europe. Only in the last fifty years or so have food companies more routinely relied on product identification codes and electronic systems. Regulations such as the 2001 Bioterrorism Act and the 2011 Food Safety Modernization Act have made traceability a critical factor for food companies to consider.
For most manufacturers, the number one reason to implement track and trace technology is to manage recalls. This capability can be also be used to improve other aspects of an organization, such as inventory management and quality assurance. This wider application can lead to improved efficiencies, reduced costs, and increased customer satisfaction.
Tracking the Source
Globalization has created gaps in safety in the food supply chain. The US imports approximately 19% of its food supply- 80% of seafood, 50% of fruits, and 20% of vegetables. The top three countries are Canada, Mexico, and China. Safety regulations vary by country, as do agricultural practices. Quality should be at the forefront of all supply chain initiatives for risk management and business continuity planning.
Solutions can include built-in controls to provide manufacturers with visibility into qualified suppliers and the ability to specify incoming inspection requirements. If a tolerance issue or contaminant is identified, track and trace technology can notify the manufacturer in real-time to begin addressing the problem and avert the deficient product from the leaving the production floor. If the same product is returned multiple times, a root cause analysis of track and trace data might reveal a quality issue with a specific ingredient or supplier.
Tracking In House
Food manufacturers yield an average of 84% of raw material. Even a small increase in yield improves profitability. Managing growth and keeping costs under control are high priorities for any organization, and visibility into manufacturing operations is crucial.
Track and trace technology can be used to improve inventory management. Knowing when an ingredient arrived, and what its shelf life is, allows a manufacturer to optimize use of its materials. For example, establishing protocols with a first-expired/first-out (FEFO) rotation ensures that stock is used in order, rather than being left to languish on the shelf. Lot controls can also dictate distribution order to that product with an approaching expiration date is shipped ahead of the next batch. Better use of inventory can lead to improved demand forecasting and planning, thus allowing for more strategic operational decisions.
Tracking the Distribution
Increased scrutiny and improved testing methods have led to more product recalls. In fact, contamination recalls have increased 167% from the first quarter of 2016 to the second. General Mills recalled 45 million pounds of flour after it was linked to an E. coli outbreak going back to December 2015. The flour was distributed to consumers, as well as other producers. Betty Crocker instituted a recall of its cake mixes and Krusteaz pulled its blueberry pancake mix, due to receipt of recalled flour. These secondary recalls are a direct result of traceability. By knowing the ingredients that went into the product, these manufacturers were able to take action quickly.
Regulatory bodies are not the only ones demanding that manufacturers be able to track a product forward and backward in production. Many retailers are requiring their suppliers conduct mock recalls to demonstrate their ability to track an ingredient’s path through the manufacturing process. Identification is considered the most important step in increasing the effectiveness of a recall. An industry survey found that 78% of companies can locate lot information within eight hours. An integrated ERP system with full backward and forward lot trace/recall capability has the potential to reduce that time to minutes. The sooner an issue is identified the sooner steps can be taken to resolve it.
According to 2016 International Food Information Council (IFIC) Foundation Food & Health Survey, 66% of respondents were confident in the safety of the US food supply, down 12% from the previous year. Traceability can allow a manufacturer to greatly improve agility and decision-making, thus ensuring product safety, securing customer and consumer trust, and meeting industry and government regulatory requirements.
An estimated 15 million Americans suffer from food allergies, and the numbers are growing. Reactions can range from mild responses, such as a rash or an upset stomach, to severe symptoms including trouble breathing, chest pain, and loss of consciousness. While more than 160 foods have been described as causing allergies, the Food and Drug Administration (FDA) has identified eight that must be declared at least once on the food label. These major allergens - milk, eggs, fish, shellfish, tree nuts, peanuts, wheat, soy - account for 90% of allergic reactions, and are the food sources from which many other ingredients are derived.
Undeclared allergens have been the leading cause of recall since 2011, accounting for 45% of all FDA recalls in 2015, exceeding the total number of recalls for all previous years. In the two months prior to the release of this article, the FDA reported 20 recalls for undeclared allergens. In years past, the FDA had urged manufacturers to avoid unidentified allergens; now the industry is required avoid them as part of the Preventive Controls provisions of the Food Safety Modernization Act (FSMA). The implementation of an integrated ERP system can help a company meet these requirements.
What Went Into It?
Manufacturers need to have control over their recipes and formulas to ensure consistency and quality. In the case of allergens, recipe management is essential. When a new product is formulated, ingredients are tracked within the system. At this point, the presence of allergens is easily captured. But what if an ingredient is not in stock? A substitute is used, and the recipe needs to be modified. For example, if a recipe calls for milk, soy milk is acceptable replacement, but soy is another allergen. An ERP system would detect the conflict and prevent that change from going into production. An alert would bring the error to the attention of the appropriate individual.
What Came In Contact With It?
Another potential source of undeclared allergens involves cross-contact. Cross-contact occurs when an allergen is inadvertently transferred from a food containing an allergen to a food that does not contain the allergen. Ideally, products containing allergens would be processed on separate equipment. If that option is not available, scheduling becomes critical. A hierarchal structure can be programmed into the ERP system so that jobs run from the lowest to the highest of allergens. In a bakery, sugar cookies would be the first product down the line, then peanut butter cookies. Sanitation would occur before the next batch ran on that line, to prevent possible peanut residue from coming into contact with the next batch of cookies.
Where Did It Go?
Traceability has become the guiding principal for almost all food safety regulations. A company must be able to track material along every step of production. Lot traceability allows manufacturers to determine not only where exact ingredients originated within a given batch, but also where that batch went. Version control features provide a historical view of the recipe used to produce each finished good lot so that a complete audit trail is available, back to the original ingredient lots used at a specific date and time. In the event of a recall, time is of the essence. If a supplier realized a shipment of spice mix contained peanuts, the ERP system would be able to answer specific questions such as where the ingredient was used, how much was used, when it was used, and where the finished product went. A targeted recall is more effective than a widespread one, and less damaging to the brand and the bottom line.
When it comes to allergens, ignorance is not bliss. Allergic reactions to food result in more than 300,000 outpatient visits per year among children under 18. Strict avoidance of allergens is important to prevent serious health consequences. Use of an ERP system to manage recipes, establish production schedules, and execute precise recalls can help a company comply with FSMA regulations and protect vulnerable consumers.
The Food Safety Modernization Act (FSMA) requires manufacturers and processors to evaluate and identify food safety hazards, implement preventive controls, and document those measures. Many companies see these regulations as a means of raising the bar for the food and beverage industry. It could be argued that standards are long overdue. Consumer confidence in food manufacturers is low. According to the 2016 Food and Health Survey conducted by the International Food Information Council (IFIC) Foundation, only 10% of respondents view manufacturers as trusted source for food safety.
More educated consumers combined with tougher industry standards are creating an environment where food manufacturers need to take additional steps to ensure their processes can meet these expectations. An ERP system specifically designed for food manufacturers will benefit a company as they comply with FSMA regulations regarding preventive controls, traceability, and documentation. Forward-thinking businesses are going even further, by exploiting the full capabilities of the system in order to improve efficiencies, reduce costs, increase margins, and increase customer service levels.
The Best Defense is a Good Offense
Prevention is the cornerstone of FSMA and is an important issue to consumers. Up to 15 million Americans have food allergies, and reactions can vary from a mild response, such as a rash, to anaphylaxis, which can be fatal. Undeclared allergens are the leading cause of recall. There were over 600 recalls in the United States and Canada in 2015, and a third of those were due to the same allergens: milk/dairy, peanuts, eggs, and wheat/gluten.
Food safety standards recognized by Global Food Safety Initiative (GFSI) are a good defense against potential recalls. When these certifications are complemented by intelligent technology, the protective net around the company tightens. For example, an ERP system with Allergen Control can prevent the creation of recipes containing allergens that are not allowed in the product being produced, as well as control material issues preventing ingredients to be added that are not declared on the label. In addition, using sequencing rules to manage when products with allergens are produced can help reduce any chance for cross contamination. As an additional benefit, improved sequencing using the planning and scheduling tools in ERP can also help reduce changeover times between jobs, thereby increasing utilization resulting in additional production capacity. Software can also capture and analyze data to identify where bottlenecks occur and allow managers to assess and correct such situations. What started as compliance with preventive controls became a more efficient production line, which can lead to greater revenue for the organization.
An Ounce of Prevention is Worth a Pound of Cure
The industry average cost of recalls is $10 million in direct costs, as well as brand damage and lost sales. Actual total loss data is seldom available, and the scope of the damage can be dependent on how well media attention and public perception is managed. Financial analysts estimate that Chipotle will have lost approximately three years of earnings between fiscal years 2014 and 2017, due to outbreaks of E. coli and norovirus. Additionally, they expect to spend about $50 million in food safety measures and marketing campaigns to regain consumer trust.
Hazard Analysis and Critical Control Point (HACCP) plans are the starting point in identifying vulnerabilities. By implementing a comprehensive track-and-trace solution, a company has the ability to conduct an efficient, targeted recall that minimizes potential harm to consumers and negative impact to manufacturers, distributers, and retailers. Using real-time data, problems can be quickly identified and drilled down to the exact culprit within the supply chain, thus avoiding mass recalls. Mock recalls utilizing a robust traceability system reduces the timeframe to execute a recall from days to minutes. Fewer recalls improve bottom line performance; recovery expenses are avoided, the company brand is protected, and supplier relationships are preserved.
Don’t Get Lost in Translation
FSMA regulations require much more stringent data management procedures; there are guidelines as to what data must be recorded, how to record it, when it must be recorded, and which employee recorded it. Standalone applications and homegrown measures can be time-consuming as information is keyed into multiple systems, and the probability of inaccurate information increases due to errors in reentering data. Comprehensive reporting also becomes difficult as information has to be pulled from various systems and compiled in another.
A fully integrated ERP system provides a single source of truth. It should be powerful enough to capture detailed data and flexible enough to produce reports suitable for an auditor. Errors decrease and quality increases when employees have access to documented processes. Business intelligence and analytic solutions present Key Performance Indicators (KPIs) that make it easier to identify situations that require attention. Drill-down capabilities enable users to identify trends and conduct root cause analysis. Real-time information is available to support manufacturing and distribution activities. Managers can focus on strategic planning rather than time-consuming administrative tasks.
FSMA will have some kind of impact on almost every food manufacturer. While compliance is mandated, there can be additional benefits for those organizations that choose to go beyond the minimum standards. A comprehensive ERP system allows a manufacturer more in-depth information about their operation. Such a view allows for improved inventory management as resources are better utilized; increased customer service levels as more accurate electronic records are used in forecasting and planning; and increased efficiencies as workflows are simplified and the possibility of human error is minimized. The end result is a more productive, more profitable organization that has earned the trust of its customers and the confidence of consumers.
Roughly one in six Americans (or 48 million people) are estimated by the CDC to get sick from foodborne diseases each year. When someone reports a foodborne illness, the immediate response is to figure out where the contamination occurred and issue a recall. However, with the Food Safety Modernization Act (FSMA) coming into play, the focus in the food industry will go from responding to contamination to preventing it. FSMA is also increasing the need to track what happens to food across the entire supply chain.
Tracking your food across the total supply chain ensures that manufacturers and distributors take a “one up and one back” approach. This approach enables everyone to know where it came from (one back) and who it was sold to (one up). Confirming the integrity and safety of your food is not just an issue of what happens inside the manufacturing walls anymore. It’s all about being able to promptly respond to a recall during the unfortunate event of a food safety issue, mock recall or demonstrate compliance.
One Back to the Supplier and One Up to the Distributor
Many producers, manufacturers, and retailers have product tracing systems already in place. However, they vary on the amount of information the system records and how far forward or backward in the supply chain the system tracks.
One part of the FSMA focuses on tracking back to the supplier. For example, if you are a tomato sauce producer, it is likely that you do not get your tomatoes directly from the farm. You probably buy them upstream from a tomato supplier and process it into the tomato sauce that is sold in stores. While it is important to know which supplier your tomatoes came from, FSMA focuses on the immediate supply chain – one up and one back. If tomatoes come into your sauce factory contaminated, they will need to be traced back through each system to find the source of the contamination.
The other part of the FSMA focuses one up to the next step, either distribution or customer. It is necessary to trace who you’re selling the product to, where it’s going and how it got there. Traceability plays a tremendous role in this and as the importance of track and trace moves downstream into the food supply chain, manufacturers and distributors will benefit by using traceability solutions to meet FSMA standards and compliance and understand where their product is going. There are other benefits as well. With traceability, labor in the supply chain is more efficient and easy to track and trace. Food is being moved more rapidly through the supply chain and with less risk of spoilage or contamination.
Tracking Your Way Through the Supply Chain Round Trip
While the FDA does not require companies across the supply chain to use electronic traceability solutions, many are recognizing that keep records electronically is the only way to comply with the FSMA. When it comes to tracking up and back through the supply chain, electronic traceability gives manufacturers the capacity to view information at both a high level and a more drilled-down version.
Having access to these different views empowers everyone within your organization to gain a better understanding and track the supply chain process round trip – from receipt of raw materials to shipment to customers and back again. In the end, no matter which part of the supply chain your organization falls in, ensuring the safety of your consumers puts your company’s reputation on the line all the time. FSMA sanctions manufacturers to take a proactive stance and commit the necessary time and resources toward compliance planning for prevention and supply chain traceability implementation.
The number of U.S. food products recalled, and the cost associated with those recalls, has nearly doubled since 2002, according to several reports. With the recent influx in food safety issues, it's no surprise the spotlight is burning brightly on supply chain management.
Fatal mistakes made by well-known brands, like Blue Bell Creameries, have called into question how manufacturers - and supply chain executives specifically - are executing two major components of food safety: prevention and response. Could it be time for supply chain executives to recall their own processes?
Some still leverage antiquated and error-prone manual techniques, while others aren't properly using the track and trace technology they have. With advancements in these solutions, supply chain executives have no excuse for not being more proactive in mitigating risks.
When it comes to reducing the number of food recalls, preparation is prevention's greatest ally. Continual process refinement paired with the proper use of track and trace technology can greatly reduce the occurrence and effects of food safety issues. Establishing automated preventative measures, including mandatory product checkpoints and quality tests during the procurement and manufacturing stages of the supply chain, can help identify issues faster and more consistently.
If used correctly, track and trace solutions can notify manufacturers in real-time so issues are addressed before the product leaves the production floor. Furthermore, accurately implementing track and trace technology into the supply chain provides you with greater visibility and actionable insight to improve pre-distribution processes. At the same time, in the event that a recall needs to be issued, track and trace technology can also quickly and easily kick-start the recall process in a more strategic manner - aiding in avoiding common pitfalls.
Let's say you manufacture a particular type of sauce and leverage a variety of outside vendors to source its ingredients. You also supply the sauce to thousands of grocery stores throughout the country. News hits about a listeria outbreak at one of your vendor's plants. Now what? Without a clear understanding of the flow of product and materials coming and going, you jeopardize your brand and the well-being of consumers.
Properly using track and trace technology can allow you to document your sauce's ingredients and suppliers while also identifying - in real-time - where sauce produced during the outbreak is located within the supply chain. This enables you to quickly determine every point of possible contamination and recall accordingly.
Seemingly simple answers to questions like where, when, and what quantities of products were shipped to and from, are being missed daily by supply chain executives. Not knowing the ins and outs of your product's lifecycle during a recall can truly cost you. In fact, according to Food Safety News, in more than half of the recalls occurring over the past 15 years, the recall cost each affected company more tha n $10 million. Some lost more than $100 million, and a few closed their doors for good because of the excess cost.
Many supply chain executives have product tracing systems, but they differ in quality based on precision and how far forward or backward in the supply chain they can track. Whether or not they can provide full control over the end-to-end process is critical to meeting compliance and maximizing efficiency.
Amidst growing consumer concern and compliance demands, increasingly more changes to the supply chain are necessary. Now is the perfect time to re-evaluate your recall processes to ensure you're using the right technology to minimize revenue losses and maximize consumer safety.
When beginning your quest to purchase an ERP solution, building a case for the cost benefit should be priority. However, focusing on all of the bells and whistles of a new ERP often overshadows looking at an actual cost benefit and understanding the overall value you are getting with your ERP. In part 3 of this blog series, we look at selecting a Best-in-Class ERP.
ERP COST BENEFIT EXAMPLES AND SUCCESSES
Best-In-Class - Set Your Business Up to be the Best
Overall, organizations need to be using as much of their ERP investment as possible. A Best-In-Class organization may have detailed plans for what they hope to accomplish with their ERP. However, if a solution that employees cannot actually use is selected, those plans become useless. According to Aberdeen Research Group’s report, How ERP Can Make Your Job Better on a Day to Day Basis, top performers will select a solution that enables users to take advantage of functionality designed to improve their jobs on a day-to-day basis.
The same Aberdeen report states that as compared to all others, leading companies are:
The bottom line is that the best-in-class invest in an ERP solution that is easy to use. Even the most functional of ERP solutions can end up being a waste of money if employees can’t use it. A user-friendly ERP solution leads to a higher adoption rate among employees and the benefits of the solution will more quickly and profoundly exhibit themselves throughout the entire organization.
Is ERP worth the cost?
One of the most common causes of delay in purchasing an ERP solution is trying to figure out which software to use. While having access to the trendiest features and functionality of an ERP solution sounds like the most obvious reason to invest, sometimes that doesn’t always make the most sense. It is up to each individual business to analyze the costs of purchase and implementation and compare it with the net annual benefits to calculate their ERP pay back opportunity. Finding the functionality that works best for your employees and empowers them to utilize all of the ERP features for better business is what’s going to pay for your system.