| DTI study unveils risks and challenges to impact UK food sector now and in the future
The report (entitled ‘IT for Traceability in the Food Sector’) addresses the issue of traceability, i.e. the ability by food companies to quickly track and trace back to the origins of a food product in the event of a contamination incident (or other such event that may lead to a crisis), often requiring the recall of hundreds or thousand of items at significant cost. The study was commissioned to a consortium consisting of Lysis (a business assurance consultancy), Brunel University and CCFRA Technology (the leading UK food research association). Within the working framework, this consortium formed an Industry Forum from 20 leading food firms, working as a team to address the traceability issue. Vincent Tombros, Lysis’ managing partner and the study team’s leader explains: “From January 2005, a new regime of traceability and documentation (Article 18 of European Union Regulation 178/2002) comes into force aiming to put everyone in the EU onto the same footing. The legislation states that ‘traceability of food, feed, food-producing animals and any other substance intended to be, or expected to be, incorporated into the food or feed shall be established at all stages of production, processing and distribution’. The law says that the information must be available ‘on demand’ – not tomorrow, nor even in a couple of hours, but when requested by a local food inspector”. The results of the study provide a fascinating insight on how companies’ risk management and business continuity policies will be affected as a result of the traceability law. Vincent adds: “Most larger UK food companies have in place procedures and systems (such as bar codes and most recently, RFID – radio frequency identification systems) that assist in meeting the new requirements. However, significant black holes were identified in many cases where UK companies use non-UK suppliers, especially those from outside the EU”. The risk of non-compliance to the new food law appears to be much higher than many senior managers feared. Take for example the case of a large importer of foods from the Far East. How quickly can that importer track and trace back a contaminated batch originating from Thailand? Can it be done “on demand”? How quickly can the Thai supplier then mobilise to address the crisis and provide the required product origin info? A similar example identified by the study concerned a UK producer of high quality pizzas, importing fresh produce (mozzarella cheese, anchovies, etc.) from cottage industry producers in Southern Europe. Vincent notes: “We were surprised by how insufficient business assurance controls were, as implemented by companies using overseas suppliers. Many of those companies risk falling foul of the new regulations and this will severely inhibit their ability to operate within the new legal framework. We are not talking about a handful of small companies here, but of hundreds of firms with turnovers of £10m-250m that will have a big adjustment to make in a short timescale. This being an EU mandate, it simply cannot be ignored”. One of the solutions agreed in the report was the development of so-called Global Minimum Standards for Business Assurance. In practice, this means that UK food firms should sanction their suppliers to comply to a new so-called Business Assurance model, under which each overseas supplier must demonstrate that it has in place up-to-date plans for risk management, crisis management, business continuity management, product recall and other related topics. Of course, first of all the UK food firms need to develop the generic standard that they then can present to their suppliers for their buy-in and tailor them as required. Then, the supplier will need to prove compliance, whereby their chief executive signs-off an annual Business Assurance letter. Vincent concludes: “The difficult thing will be for the UK food firms to not only develop a standard that is well-structured but also to successfully engage their suppliers to adopt it. Suppliers will need to see benefits from all the effort they need to input. Fortunately, best practices in the development of such standards were identified from leading companies in other industrial sectors (such as in energy and automotive), which have had to address similar issues within their global assurance process. Such practices can now be modified and imported into the food sector. “However, at the same time, food companies face the challenge of streamlining their supply chain management approach, so that they only collaborate with suppliers capable of meeting the new requirements. On the plus side, food firms that will introduce such standards can demonstrate to their customers (retailers, etc.) that they have control of their supply chain’s traceability and use this fact to their competitive advantage. All in all, this new food law may turn out to be a blessing in disguise for those companies quick enough to adapt, firming up business controls and creating new win-win partnerships all through the supply chain”. For an advance copy of the DTI report or more information on food sector business assurance in the new legal framework, food companies can contact Vincent.Tombros@lysis-consulting.co.uk
•Date:
2nd March 2004 •Region: UK •Type:
Article •Topic: BC
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