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SPECIAL EDITION: FOOD SAFETY

Food Logistics A PRIMER ON INSURANCE COVERAGE

FOR FOOD CONTAMINATION LOSSES

THE CASE FOR INFORMATICS: REGULATORY COMPLIANCE, DEFENSIBLE DATA, TRACEABILITY, BRAND PROTECTION

Global Supply Chain Solutions for the Food and Beverage Industry

CHIPOTLE STRIKES BACK

NO SECRET INGREDIENTS: THE IMPORTANCE OF TRANSPARENCY IN FOOD MANUFACTURING

HOW AN OREGON INDEPENDENT GROCER

SETS THE BAR FOR SAFETY Issue No. 175 April 2016

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ON THE MENU

April 2016 ISSUE NO. 175

COLUMNS FOR STARTERS

16

Creating A Food Safety Culture 6

Five years after the FSMA was signed into law, companies are changing the way they view food safety. By Lara L. Sowinski

COVER STORY

No Secret Ingredients: The Importance Of Transparency In Food Manufacturing

COOL INSIGHTS

Utilize 3PL Sales To Build Your Cold Chain 14

Regulators and consumers demand greater transparency from food manufacturers. By Katie Moore

Third-party logistics providers can be strategic partners in overcoming today’s challenges. By Jamie Overley FOOD (AND MORE) FOR THOUGHT

A Primer On Insurance Coverage For Food Contamination Losses 32

Be prepared: Product contamination poses a worst-case scenario in food and beverage. By Matthew T. McLellan and Syed S. Ahmad

22 Chipotle Strikes Back

Unexpected foodborne illnesses push Chipotle to tighter controls as safety technology advances. By Elliot Maras

30 How An Oregon Independent Grocer Sets The Bar For Safety

Newport Avenue Market uses technology to support safety along with sustainability.

By Elliot Maras

36 The Case For Integrated Informatics: Regulatory Compliance, Defensible Data, Traceability And Brand Protection The complexity and scale of today’s food supply chain demands an integrated informatics solution. By Trish Meek

SPECIAL REPORT LABELING

How To Respond Quickly To Customer And Regulatory Labeling Requirements 40

A labeling solutions veteran explains how a centralized system can improve supply chain efficiency. By Josh Roffman

How To Create A Company Culture To Ensure Food Safety 42

Creating a holistic, positive food safety culture is sometimes overlooked in favor of a short-term, standards led approach. By Craig Adams

DEPARTMENTS

Supply Scan 12 Food on the Move 41 Ad Index 8

WEB EXCLUSIVES • Robots Deploy At The Port Of Long Beach, Showcasing Future Dock Handling Equipment • How Kellogg Stabilizes Its Food Supply Chain • FL’s Educational Webinar Series www.FoodLogistics.com

Published and copyrighted 2016 by AC Business Media Inc. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording or any information storage or retrieval system, without written permission from the publisher. Food Logistics (USPS 015-667; ISSN 1094-7450 print; ISSN 1930-7527 online) is published ten times per year in Jan/Feb, March, April, May, June, July, August, September, October and Nov/Dec by AC Business Media Inc., 201 N. Main Street, Fort Atkinson, WI 53538. Periodicals postage paid at Fort Atkinson, WI 53538 and additional mailing offices. POSTMASTER: Send address changes to Food Logistics, PO Box 3605 Northbrook, IL 60065-3605. Canada Post PM40612608. Return Undeliverable Canadian Addresses to: Food Logistics, Station A, P. O. Box 25542, London, ON N6C 6B2. Subscriptions: US, one year $45, two years $85; Canada & Mexico, one year $65, two years $120; International, one year $95, two years $180. All subscriptions must be paid in U.S. funds, drawn on U.S. bank. Printed in the USA.

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FOOD LOGISTICS | APRIL 2016

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FOR STARTERS

FROM THE EDITOR’S DESK

CREATING A FOOD SAFETY CULTURE T SOWINSKI

6

his special edition of Food Logistics is devoted to maintaining food safety from farm to fork—arguably, one of the most critical issues facing our industry. The U.S. Food and Drug Administration’s Food Safety Modernization Act (FSMA) is the landmark legislation driving improvements in food safety across the supply chain, and like others we were eagerly awaiting the publication of the FSMA’s final rule on the Sanitary Transportation of Human and Animal Food on March 31, which would have allowed us to at least provide initial commentary before this issue shipped to the printer. Unfortunately, the publication in the Federal Register took a few more days than our deadline allowed. However, we will certainly follow up on this important rule (one of the seven key rules that comprise the FSMA) in the weeks ahead. It has been five years since the FSMA was signed into law. During this time, Food Logistics has delved into myriad topics related to the impact of the FSMA, from the potential costs of compliance to new products

FOOD LOGISTICS | APRIL 2016

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and software designed to capture and disseminate information among supply chain partners. One topic that has gotten less coverage though is how companies are steadily creating a food safety culture within their organization and broader ecosystem. This fundamental transformation is increasingly apparent as the protocols and processes for ensuring food safety become more firmly rooted in the food supply chain. Overall, this embrace of food safety and its integration into companies’ cultures is reassuring to me not only as a member of the food supply chain community but as a consumer as well. Elektron Technology’s business group Checkit offers some worthwhile and no-frills insight into what it takes to create a food safety culture in a company, which includes three main parts: ➊These are your premises, your equipment, what staff are doing when you walk in, documents and records you can visibly see. ➋ These are the spoken. These are the things that are said, managers’ communications, training, rewards, schemes that are set in place. ➌ Deep beneath the surface are the underlying values. These are the hardest to see and the hardest to assess, but they do make an impact on the culture. The unspoken rules. Enjoy the read.

LARA L. SOWINSKI, EDITORIAL DIRECTOR LSOWINSKI@ACBUSINESSMEDIA.COM

DETAILS

Published by AC BUSINESS MEDIA INC. 201 N. Main Street, Fort Atkinson, WI 53538 (800) 538-5544 • www.ACBusinessMedia.com

WWW.FOODLOGISTICS.COM PRINT AND DIGITAL STAFF Group Publisher Jolene Gulley Associate Publisher Judy Welp Editorial Director Lara L. Sowinski lsowinski@ACBusinessMedia.com Editor Ronnie Garrett rgarrett@ACBusinessMedia.com Managing Editor Elliot Maras emaras@ACBusinessMedia.com Associate Editor Carrie Mantey cmantey@ACBusinessMedia.com Web Editor Eric Sacharski esacharski@ACBusinessMedia.com Ad Production Manager Cindy Rusch crusch@ACBusinessMedia.com Creative Director Kirsten Crock Senior Audience Development Mgr Wendy Chady Audience Development Mgr Angela Kelty ADVERTISING SALES (800) 538-5544 East Coast Sales Manager Judy Welp (480) 821-1093 jwelp@ACBusinessMedia.com Midwest/West Sales Manager Carrie Konopacki (920) 542-1236; Fax: (920) 542-1133 ckonopacki@ACBusinessMedia.com National Automotive Sales Tom Lutzke (630) 484-8040; tlutzke@ACBusinessMedia.com EDITORIAL ADVISORY BOARD Smitha G. Stansbury, partner, FDA & Life Sciences Practice, King & Spalding Raymond J. Segat, director, cargo & business development, Vancouver Airport Authority Dr. Barbara Rasco, professor and interim director, School of Food Science, Washington State University Adriano Melluzo, vice president, national sales, Ryder CIRCULATION & SUBSCRIPTIONS PO Box 3605, Northbrook, IL 60065-3605 (877) 201-3915, Fax: (800) 543-5055 Email: circ.FoodLogistics@omeda.com LIST RENTAL Elizabeth Jackson, Merit Direct LLC (847) 492-1350, ext. 18, Fax: (847) 492-0085 Email: ejackson@meritdirect.com REPRINT SERVICES Carrie Konopacki (920) 542-1236; Fax: (920) 542-1133 ckonopacki@ACBusinessMedia.com AC BUSINESS MEDIA INC. Chairman Anil Narang President and CEO Carl Wistreich Executive Vice President Kris Flitcroft CFO JoAnn Breuchel VP Content Greg Udelhofen VP Marketing Debbie George Digital Operations Manager Nick Raether Digital Sales Manager Monique Terrazas Published and copyrighted 2016 by AC Business Media Inc. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording or any information storage or retrieval system, without written permission from the publisher.

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SUPPLY SCAN

NEWS FROM ACROSS THE FOOD SUPPLY CHAIN Daily Updates at FoodLogistics.com

Arizona Plan To End Licensing Alarms Produce Industry Arizona lawmakers are considering a bill that seeks to do away with state licensing for a variety of professions, trades and positions —including packers of fresh produce and other foods, according to Food Safety News. With the state being No. 2 in the nation for production of lettuce and leafy greens, the deregulation legislation could compromise food safety for millions, according to some in the fresh produce industry. “I’ll get right down to it. The concern is food safety,” said Shelly Tunis of the Yuma Fresh Vegetable Association when she testified before Arizona’s House Commerce Committee. Also opposing the bill is the Arizona Citrus, Fruit and Vegetable Advisory Council, according to the Arizona Republic. The council is urging Republican Gov. Doug Ducey to retain licensing for produce packers.

GMO Labels Coming: ConAgra Foods, General Mills, Campbell Soup Co., Kellogg And Mars Inc. ConAgra Foods is the latest food company to commit to GMO labeling, following General Mills, Campbell Soup Co., Kellogg Company and Mars Inc. ConAgra Foods announced it will begin adding labels to products nationwide by July 2016 to meet Vermont’s GMO labeling requirements. “We stand behind the health and safety of all of our products, including those with genetically modified ingredients, and believe consumers should be informed as to what’s in their food,” CongAgra Foods said in a statement.

U.S. Senate Blocks Bill To Prevent State GMO Labeling The U.S. Senate blocked a bill that would prevent states from requiring labeling of genetically modified foods, according to reports. The Biotechnology Labeling Solutions Act (S2609), authored by Sen. Pat Roberts, R-Kan., which would create a national voluntary labeling standard for genetically engineered foods, did not pass. Roberts had hoped to pass the bill before Vermont’s mandatory labeling law goes • The Biotechnology Labeling Solutions Act into effect July 1. (S2609), authored by Sen. Pat Roberts, R-Kan. Despite getting (pictured above), would create a national support from voluntary labeling standard for genetically engineered foods. Democrats such as Agriculture Committee members Joe Donnelly of Indiana and Heidi Heitkamp of North Dakota, he didn’t get the 60 votes he needed. California Sens. Barbara Boxer and Dianne Feinstein voted against the bill.

FDA Unveils Funding For States For FSMA And Produce Rule The U.S. Food & Drug Administration (FDA) has laid the groundwork for the largest allocation of funds yet—$19 million—to help state agencies support implementation of the Food Safety Modernization Act (FSMA). The funds will support implementation of the produce safety rule, which became final in November 2015 and establishes enforceable safety standards for the production and harvesting of produce on farms. Applicants are encouraged to utilize these funds for planning, infrastructure building, training and education, and other related activities.

U.S. ALMOND EXPORTS US Exports of Almonds 2014 to 2015 (Port Districts) $6 2015 Value

2014 Value

$5 $4 Billions

U.S. export values of almonds grew by over 13 percent from 2014 to 2015 and totaled more than $5.1 billion. The port district of San Francisco, Calif. exports about 74 percent of all U.S. almonds, which totaled over $3.8 billion in 2015, an 11 percent increase from 2014. California’s drought may have something to do with the significant increase in total value as the state produces 80 percent of the world’s almond supply.

$3 $2 $1 $0

Source: Datamyne.com Source: Datamyne.com

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FOOD LOGISTICS | APRIL 2016

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San Francisco, CA

Los Angeles, CA

Total

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Visit your local Isuzu dealer for details. WWW.ISUZUCV.COM

Vehicle shown with optional equipment, some equipment is dealer installed. The FTR model shown is a prototype and Isuzu Commercial Truck of America, Inc. reserves the right to make changes or discontinue at any time, without notice, colors, materials, equipment, specifications and models. The Isuzu FTR is expected to go into production mid-2017. This vehicle is assembled from component parts manufactured by Isuzu Motors Limited and by independent suppliers who manufacture such components to Isuzu’s exacting standards for quality, performance and safety. Truck body represented herein is a product of Morgan Corporation. Please see your authorized Isuzu truck dealer for complete details. Copyright © 2016 Isuzu Commercial Truck of America, Inc.

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SUPPLY SCAN

NEWS FROM ACROSS THE FOOD SUPPLY CHAIN Daily Updates at FoodLogistics.com

The U.S. Department of Agriculture’s Food Safety and Inspection Service (FSIS) has proposed a rule that would consolidate and streamline existing regulations for meat and poultry products. The rule would eliminate redundant trichinae control requirements for pork and pork products and consolidate regulations for thermally processed, commercially sterile meat and poultry products. FSIS is seeking comment on this rule. This rule is a supplement to the 2001 FSIS proposed rule to establish food safety performance standards for all ready-to-eat and all partially heat-treated meat and poultry products.

Dematic Acquires NDC Automation In Australia And New Zealand Dematic, a global supplier of integrated automated technology, software and services to optimize the supply chain, acquired NDC Automation, a provider of automated guided vehicles (AGVs) and software in Australia and New Zealand. NDC Automation will operate under the trade name NDC Automation for a transition period locally, and globally as Dematic, and will continue to deliver AGV solutions for Dematic customers. Ulf Henriksson, Dematic president and CEO stated, “We are pleased to announce the acquisition of NDC Automation, which enhances our ability to design, deliver and deploy global AGV solutions that move, store and/or retrieve goods.” Image courtesy of the Dematic Facebook

USDA Seeks To Streamline Meat And Poultry Rules

FDA Issues Final Guidance On Acrylamide Levels In Food The U.S. Food and Drug Administration (FDA) has issued final guidance to the food industry to help growers, manufacturers and food service operators take steps to reduce levels of acrylamide in certain foods. Acrylamide is a chemical that may form in certain foods during high-temperature cooking, such as frying, roasting and baking. The National Toxicology Program (an interagency program that evaluates possible health risks associated with exposure to certain chemicals) characterizes the substance as “reasonably anticipated to be a human carcinogen.” Efforts to reduce acrylamide levels are already under way in many sectors of the food industry.

U.S. Opposition Grows Against China’s Bid For Pesticide/Seed Giant Syngenta AG U.S. opposition to the largest acquisition by a Chinese company is growing, with a top farm state senator saying the $43 billion takeover of seed giant Syngenta AG could pose risks to the security of America’s food supply, according to The Wall Street Journal. Charles Grassley, R., Iowa, launched a public broadside against China National Chemical Corp.’s planned deal, saying that the government must ensure that “we’re not permitting the sale of too much of our food industry, especially when government-controlled entities like ChemChina are the buyers.” Grassley said a bipartisan group of senators would seek a formal role for the U.S. Department of Agriculture as the Treasury-led Committee on Foreign Investment in the U.S. (CFIUS) carries out a national security review of the proposed ChemChina-Syngenta deal. Lawmakers want food security and safety implications analyzed, Grassley said.

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C&S Wholesale Grocers Inc. To Acquire Edsung Foodservice Co. In Hawaii C&S Wholesale Grocers Inc.’s wholly-owned subsidiary Hawaiian Housewares Ltd. has signed an asset purchase agreement to acquire the operations of Edsung Foodservice Co., located in Honolulu, Hawaii. The sale is expected to close in late April 2016, at which point the Edsung business will be consolidated into the Hansen Distribution Group, a division of Keene, N.H.-based C&S Wholesale Grocers, providing operational efficiencies, increased purchasing power and product breadth, and opportunities for continued growth.

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FOOD ON THE MOVE

LOGISTICS TRENDS IN OUR INDUSTRY

PANAMA TO OPEN EXPANDED CANAL ON JUNE 26 Panama will inaugurate its newly expanded canal on June 26, nearly two years behind schedule, the head of the state canal authority said recently. “With the inauguration of this project, we will claim once again our historic vocation as a route of transit and a meeting point of

civilizations,” the Canal Authority’s CEO Jorge Quijano said at a ceremony alongside Panama’s President Juan Carlos Varela. The multibillion-dollar project had originally been scheduled to end in October 2014 but has been successively pushed back. It has suffered construction and

labor problems, legal issues and the discovery of fissures in one of the widened locks. Work to enlarge the 50-mile (80-kilometer) long waterway to handle more

U.S. EASES RESTRICTIONS ON TRAVEL AND COMMERCE TO CUBA The Obama administration announced it would allow individuals to travel to Cuba for “people to people” educational trips and lift limits on the use of American dollars in transactions with Cuba, wiping away stiff restrictions on travel and commerce, according to The New York Times.

traffic and bigger cargo ships started in 2007. The project’s cost is estimated to have ballooned from an initially budgeted $5.3 billion to around $7 billion.

The change punctures a major element of the American embargo against Cuba, which remains in effect despite Obama’s repeated calls for its repeal. The Republican-led Congress has shown little interest in lifting it. While tourism is still barred by statute, the new rules amount to permission for any American who wants to travel to Cuba to plan an educational sojourn there, as long as they keep records of their activities for five years.

DAT SOLUTIONS’ MONTHLY FREIGHT REPORT

The Law Of Spot Market Averages Mark Montague is industry rate analyst for DAT Solutions, which operates the DAT network of load boards and RateView rate-analysis tool. He has applied his expertise to logistics, rates and routing for more than 30 years. He is based in Portland, Ore. For information, visit www.dat.com.

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On the refrigerated spot truckload freight market, three is a magic number. As a general rule, where there are three loads for every truck available on the DAT network of load boards, spot market rates begin to tip in the carrier’s favor. The market is getting there. By March 19, 41 states had reefer load-to-truck ratios of 2.3 or higher. The national average reefer rate had risen 2 cents compared to the previous week at $1.83 per mile. We’ve come to expect higher rates and demand this time of year, when produce harvests are in swing. But an average is just that—a central value in a set of data. There are still plenty of lows to balance out the highs. When your livelihood depends on a profitable load, you want to avoid the soft spots and go where the money is. One region sets the pace when it comes to demand and rates right now: the Southeast.

FOOD LOGISTICS | APRIL 2016

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By Mark Montague

Looking at the week of March 13 to19, rates were up on every major lane out of Miami, Fla., gaining an average of 6 cents per mile compared to the week prior. Lakeland added 7 cents and averaged $1.38 a mile. Rates between Miami, Fla. and Atlanta, Ga. rose in both directions for a roundtrip average of $1.96 a mile, up 36 cents. Elsewhere, demand was mixed.

Average spot reefer rates were unchanged out of Los Angeles ($2.30 a mile) and generally lower in California. McAllen, Texas—the top source of reefer load posts on DAT load boards since the start of the year—dropped 4 cents to an average of $1.82 a mile. And rates from major Midwestern hubs were down: Chicago was off 5 cents to an average of $2.02 per mile. When it comes to prices and demand for capacity, national averages are great indicators of where markets are heading. But during a seasonal shift where regions are heating up at different rates, a full-featured load board can help you find the best load-totruck ratios and pricing on a lane-by-lane basis. As we wait for the rest of the United States to catch up, most of those lanes are in the Southeast.

www.foodlogistics.com

4/5/16 11:05 AM


FOOD ON THE MOVE

LOGISTICS TRENDS IN OUR INDUSTRY

VERSACOLD LOGISTICS SERVICES BUYS COASTAL PACIFIC XPRESS VersaCold Logistics Services, Canada’s largest supply chain solutions company focused on the handling of temperature-sensitive products, has entered into an agreement to acquire Coastal Pacific Xpress, British Columbia’s largest refrigerated carrier specializing in the shipping of perishable and ambient products throughout Canada and the United States. The acquisition comes just one month after the announcement of VersaCold’s acquisition of Gary Heer Transport and the launch of its newest subsidiary, VersaCold North America Transportation Solutions Limited.

OCEAN CONTAINER WEIGHT RULE TO BOOST RATES In an assessment of a rule that has roiled the container shipping world, Cowen and Co., a New York Citybased financial services firm, said the total cost of shipping an ocean container from Los Angeles to Shanghai could increase by approximately 14 percent because of the extra time and expense that shipping lines and their customers face, according to The Wall Street Journal. Those costs may include fees for weighing shipping containers and charges for holding goods while information on the goods is collected and verified.

NORFOLK SOUTHERN SERVICE LINKS PORT OF CHARLESTON TO CHARLOTTE INTERMODAL FACILITY South Carolina Ports Authority (SCPA) announced an enhancement to international intermodal rail service between the Port of Charleston and the Charlotte Regional Intermodal Facility at the Charlotte Douglas International Airport. The new, two-day Norfolk Southern service will operate five days per week connecting Charleston and Charlotte using existing dedicated intermodal trains. “This dramatically improved containerized rail service between Charlotte and the Port of Charleston is the result of collaboration between the Norfolk Southern Railway and the South Carolina Ports Authority,” said SCPA President and CEO Jim Newsome.

TOTAL TRANSPORTATION SERVICES FILES FOR BANKRUPTCY Premium Transportation Services Inc., known locally as Total Transportation Services Inc. (TTSI), one of Southern California’s largest port trucking companies, filed for Chapter 11 bankruptcy protection in federal court in Delaware. The company said in a court filing that “downward pricing pressure from some of its major clients over the past year” along with mounting costs of litigation with independent drivers had proven more than it could manage. TTSI has lost nearly a dozen misclassification claims before the California Labor Commission and 14 lawsuits in state court, which amounted to roughly $3.5 million in awards and damages. Legal fees for those cases, along with several other lawsuits currently proceeding before the commission and the courts, have cost the trucking company an additional $4 million, according to the bankruptcy filing.

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COOL INSIGHTS

BY JAMIE OVERLEY

UTILIZE 3PL SALES TO BUILD YOUR COLD CHAIN T OVERLEY

3PLs can be strategic partners in helping overcome today’s challenges.

14

he ongoing rebound of the ways to cut down on the amount of U.S. economy has given way time inventory is sitting in a wareto a period of rapid change house. While manufacturers are within the third-party logistics (3PL) finding it can be more economical to sector. Arguably more diversified run larger production cycles based and sophisticated than ever, the 3PL on customer buying habits, 3PLs sector is seeing an emergence in are experiencing more ebbs and more 4PL partnerships, resulting in flows from a labor standpoint, since deeper, more strategic relationships. larger production cycles signifiThere are, however, a set of challeng- cantly alter the way in which freight es to which no 3PL is immune—from moves in and out of the warehouse. greater reliance on just-in-time This means 3PLs are dealing with inventory and the increasing role a higher volume of goods in a more of and reliance on technology, to compressed time period, leading to congestion at the ports and the truck worker/productivity challenges and driver shortage. congestion at the ports. As a result, today’s 3PLs face some The widespread truck driver serious obstacles when it comes to shortage issue also plays a role in moving products efficiently through that 3PLs must identify tactics to enthe supply chain. Today’s cold chain sure drivers feel valued, appreciated manufacturers need a 3PL partner and motivated during the downtime with a comprehensive solution— Cargo Owner someone who can demonstrate the (Manufacturing, Retailing) expertise of being able to provide all Carrier of the necessary resources from a (Transportation) business, operational and IT standpoint in the most effective, costLogistics service provider efficient manner. (Logistics) For example, does the 3PL provide Lead logistics providers data metrics throughout the day, & consultants week, month? Do they have an (Supply chain management) infrastructure in place that allows them to be flexible should different between manufacturer production needs arise? Is the 3PL equipped cycles so they aren’t tempted to to handle adversity and challenges jump ship and seek employment that pop up —from internal manuelsewhere. facturer issues to weather-related Finally, to stay competitive, 3PLs problems? How are they handling must be continually investing in the general industry challenges like the technology infrastructure necessary reliance on just-in-time inventory to provide cold chain manufacturers and the truck driver shortage? with the critical, real-time information they need and want regarding What manufacturers their supply chains. are looking for today To succeed, logistics companies Most manufacturers—cold chain must clearly communicate their included—don’t want to carry invenvalue proposition to stand out in tory, and as a result, are looking for the marketplace as not just another

FOOD LOGISTICS | APRIL 2016

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warehouse, but rather as a strategic partner and critical component of the cold chain. Additionally, they must work to drive more 4PL type partnerships and serve as an integrated, end-to-end solution. This is especially important because cold chain demands for 3PL services in the United States extend beyond a single distribution point, which means cold chain manufacturers are increasingly looking for a one-stopshop with greater integration of supply chain partners so they can focus on other priorities.

What makes a strategic partner? Logistics companies that can consolidate all operational and customer service functions through a united platform also will be able to handle larger cold chain man1PL ufacturers whose supply chains are more diverse and complex. 2PL As technology continues to play a 3PL larger role within the 3PL sector 4PL —especially as cold chain manufacturers have an increased demand for upto-the-minute information with the click of a button—it’s important that customer service remains a priority. Logistics companies that commit to customer service excellence by cultivating a skilled and helpful team that is always at the ready to assist with a supply chain question or issue can further differentiate themselves in the marketplace. Jamie Overley is CEO of East Coast Warehouse & Distribution based in Elizabeth, N.J.

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COVER STORY Transparency

BY KATIE MOORE

T E R C E S NO : S T THE N E I D E INGR IMPORTANCE

OF TRANSPARENCY RING IN FOOD MANUFACTU

Regulators and consumers demand greater transparency from food manufacturers.

The costs of

processing transparency initiatives are often offset by the operational efficiencies gained by using visibility to improve supply chain processes.

16

H

ow many times have you read the label of your favorite food and wondered, “What is really in this?” Today, more than ever before, consumers are thinking about food—from how it’s produced and what’s in it, to where and when they eat it. They are also increasingly prone to anxiety about food safety, and that’s no wonder, with reported foodborne illnesses hitting the news seemingly every day. Globalized supply chains, digitalization and stronger reporting of food safety scares have all led consumers and regulators to demand greater transparency from food manufacturers. In fact, a recent survey revealed that consumers hold food companies the most responsible for showing transparency, more so than farmers, grocery stores and restaurants. For food companies, this means that food manufacturing transparency has become an even more critical area of focus to ensure both compliance and customer satisfaction. Transparency has now become a watchword in the food industry as stakeholders are becoming more and more concerned with the quality and source of finished goods.

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However, many food companies do not have a clear understanding of what transparency means, why to pursue it, what it involves or how to improve it. How can a food manufacturer tackle such a huge issue? For food manufacturers that utilize the Industrial Internet, the possibilities to ensure transparency are endless. From the capability to conduct powerful and speedy data analysis, to end-to-end traceability on all production lines, any modern food manufacturer should be considering a move into the Industrial Internet if they want to stay competitive both on the factory and store floor.

Transparency in processing Transparency starts with your own food manufacturing operations.

Although this may sound easier than sifting through the multiple levels of supply chain transparency, in fact, it can be quite challenging. Food manufacturers may have a good grasp of all their workflow processes, but it’s also important they have the ability to make appropriate information available in real-time to regulators, consumers and internal food safety personnel. A key first step to obtaining the necessary real-time information for transparency in processing is to conduct an internal audit to certify that proper food safety practices are being abided by and reported on. Transparency requirements in food processing are now becoming stricter with the U.S. Food and Drug Administrations’ Food Safety Modernization Act (FSMA). In addition to mandating expanded record keeping with food companies, the FSMA will give the FDA greater access to company records. Accordingly, it’s critical that additional attention is devoted to how food manufacturers track lots, record their manufacturing processes, and share information both within their organization and with key stakeholders. However, there’s good news for food manufacturers—the costs of processing transparency initiatives are often offset by the operational efficiencies gained by using visibility to improve supply chain processes. www.foodlogistics.com

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Examples include: eliminating workflow steps and outside vendors in the supply chain, verifying the efficiency of practices upstream, preventing product counterfeits, maintaining sustainable and environmentally friendly practices, and smoothing price volatility by working directly with suppliers instead of using middlemen. Additionally, manufacturers can make process improvements by linking production data to quality and food safety data—something that is not widely done.

Transparency in the supply chain The recently-passed FSMA greatly expands the power of the FDA to require transparency from food companies, including detailed record sharing, stricter supplier verification, and product tracking farther along the supply chain. Instead of being required to trace the supply chain only one step back and one step forward, as is the rule under current regulations, it’s safe to assume that

in the future, companies will be required to go two steps backward and forward—or possibly even farther. Some basic elements of supply chain transparency for FSMA compliance include: conducting an analysis of your supplier’s facilities, drafting a sufficiently detailed partnership agreement, mandated inspections and ongoing audits. However, online platforms have emerged for retailers and suppliers to communicate and share best practices to improve their systems, increase transparency and meet FSMA regulations. Food manufacturers should also invest in supply chain management software that maintains sufficient monitoring of their products and provides accurate records for the FDA and state government officials. Cloud-based technology now exists to help food manufacturers meet FSMA requirements while working to prevent outbreaks and quickly limiting situations when they occur. This technology goes beyond just storing digital copies of documents —it helps to manage compliance with exception-based alerts for expired, missing or inaccurate records.

Keep in mind that responsible and transparent supply chains can be costly to implement and can force difficult business decisions for the food manufacturer. For instance, look at the legislation around mandatory labeling laws for foods that contain genetically modified organisms, often called GMOs. This has not been passed in all the states, but if passed, it could mean extremely costly labeling and processing changes (including better tracking GMOs through the supply chain) for food and beverage manufacturers. Today, even the most basic food can involve suppliers around the world, so the bottom line for food companies lies in knowing and trusting the organizations they’re doing business with. It’s important for food manufacturers to partner with suppliers who value transparency as much as they do themselves. They also must be prepared to communicate with stakeholders about these supplier relationships in order to fulfill transparency expectations. Food manufacturers must prepare to dedicate more time to evaluating and nurturing relationships with

Food manufacturers must prepare to dedicate more

time to evaluating and nurturing relationships with their suppliers, including making sure all regional and international laws are being upheld.

CONSUMERS PRIMARILY HOLD FOOD COMPANIES RESPONSIBLE FOR TRANSPARENCY FOOD COMPANIES

FARMERS

GROCERY STORES

RESTAURANTS

IMPACT OF FOOD ON HEALTH

FOOD SAFETY

ENVIRONMENTAL IMPACT

Respondents allocated 100 points across the groups responsible for providing information in each transparency topic. The numbers shown are the average number of points allocated to each group, across all respondents.

LABOR & HUMAN RIGHTS

ANIMAL WELL-BEING

BUSINESS ETHICS Source: THE CENTER FOR FOOD INTEGRITY

www.foodlogistics.com

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TRANSPARENCY continued their suppliers, including making sure all regional and international laws are being upheld. It is especially important for partners to have the same sense of urgency, because when a food contamination risk is present, everyone must react accordingly. Failing to do so, or to escalate quickly, puts both consumers and brands at risk—how one company reacts can be very different than another in timeliness. We had an issue once where an ingredient supplier notified our corporate offices of an issue on the weekend—but our corporate offices were closed. We ended up using the

potentially contaminated ingredients to produce that weekend. Fortunately, the finished goods hadn’t left the warehouse, but it could have been avoided if both companies had escalation plans that included what to do outside of regular business hours.

Transparency in marketing The desire for transparency has been created in a technological culture where feedback moves fast, access to information is easy and open sources are expected.

Consumers have always had a voice but now, thanks to social media, they can make their voice resonate internationally and in real-time. Although the requirements of transparency may sound like a burden for food manufacturers, they also represent a powerful marketing opportunity. Consumer desire for transparency in food means those food companies that can provide transparency grow in consumer esteem and, ultimately, brand equity. It’s important for food companies to make sure that whatever is promised and marketed to its cus-

IS THE U.S. FOOD SYSTEM HEADED IN THE RIGHT DIRECTION OR DOWN THE WRONG TRACK?

RIGHT DIRECTION

UNSURE

31%

40%

40%

31% 41%

49%

38%

33%

28%

50%

37% 33%

20%

28% WRONG TRACK

31%

27%

32%

32%

EARLY ADOPTERS

MOMS

23%

ALL

WOMEN

MEN

26%

30%

MILLENNIALS

FOODIES

Source: THE CENTER FOR FOOD INTEGRITY

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TOP 5 TRUSTED INFORMATION SOURCES:

TRANSPARENCY continued

GRITY

FOOD INTE

i

Source : THE C ENTER FOR

tomers is actually delivered. Nothing makes a customer lose faith in a company faster than false promises made to sell them a product. Not keeping promises can also harm food manufacturers because unhappy customers tend to be more vocal in their complaints than satisfied ones. Food companies need to tailor how they market transparency to each stakeholder, rather than treating all of them in the same manner—and this can only be achieved through feedback. Food companies often measure how satisfied its stakeholders are by using communication methods such as surveys and polls. For example, a food manufacturer may feel it’s doing an excellent

job of maintaining transparency with its customers, but unless there is direct input from the consumers Websites (21%) are the themselves, top-ranked source of there may be a information for food system jarring disconnect. issues followed by Feedback Local TV (15%), on transparFamily Not Online (13%), ency efforts also can Friends Not Online (13%) be used and Google (10%). by food manufacturers to target new consumers and partners. For instance, once a food company knows the sources for its raw materials and how they are handled ing campaign based on company through its facilities, it has the nexus transparency and the pride it takes in of creating a new, focused marketits product.

PREDICTIVE MAINTENANCE TECHNOLOGY CAN PREVENT RECALLS By Paul Lachance

Earlier this year, Dole Food Company recalled its branded and label-packed salads after consumer reports of Listeria infections. By February, dozens of consumers were infected across the United States and Canada, resulting in numerous hospitalizations and a single death. While consumer health hazards are the primary concern when these types of issues arise, the financial costs to correct the problems are enormous. Every year, food product recalls cost the economy about $7 billion, with costs coming from handling lawsuits, getting food off shelves, inspecting plants and repairing public relations. To make matters worse, not only must these companies completely remove their products from the shelves, but they also risk permanent harm to customer brand loyalty. A recent survey found that 15 percent of consumers will never purchase a recalled product again. What’s more, nearly one in five will avoid the product’s manufacturer altogether. Advancements in maintenance technology can prevent many of the health and financial risks posed by these recalls. For food and beverage businesses, predictive maintenance can prevent foodborne illnesses, avoid product recalls and keep consumers safe and healthy. But even preventive maintenance approaches that rely on calendar-based processes can leave food manufacturers at risk. Manually monitoring a piece of equipment once or twice a month still does very little to prevent unexpected issues from occurring. Once a food product spoils, it immediately becomes a widespread health and financial issue, even if it’s identified immediately. The best approach to food and drug maintenance lies with predictive technology. Modern computerized maintenance management systems (CMMS) can integrate with equipment monitoring and data collection systems, which feed data to CMMS in real time to alert maintenance staff when assets are functioning at inadequate levels before a serious issue occurs. The system can also record a maintenance request or create a work order, assigning it based on pre-established parameters and rules.

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For example, temperature sensors can feed values through the cloud into a CMMS system and issue a notification when the temperature has dropped a degree, informing staff that the asset is at risk of having sanitation issues and that a technician should take a look before it becomes a health problem. At the end of the day, predicting this temperature change and correcting the problem before it becomes unsanitary is absolutely necessary to prevent a major health crisis. CMMS can also help food and beverage manufacturers stay ahead of audits. Even if a sanitary issue does occur, businesses can leverage the CMMS’ occupational safety and health solution to document incidents and previous inspections, and present all of the necessary information to pass audit checks with ease and remain in business after the issue has been corrected. For example, if auditors come to inspect a facility after a recall, they will look at the bigger picture of what’s happened within a facility, while also drilling down to the details. They’ll want to see exactly which pieces of equipment were addressed for the specific issue at hand, the technician who handled the jobs, and the exact dates and times these key events occurred. A CMMS can show executives all of this date/time-stamped data at the click of a button for greater compliancy and ease of management, as opposed to fumbling through spreadsheets and notebooks. While a CMMS may not save you entirely if you’ve made a human error or a legitimate mistake that caused a foodborne outbreak, having that history and access at your fingertips will go a long way in helping those high-pressure audit situations. Poorly maintained equipment can lead to inferior or unsafe products that can have serious health implications on consumer health. At the end of the day, it can be a question of life and death. One of the best ways to prevent these issues today is by using smart technology that monitors key assets in real time and alerts maintenance teams before it’s too late. Paul Lachance is president of Smartware Group Inc., a provider of computerized maintenance management systems in Center Harbor, N.H.

www.foodlogistics.com

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Tips to get transparency started Even supply chain executives who understand the importance of transparency may struggle to prioritize activities and build a transparency process. Creating a high-level road map of both supply chain workflows and internal operations is a key first step. Food manufacturers can begin this process by identifying, prioritizing and visualizing potential supply chain risks and highlighting information gaps. Food manufacturers must also build checkpoint systems to ensure they are in compliance with all regulatory regimes where their product is consumed, including regular verification procedures. Once again, extensive collaboration and cooperation throughout the supply chain is necessary to make sure these systems operate effectively. Food companies should work with their partners in the supply chain both up and downstream to enhance communication so that all members of the chain understand the risks associated with a safety failure. Finally, food manufacturers need to analyze the big data gained from the transparency process for actionable insights and put in place mechanisms to monitor the supply chain for additional information going forward. A food manufacturer that scans its ingredients and batch numbers throughout the supply chain is able to show “end-to-end” traceability and collect invaluable data along the way. This data can be analyzed for historical patterns that alert a food company to locate the source of a potential pathogen outbreak or flawed ingredient before a recall is needed.

The demand for transparency in food manufacturing will only increase In the Center for Food Integrity’s (CFI) 2015 research, consumers were asked if the U.S. food system is headed in the right direction or down the wrong track—the fourth year the question has been posed. Forty percent said “right direction”—a slight dip from 2014 but up significantly from 30 percent in 2012. It’s encouraging that many of the new approaches to supply chain management have the potential to be employed by producers and suppliRather than viewing ers, large or small, and regardless of transparency as a whether the ingredients in question challenge or burden, are produced in vast or minuscule food manufacturers quantities. It doesn’t happen overcan leverage the night, but with the use of technology opportunity to and the application of clear standards, identify potential operational the food industry is on the path to improvements, promote enhanced safety and clarity regarding good corporate citizenship, the ingredients used throughout the reinforce the strength of supply chain. Rather than viewing their brands and potentially transparency as a challenge or burminimize the impact of den, food manufacturers can leverage future events the opportunity to identify potential operational improvements, promote good corporate citizenship, reinforce the strength of their brands, and potentially minimize the impact of future events. The ability to show transparency throughout the supply chain, from farm to fork, will continue to truly be a food manufacturer’s biggest competitive advantage. Katie Moore is the industry marketing manager for GE Digital’s food and beverage manufacturing practice. A former plant manager, Moore has managed plant operations for Bimbo Bakeries USA, Sara Lee Corp. and Anheuser-Busch. She can be reached at Katie.Moore@ge.com. www.foodlogistics.com

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FEATURE CHIPOTLE

BY ELLIOT MARAS

CHIPOTLE Unexpected foodborne illnesses push Chipotle to tighten controls as safety technology advances.

F

rom its beginnings 22 years ago, Chipotle Mexican Grill set out to raise the bar in delivering fresh, sustainable, locally sourced food to U.S. customers. In the course of establishing close to 2,000 restaurants, the company gained customer trust with its commitment to transparent product sourcing, becoming a market leader in the rapidly growing fast casual segment. Little did Steve Ells, chairman and co-CEO, know that he would also be tasked with raising the bar for food safety to ensure the company’s survival in the wake of E. coli and norovirus outbreaks that took the company by surprise. Ells told investors in February that, while Chipotle prided itself on its safety, the customer illnesses that began in October showed it needed to improve. In December, the company announced what it described as a pioneering safety program designed by Mansour Samadpour, Ph.D., Chipotle’s CEO of Lake Forest Park, fresh Wash.-based IEH Laboratoproduce ries and Consulting Group. from local Chipotle’s response to the farms (2015)

12%

22

STRIKES BACK

outbreaks signifies challenges that the food industry as a whole faces in the modern environment. Improved transportation networks and a more globalized marketplace have extended many companies’ supply chains. Chipotle is one of many companies responding to consumer demand for fresher, locally sourced product. Manufacturers, distributors, retailers and restaurants continue to switch to more natural foods with fewer artificial ingredients. Chipotle’s new safety program components include: • High-resolution testing of all fresh produce in which a series of DNAbased tests ensure the quality and safety of ingredients before transporting them to restaurants. • End-of-shelf-life testing in which ingredient samples are tested to ensure quality specifications are maintained throughout the ingredient’s shelf life. • Continuous improvement throughout the supply chain using data from test results to strengthen the ability to monitor supplier performance. • Improved training to ensure employees understand the company’s food safety standards.

On its website, the company notes it is testing samples of some of its produce using high-resolution methods. High-resolution testing refers to taking a large number of samples from a small amount of ingredient. This reduces the chance that unsafe product goes undetected. The company retained IEH Laboratories to identify opportunities to enhance food safety practices throughout its operations—from the farms that supply its food to its restaurants that prepare and serve it. The website notes that more ingredients will be prepared in central kitchens rather than in restaurants. This ensures they are free of germs and minimizes the chance that they will acquire other germs while they are prepared in restaurants. Other safety practices include marinating chicken and steak only in the evening after other fresh ingredients are put away, preventing the chance that the meat will have germs from other ingredients. Chipotle suspected the source of the E. coli was beef imported from Australia, which it believed spread to other ingredients through cross-contamination, according to people familiar with the matter interviewed by The Wall Street Journal. Federal authorities, who suspected produce as the likely cause, said cross-contamination was unlikely,

FOR MORE INFORMATION: Aptean, aptean.com | BRC Global Standards, brcglobalstandards.com | Centers for Disease Control and Prevention, cdc.gov | Center for Innovative Food Technology, ciftinnovation.org | Clear Labs, clearlabs.com | Disaster Recovery Institute International, drii.org | Global Food Safety Initiative, mygfsi.com | GS1, gs1us.org | IBM Accelerated Discovery Lab, research.ibm.com | IEH Laboratories and Consulting Group, iehinc.com | Kellogg School of Management at Northwestern University, kellogg.northwestern.edu | National Restaurant Association, restaurant.org | NSF International, nsf.org | Park City Group, parkcitygroup.com | Produce Marketing Association, pma.com | ReposiTrak, repositrak.com | Rutgers Food Innovation Center, foodinnovation.rutgers.edu | Sample6, sample6.com | Thermo Fisher Scientific, thermofisher.com

FOOD LOGISTICS | APRIL 2016

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www.foodlogistics.com

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• Chipotle

Photo Credit: Chipotle Mexican Grill, Inc

and that Chipotle’s distribution records did not establish a link between Australian beef and the restaurants where people became ill. Chipotle did not drop the Australian beef supplier, but said it was testing meat for pathogens before it arrived at restaurants. Chipotle in January said that restaurants used to transfer arriving raw beef and chicken to bowls, and workers hand-rubbed it with adobo spices before marinating it in refrigerators and cooking it. The company recently altered the practice so that employees would add the rub in sealed bags so as not to directly handle any raw meat. Workers would marinate chicken and beef after restaurants closed to prevent contamination with food prepared during the day, the company stated on its website in February. In March, the website only mentioned that raw chicken is marinated at night, making no mention of beef. There will also be weekly restaurant inspections by trained field

leaders, multiple annual inspections by corporate safety teams, independent health inspections and government inspections. The plan also addresses the need to ensure growers have the resources to meet safety standards. About 12 percent of the company’s fresh produce came from local farms in 2015. To ensure these growers have the training and technology needed, Chipotle allocated $10 million to its Local Grower Support Initiative.

suspected E. coli came from beef imported from Australia. The company did not drop its beef supplier, but is testing pathogens before delivering it to restaurants.

One question hovering over Chipotle’s initiative is the fact that the cause of the E. coli remains unknown. A company spokesperson told The Wall Street Journal in February that it will probably never know for sure what caused the outbreaks, which is why the company is taking significant safety measures. Jack Payne, vice president of solution consulting at Aptean, an Alpharetta, Ga.-based provider of enterprise resource planning sys-

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CHIPOTLE continued tems, thinks it’s premature to think that Chipotle’s local sourcing program caused the foodborne illness. “It could happen to any restaurant chain,” he says.

Is local sourcing at fault? Payne notes that the business model of shipping ingredients to central kitchens and direct to restaurants is not new in the food supply chain. Nor does he think Chipotle was managing an overly ambitious number of products. Like any food company, a restaurant chain has to oversee the certification of its suppliers, the safe practices of its employees and the training of its employees. Some suppliers may need more training than others. Payne says a restaurant chain has the opportunity to have a more connected supply chain than some other players in the food industry, such as processors that deliver to a larger and less uniform customer base.

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Supply chain traceability intact? Supply chain traceability, an element in food safety planning, came into question for Chipotle when a Centers for Disease Control and Prevention (CDC) official told The Wall Street Journal in February the company’s distribution records posed a challenge. The official declined to be specific, but said having traceability from field to slaughterhouse to restaurant can facilitate traceback, and that Chipotle articulated plans to make that system more robust. In September 2015, a month prior to the first reported E. coli incident, Food Logistics reported on Chipotle’s cloud-based supply chain solution to track and manage data. The article noted the company’s suppliers and distributors already provided GS1’s Global Trade Item Numbers (GTINs) for each product destined for Chipotle kitchens. The system allows Chipotle to trace produce to the packing house from where it was shipped or to the field where it grew. The company said it improved efficiencies in quality assurance and logistics, along

with providing real-time visibility of product at each step in the supply chain. Hence, the company claimed it established a comprehensive traceability solution prior to the 2015 outbreaks.

Comprehensive traceability In early February 2016, Monty Moran, Chipotle co-CEO, told investors the company was completing a comprehensive food-tracing system that would allow it to locate each ingredient from its source, such as the individual farm where it was produced, through its distribution system and individual restaurants, in real time. The system uses barcodes on each package for every ingredient. The ingredients get scanned at the source and at each point in the supply chain. The investor remarks in February indicate the company improved its traceability initiative following the outbreak. The traceability program, however, is only one part of the overall safety plan. Other aspects of the plan are new for the company.

Safety experts weigh in Food safety experts interviewed by Food Logistics recognized the improvements Chipotle is making in its food safety program, but pointed out that the program will only be as good as its execution. Most noted www.foodlogistics.com

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Photo Credit: Chipotle Mexican Grill, Inc

• More ingredients will be prepared

in central kitchens to ensure they are free of germs and minimize the chance that they will acquire other germs.

that Chipotle charted new territory in expanding its commitment to freshness and local sourcing, and left itself vulnerable to more contamination opportunities. “It’s a constant balancing act in terms of where you invest,” says Chloe Demrovsky, executive director for New York, N.Y.-based Disaster Recovery Institute International (DRI), which is a non-profit that helps organizations prepare for and recover from disasters. This is especially challenging for a company using a large number of suppliers, some of which are likely to change periodically. “When you add complexity to a process or a program, there is potential for an elevated level of supply chain risk,” she says. “Organizations need a program to constantly manage the risk and its effects as they emerge, especially as the suppliers are constantly changing.” Experts offered mixed views about the challenges posed by sourcing from local farms. “The more local we become, the greater the chance that good agricultural practices aren’t being followed,” says Randy Fields, chairman and CEO of Park City Group and ReposiTrak, a Salt Lake City, Utahbased compliance management and www.foodlogistics.com

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track-and-trace solutions provider. “Local doesn’t necessarily mean less safe,” says David Crownover, product manager for the National Restaurant Association’s (NRA) ServSafe restaurant food safety program. He says there are definitely small farms that adhere to Global Food Safety Initiative (GFSI) standards. One aspect of Chipotle’s plan is to move some of the food preparation from restaurants to centralized kitchens. This more centralized approach is meant to reduce the amount of food handling in restaurants. Fields of ReposiTrak says sending product to centralized kitchens adds a step to the supply chain that can undermine the goal of extending product freshness in the restaurants. Food safety experts generally commend Chipotle for committing to more aggressive product testing. Most, however, do not view this as the most important part of a food safety plan. “It’s kind of hard to test your way to food safety,” says Bob Whitaker, chief science and technology officer of the Produce Marketing Association (PMA), based in Newark, Del. While there has been a lot of progress over the years in product testing technology, Whitaker says that, typically, contamination occurs very infrequently and is not uniform, and the levels are very low, so the odds of isolating that product randomly are very small. For testing to be effective, a company needs to suspect a widespread contamination that would permit detection. Food companies also need to consider the possibility of contamination of non-food areas of their operations, Whitaker says. These include water sources, fertilizers, soil amendments, harvest equipment and production facilities. “There are some really good uses for testing,” he says. Producers need to evaluate these opportunities,

set objectives, and make sure they choose the correct tests and design appropriate sampling plans. “Any time you handle food, there’s a risk of cross-contamination,” says Whitaker. “You can’t eliminate all risks. They have to be managed.” Chipotle’s decision to test smaller batch samples help improve chances for detecting infected produce, says Fields of ReposiTrak. But as pathogens become more antibiotic-resistant, he says foodborne illness risks will increase. He echoes nearly every expert interviewed in saying that prevention measures are more critical to improving safety than testing. Safety is a highly cumbersome endeavor, Fields adds. Much of the work is administrative. A company that wants to manage its supply chain needs to keep track of its suppliers’ safety practices and, in some cases, the suppliers’ suppliers. “It’s a paperwork blizzard,” he says.

Typically, contamination occurs very infrequently. It is not uniform and the levels are very low, so the odds

of isolating that product randomly are very small. For testing to be effective, a company needs to suspect a widespread contamination that would permit detection.

Enhanced DNA testing Several experts cite improved testing capabilities as important

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CHIPOTLE continued

IBM PARTNERS WITH MARS ON

SEQUENCING THE SUPPLY CHAIN Aside from rigorous testing along the entire food chain—beginning with the soil at the farm and ending with the consumer—there is little done from an information technology standpoint to circumvent contamination at any point in the process. In a large-scale experiment between IBM and Mars Inc., researchers are harvesting and sequencing the DNA and RNA of food samples to determine where anomalies and mutations occur when paired with common organisms or genes, toxins and heavy metals. Resulting in a “microbial baseline,” or a benchmark representing normal microbe communities, the index produced from this study could provide a standard for food and health officials globally to understand what triggers contamination and the spread of disease. An “informatics” infrastructure (See the story on page 36) developed in the IBM Accelerated Discovery Lab, a data and analytics hub for IBM researchers, and their clients and partners, will help the team parse and aggregate terabytes of genomic data from Mars, and apply decades of refined analytics to uncover new insights. Adding relevant weather, transport and other contextual data could help define a targeted breakout, marking on the index a warning for food producers and distributors at the outset of a processing cycle. The research environment allows experts from both parties to integrate data from multiple sources, and use state-of-the-art bio-informatic algorithms to identify the active genes and metabolic processes in the food ingredients. This allows for identification of anomalies with speed and precision, and the design of new tests and protocols for different food and health processes.

Prevention measures are more critical to improving safety than testing.

26

aspects of food safety. In recent years, restaurant organizations have been relying on their suppliers to handle DNA testing, one of the more recent food safety technologies. Whether Chipotle’s DNA testing, in combination with other aspects of its plan, makes an important contribution to safety is a matter of debate among specialists. Samadpour of IEH Laboratories and Consulting Group, the lab overseeing the DNA testing, told Food Logistics one aspect of the program is that the company will conduct DNA tests of 2,000-pound lots. He says this lot size

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marks a more aggressive test than programs that test larger-size lots. “DNA is the greatest tool we have to ensure the safety and purity of our foods,” according to Danica Harbaugh Reynaud, Ph.D., global director of scientific innovation at NSF International, an Ann Arbor, Mich.-based third-party safety certification auditor. “DNA is arguably the most specific tool for identification of organisms from germs and microbes to plants and animals. It can be extremely sensitive, identifying trace levels of DNA from a wide range of species

in a single sample—from GMOs to allergens and substitute species.” Developing DNA testing capabilities requires a significant amount of cost and time, says Reynaud. However, once developed, the per-sample cost can be very inexpensive. The ultimate price depends on the number of items to be tested, as well as the types of contaminants the client needs as part of its testing. The NRA’s Crownover says DNA testing, which became pervasive in the late 1990s, marked an improvement over the earlier culture-based and biochemical testing methods in terms of speed and effectiveness. However, DNA testing is not foolproof, Crownover says. “There are limitations to product testing,” he says. “You can’t test 100 percent of the product.” Samples have to be enriched and then analyzed. Depending on the pathogen, the initial result sometimes has to be confirmed, which can take as long as five days. In some cases, packaged products are held up in warehouses, losing shelf life. One question about DNA testing for identifying pathogens is the sample size, says Shari Plimpton, Ph.D., vice president and director of food industry programs at the Center for Innovative Food Technology in Toledo, Ohio. No matter how many samples are taken, it is possible to miss an infected leaf. Plimpton, a certified Hazard Analysis and Critical Control Point (HACCP) instructor, commends Chipotle’s plan to test at both harvest and post-washing since contamination can occur during washing. The length of time it takes to determine the presence of any pathogens in a food is also a concern in some situations. Cheryl Mooney, marketing manager at Thermo Fisher Scientific of Waltham, Mass., says polymerase chain reaction (PCR) tests for pathogen detection in foods normally takes around 24 hours to complete due to the target enrichment time required. She notes that PCR testing is most widely adopted in North America, where she estimates 35 percent of pathogens de-

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tected by food manufacturers are discovered using this technology, compared to Asia where the figure would be less than 5 percent. This raises concerns for companies sourcing product from areas that are not conducting these tests.

PCR testing is most widely adopted in North America, where approximately 35 percent of pathogens detected by food manufacturers are discovered using this technology, compared to Asia, where the figure would be less than 5 percent.

Testing has different uses DNA/genotype testing is commonly used in the food supply chain for ensuring that the food processing environment—the food-contact preparation and packaging equipment—is not contaminated with specific pathogenic microorganisms, says Donna Schaffner, associate director of food safety, quality assurance and training at the Rutgers Food Innovation Center in Bridgeton, N.J. Under the Food Safety Modernization Act (FSMA) Preventive Controls for Human Food rule, environmental monitoring generally would be required if there is a likelihood of contamination with an environmental pathogen of a post-lethality exposed, ready-to-eat food prior to the packaging step, which is determined by a hazard analysis to be a hazard requiring a preventive control. John Kukoly, director of BRC Americas at BRC Global Standards, says testing for pathogens is secondary to utilization of food safety management systems that minimize exposure and risk, rather than testing it afterward. BRC conducts audits to certify safety standards recognized by GFSI. Kukoly was one of several experts who cited DNA testing as having more application to expose fraudulent food labeling than for identifying harmful pathogens. Russell Walker, Ph.D., clinical associate professor at the Kellogg School of Management at Northwestern University in Evanston, Ill., agrees minimizing cross-contamination in the

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restaurant kitchens is important. He thinks it is likely the E. coli spread via cross-contamination in Chipotle kitchens. Walker is among those who view DNA testing as having significant use in verifying the authenticity of ingredients. He says this is important in light of the growing amount of

ASIA

NORTH AMERICA

attributes that consumers are looking for. As attributes, such as species, place of origin and GMO content, become more important, the market for fraudulent package claims is increasing. He says that the problem is most pervasive in seafood since consumers are not familiar with how to identify fish species.

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Photo Credit: Chipotle Mexican Grill, Inc

CHIPOTLE continued

• Chipotle raised

the bar when it embarked on using fresh, locally sourced ingredients. As a result, it is charting new territory in safety and traceability.

Testing technology advances

that sequences the DNA of food samples and sends the data to While experts have different views the cloud for analysis. Under this system, it is not necessary for the lab about the way Chipotle is using DNA to know which pathogen it is looking testing, the science is not standing for to identify the sample’s full DNA still. Some say emerging genome secomposition, says Mahni Ghorashi, quencing technology provides more co-founder. The system allows a lab powerful pathogen detection. to identify all pathogens or unexClear Labs, a Menlo Park, pected ingredients in a given sample. Calif.-based lab focused on the food Clear Labs, founded in 2014, supply chain, developed a process adapted next-generation genomic sequencing for the food supply chain, according to Ghorashi. He says this technology, which he calls next-generation sequencing (NGS), is important given the globalization of the food supply chain and the difficulty of tracking ingredients. Ghorashi acknowledges that the NGS test is not as fast as the PCR test, which could be important for some food clients. Ghorashi agrees the technology will find its greatest application in testing products for inaccurate or fraudulent label information. NSF International also introduced an NGS technology, following its acquisition earlier this year of Richmond, Calif.-based AuthenTechnologies. “We have developed a single method for simultaneously testing a food product for all of its ingredients, aller1-800-628-4065 gens, fillers and GMOs,” says www.loadtransfer.net Reynaud. “Therefore, it can

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FOOD LOGISTICS | APRIL 2016

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be used as a routine test from seed to shelf—from the living organisms to the finished products.” Sample6, a Cambridge, Mass.based food safety diagnostic company, offers an on-site test that detects pathogens in seven hours or less. The company claims its “bio-illumination” platform allows it to detect pathogen cells without enrichment. “The problem for retailers/restaurants is that the old testing methods really can’t be done onsite because they require enrichment, which means growing a lot of the pathogen (e.g., E. coli). Or the samples are sent offsite for testing with results received in two to four days,” says Tim Curran, CEO. “That makes it very hard for a fresh, locally sourced ingredients restaurant like Chipotle to keep its restaurants and food well-tested and safe.” Whitaker of the PMA considers whole genome sequencing a significant advancement in pathogen identification. Mooney of Thermo Fisher Scientific says NGS offers many exciting possibilities, some of which are already being employed within the scope of food safety, but it is not yet affordable for routine pathogen analysis. The NRA’s Crownover says the increasing reports of foodborne illness in recent years more likely reflect better detection capabilities. He thinks the food industry is doing a good job working with government to improve safe practices. “It’s all about collaboration,” he says. Whitaker says major improvements in sharing data over the last 20 years is making the food supply safer. He commends the work of the CDC, public health agencies and PulseNet, a CDC communications network. As science progresses, the ability to detect outbreaks will improve. Chipotle raised the bar when it embarked on expanding the use of fresh, locally sourced ingredients. It charted new territory in safety as well as food chain traceability.

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FEATURE NEWPORT AVENUE MARKET

BY ELLIOT MARAS

HOW AN OREGON INDEPENDENT GROCER

SETS THE BAR FOR SAFETY Newport Avenue Market uses technology to support safety along with sustainability.

• Newport Avenue Market has worked with the Food Marketing Institute to ensure compliance with new USDA labeling rules.

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A

nyone who questions the role of the independent grocer today needs to visit Newport Avenue Market, a specialty supermarket in Bend, Ore. that has established a strong local following under its second generation leadership. Independent grocers have always had an advantage in providing personal customer service. But when point-of-sale technology came on the scene in the 1970s, some thought the high cost of this efficiency enhancement would favor the larger grocers and make small players less competitive. And as government regulations expanded over the years, consolidation among food retailers increased. But one of the benefits of information technology is that small, independent companies can still be market leaders, especially those who want to assure customers they follow the strictest safety practices.

Newport Avenue Market has used technology to promote its commitment to safety, along with its dedication to sustainability and serving the local community. All of these factors are important to customers in the Pacific Northwest.

Tapping key resources The specialty grocer has long worked with the Food Marketing Institute (FMI) to stay abreast of safety regulations. Company president Rudy Dory has been a long-time FMI board member. Last year, Hilary Thesmar, the FMI’s food safety director, visited Newport Avenue Market and spent a day examining its operations. CEO Lauren Johnson, Dory’s daughter, was interested in knowing more about FMI’s Food Safety Modernization Act (FSMA) outreach program. The FMI guide includes FSMA requirements for retailers such as Newport Avenue Market that have central kitchens or off-site production; retailers with DCs; and retailers with DCs and truck fleets. The guide includes a list of what critical questions retailers need to be able to answer. Thesmar, in addition to discussing

FSMA, offered Johnson guidance on new USDA labeling requirements. A recent labeling rule mandates marinated products be labeled to indicate all added solutions. Enforcement for this rule has not yet begun. There are more labeling requirements planned, Thesmar advised. Beef that is mechanically tenderized with either a blade or a needle will need to be labeled. In addition, meat that gets grounded in the supermarket will also need to be noted. Newport Avenue Market has since switched package printing equipment so that product labels provide more information. The company sources product from nearly 1,000 vendors, The waste weighing management system from Beaverton, Ore.-based Digimarc accesses cloud-based data and uses a visualization tool to reduce waste. The scale/labeling system is an example of the important role technology plays in improving food safety and meeting safety regulations.

A new safety initiative The grocer recently required that all employees, regardless of position and number of hours worked, obtain

FOR MORE INFORMATION: Digimarc, digimarc.com | Food Marketing Institute, fmi.org | Global Food Safety Initiative, mygfsi.com | NSF International, nsf.org | Safe Quality Food Institute, sqfi.com | U.S. Department of Agriculture, usda.gov

FOOD LOGISTICS | APRIL 2016

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who directly handle food. With this new condition of employment at Newport Avenue Market, all employees are required to have the training, from people working in the office, to checkers, to receiving clerks. Johnson believes the requirement is important given the highlighted food safety concerns and how food safety is communicated to the public in the news. “We feel it is necessary to make sure all of our employees are fully aware of safe food handling practices regardless of their position,” adds

• Grocery manager/

assistant store manager Wade Combs, left, and service deli overseer Greg Boon display their Food Handler Cards. • Employees probe temperatures of all prepared refrigerated food items. • All produce is delivered from an SQF-certified warehouse.

a Food Handlers Card. Food Handler Cards can normally be obtained by completing an online training program approved by the local health department. The newly required Food Handlers Card is to ensure safe food handling among all employees. “As an employee-owned grocer – we feel this is some of the best and most useful knowledge we could require of our employees,” says Johnson regarding the Food Handlers Card. “There are times where we may have all hands on deck during peak hours. As an example, a stocker or receiving clerk may be called upon to help bag groceries—this is where food handlers training is essential in our eyes.” Typically, the only employees required to have a Food Handlers Card at a grocery store are those

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Johnson. “An example, our meat department employees and service deli people have safe food handling top of mind, but what if our box person does not? With this policy in place, the customer experience is consistent throughout their shopping experience. “We hope this policy gives our customers added faith in the job we do for them.” There are other safety measures in place: employees probe temperatures for all refrigerated products; receiving clerks have authority to reject any delivery.

Certified produce suppliers The company requires its produce suppliers to have both government-mandated and

voluntary certifications. “They [Newport Avenue Market] have set the bar for retailing in Bend,” says Matt Neumann, sales manager at the Clackamas, Ore. division of Charlie’s Produce, a Seattle, Wash.-based produce wholesaler, one of Newport Avenue Market’s main suppliers. Charlie’s Produce provides complete product and safety attributes for the market’s expanding variety of fresh produce. The Charlie’s Produce facility is certified by the Safe Quality Food Institute (SQF), based in Arlington, Va., by NSF International, based in Ann Arbor, Mich., and the State of Washington. The SQF certification is a voluntary standard that conforms to the France-based Global Food Safety Initiative (GFSI), which safety experts believe will allow a company to comply with the FSMA. SQF conducts its own annual audit for all Charlie’s Produce warehouses. Portland, Ore.-based United Salad Co., Newport Avenue Market’s other main produce supplier, also has SQF certification. In addition, United Salad Co. sources growers that follow the U.S. Department of Agriculture’s Good Agricultural Practices (GAP).

We feel it “ is necessary to make sure all of our employees are fully aware of safe food

handling practices

regardless of their position” Lauren Johnson, CEO, Newport Avenue Market

Sustainability initiatives On the technology front, the grocer has invested more than $2.5 million in technologies to reduce the store’s carbon footprint in the last few years. Electronic shelf tags from Sweden-based Pricer AB are replacing paper tags. The tags “sleep” at night to conserve energy, allowing batteries to last nearly a decade. The tags also reduce labor since the information can be changed from a desktop. As technology has created new and better ways of operating a supermarket, independent grocers like Newport Avenue Market are showing they can use these new tools to continue to set the bar in the areas of safety, customer service and community leadership.

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CONTAMINATION INSURANCE

BY MATTHEW MCLELLAN AND SYED S. AHMAD

A PRIMER ON

INSURANCE COVERAGE

FOR FOOD CONTAMINATION LOSSES Be prepared: Product contamination poses a worst-case scenario in f&b.

32

F

or businesses involved in the food and beverage supply chain, anticipation of risks is of paramount importance. In addition to the risks inherent in the manufacturing of consumer products in general, players in the food industry have even more to worry about in the production, storage and distribution of their products. For instance, depending on the type of product, environmental conditions in production, storage or transport must be tightly controlled to account for delicate or perishable goods. The production itself needs to be closely monitored to comply with an ever-expanding and evolving regulatory framework. Any adequate risk management strategy necessarily involves insurance. Property insurance can protect against fires and damage to infrastructure. Cargo insurance can protect against loss or damage to consumer goods that occurs during transit. While these risks are significant, a worst-case scenario for a company in the food industry can be loss arising out of contamination. The threat of government investigations, widespread product recalls and consumer lawsuits are only a

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few among the many consequences of a contaminated product line. Risk managers and industry professionals focus on confronting and preventing contamination but often can overlook the type of insurance coverage necessary to protect against contamination. This is understandable given the often opaque insurance policy language and exclusions and the unsettled state of the law that can govern the policies. The question almost every food and beverage industry professional asks when contamination occurs is: Will my insurance cover this? As the insurance industry becomes more specialized, policyholders are confronted with very specific insurance policy options that provide coverage for narrower types of risks than those covered by a traditional general liability policy or fire and casualty insurance policy. However, this specialization can lead to confusion and gaps in coverage.

All-risk policies A company might purchase what is known as an “all-risk” insurance policy as an attempted catch-all to protect against any number of causes of first-party property losses or damage. However, these policies often exclude from the available coverage a number of specific perils —perils that a policyholder might not realize are outside of coverage. Instead, policyholders may be required to seek out specific coverage

for a variety of risks, making any risk management program more cumbersome and labor intensive. Food contamination is often among those perils excluded from allrisk insurance policies. However, in the event of a contamination event, policyholders should not throw in the towel on coverage under an all-risk policy. This is because many all-risk policies contain an exception to the contamination exclusion. This exception applies where there is direct physical loss resulting from other damage that is not excluded by the policy. In other words, coverage for contamination may be available if the contamination was the direct result of a fire, physical damage or defects in a building or equipment, or some other hazard that the policy covers.

A case in point For example, a cheese manufacturer in Colorado experienced a disastrous fruit juice concentrate spill at a warehouse owned by a third party. The spill was so massive that it caused off-flavor in nearly 8 million pounds of cheese. The manufacturer sought insurance coverage under its all-risk policy. The insurer denied coverage, claiming that the policy’s contamination exclusion barred coverage for the spill. However, after the manufacturer filed a lawsuit against its insurer, the judge agreed that the manufacturer would be entitled to coverage if it could establish that the

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contamination was caused by other damage that the policy was designed to cover. The cheese manufacturer maintained that the contamination was actually caused by the deteriorating conditions and poor maintenance of the third-party warehouse—a peril that was within the scope of the all-risk policy coverage. This ruling demonstrates that an all-risk policy might cover food contamination even where such a hazard appears to be excluded. In other cases, however, policyholders have not had the same luck in obtaining coverage for a contamination event from an all-risk policy under the “other physical loss” exclusion. A few years ago, HoneyBaked Foods Inc. was forced to recall and destroy a line of its ham and turkey products after the U.S. Department of Agriculture’s Food Safety and Inspection Service (FSIS) discovered listeria monocytogenes in those products. HoneyBaked traced the source of the listeria to hollow rollers on a conveyor system in one of its facilities. HoneyBaked faced losses associated with the disposal of the products and business interruption while it dealt with the recall. In a lawsuit against its insurer, HoneyBaked sought coverage under an all-risk policy on the grounds that the damage was covered because it was caused by the hollow roller system itself—an equipment defect that was within the scope of the all-risk policy coverage. HoneyBaked said the contamination exclusion did not apply because a defect in the hollow rollers caused the contamination due to the rollers’ hollow designs allowing it to harbor unseen bacteria. The court rejected this argument and held that the listeria was what damaged the product, not the hollow rollers. These cases underscore the importance of reading policies in total,

especially where exclusions may contain certain caveats under which coverage may be available.

Food contamination insurance coverage More reliable, and ideally more predictable, sources of insurance protection for food contamination events are specialty policies that provide coverage for “accidental contamination.” This type of coverage

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generally applies to losses caused by the accidental presence of a contaminant into a policyholder’s food product line. Coverage under an accidental contamination policy requires “accidental or unintentional contamination, impairment or mislabeling of an insured product” during a certain manufacturing or distribution period that has caused or would cause “bodily injury, sickness, disease,

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INSURANCE continued or death” within a determinate period of time after consumption or use.

Establishing contamination

AHMAD

MCLELLAN

Syed S. Ahmad is a partner in the McLean office of Hunton & Williams LLP in Richmond, Va. He can be reached at sahmad@hunton.com. Matthew T. McLellan is an associate in the same office. He can be reached at McLellanM@hunton.com.

Editors Note: This article presents the views of the authors and does not necessarily reflect those of Hunton & Williams LLP or its clients. The information presented is for general information and education purposes. No legal advice is intended to be conveyed; readers should consult with legal counsel with respect to any legal advice they require related to the subject matter of the article.

34

One issue that arises when a policyholder seeks coverage under this type of policy is establishing that actual, as opposed to potential, contamination has taken place. A recent case in California involved a food manufacturer that was notified by a third-party supplier of beef spice mix that one of the ingredients in the mix had tested positive for salmonella. Because the manufacturer used the beef spice mix in many of its products, the FSIS required a recall of all products containing the mix. Ultimately, an investigation by the manufacturer and FSIS revealed that none of the manufacturer’s product tested positive for salmonella. Despite the food products being free of salmonella, the manufacturer incurred big costs conducting the investigation and product recall. However, the insurer denied coverage because there was no actual contamination, but only the possibility or threat of contamination. Because there was no contamination, a court ruled there was never any threat of bodily injury and the policy did not provide coverage. Wornick Foods, an Ohio manufacturer that made meals-ready-toeat (MREs) for the U.S. government, experienced a similar issue in obtaining coverage for contamination related losses. One of the products incorporated by Wornick into the MREs was a dairy shake product that was manufactured by a third party. Wornick was notified that these packets had tested positive for salmonella. The government demanded that Wornick recall and replace all the potentially tainted dairy shake packets. Wornick’s investigation later revealed that it had not actually

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received any dairy shake packets containing salmonella. Despite the expenses associated with the recall, a court held there was no coverage because none of the insured’s products were actually contaminated. While “actual contamination” may be required under many policies, policyholders should read their policies carefully because even a seemingly subtle variation in the policy language can lead to a different result regarding coverage. For example, Foster Farms, in 2013, was ordered to suspend its operations due to its non-compliance with federal sanitation regulations and the presence of salmonella in its facilities. The insurer argued that Foster could not establish actual contamination. However, the policy language at issue did not require “contamination” for coverage, but rather only an “error in the production, processing, or preparation of” Foster’s products. The court therefore held that actual contamination was not required under this policy language. Policyholders should be mindful of these nuances in policy language when purchasing or renewing coverage, because they can have dramatic effects on the breadth of risks within the scope of coverage.

Establishing danger In addition to establishing that there has been contamination, to trigger insurance coverage, policyholders may also need to show that any such event actually poses a risk to consumers. In some cases this is easy. In the case involving Foster Farms, for instance, the insurer argued that the salmonella would not necessarily harm consumers so long as the chicken was cooked properly before it was eaten. The court rejected this argument for two reasons. First, some consumers had been

hospitalized after consuming Foster’s chicken, and second, the FSIS determined that the product was dangerous even with proper cooking. Not all instances of contamination, however, pose a sufficient danger to consumers to trigger coverage under food contamination policies. An Illinois manufacturer of frozen burritos discovered that its products tested positive for listeria due to undercooking. The USDA held a large amount of the manufacturer’s products while an investigation proceeded. Ultimately, it was determined that while the burritos contained listeria, none contained strains that were actually harmful to consumers. As a result, the policy did not provide coverage for the manufacturer’s losses because the contamination was not actually dangerous. A similar case involved a producer of sausage breakfast sandwiches that failed to identify the presence of monosodium glutamate (MSG) on the label. The company recalled its products and sought to recover its losses under its contamination coverage. The company maintained that MSG posed a risk to the general population, whereas the insurer argued that only sensitive populations faced risks from MSG. The issue of whether the presence of MSG was sufficiently harmful to trigger coverage was for a jury to determine. Companies whose operations fall within the supply chain should incorporate a careful analysis of available insurance products as part of any risk management strategy. It is important to perform an independent review of policy language, exclusions and even exceptions to exclusions in order to identify any uninsured risks. The good news is that there is coverage available to protect against many of the financial ramifications of a contamination event. However, policyholders should consult with professionals when purchasing coverage and when submitting proofs of loss or claims to an insurer. If gaps can be identified at the time of purchase, insurers may be receptive to adding language to increase the scope of covered risks.

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FEATURE INFORMATICS

BY TRISH MEEK

THE CASE FOR

INTEGRATED INFORMATICS:

REGULATORY COMPLIANCE, DEFENSIBLE DATA, TRACEABILITY AND BRAND PROTECTION The complexity and scale of today’s food supply chain demands an integrated informatics solution.

MEEK

Trish Meek is senior manager of product marketing informatics and chromatography software at Thermo Fisher Scientific, a biotechnology product development company based in Waltham, Mass.

36

T

o understand why an integrated informatics solution is important to manufacturers in the food and beverage industry, it helps to first consider the unique challenges this industry faces. Simply put, food production has scaled into a global business so rapidly that oversight has hardly kept pace. Even the stricter regulatory stances taken by the U.S. Food and Drug Administration (FDA) and the European Union in the past decade are effectively catch-up efforts. The broader food industry, which for purposes of this article will also comprise beverage, has globalized quickly and, many would argue, haphazardly. It actually wasn’t that long ago that the products we purchased in our local food store were produced locally or regionally. Seasons determined selections as well—if you wanted a tomato in November you’d pay a premium for that indulgence. Seasons and geography no longer constrain what we can buy and when. By far the world’s largest industry —with a combined revenue of more than $4 trillion, the food industry has used its massive scale to overcome historical limitations. We now take for granted that our grocery carts can be filled with fresh products that may come from thousands of miles away. And those products may have been grown, processed and shipped in multiple countries before they reach our local grocer.

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• Auditors sometimes ask to review a food company’s laboratory records,

including data associated with the released batch of a product. Records from distinct but interrelated activities are critical for demonstrating compliance.

The complexity and scale of this modern food supply chain is the industry’s greatest challenge and regulators’ greatest worry (on consumers’ behalf). How can growers, producers, processors, packagers, shippers and others in the global supply chain secure a food chain that’s so distributed? How can regulators ensure safety without restricting choice or inflating prices?

The bits and “bytes” of food safety The food industry—and its regulators—would likely agree on one thing: a system this massive cannot operate on trust alone, as it once did. The grower with generations of experience on the land, for example,

is now too far removed from end consumers. A finished product may contain one farmer’s product and those from five others, all from different regions worldwide. Integrated informatics may seem like an unlikely fix for modernizing a highly distributed food chain, but it’s actually perfectly suited. An integrated informatics platform provides access to massive amounts of information in a timely fashion, dramatically improving decision making. It does this by making information rapidly available to many stakeholders and by ensuring that it’s reliable. Consider this example. A hypothetical lab uses an analytical instrument to detect pesticides in barley, and regulation dictates that www.foodlogistics.com

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this data be compared to allowable maximum residue limits (MRLs). If the barley sample exceeds allowable MRLs, the manufacturer must identify everywhere that ingredient is being used, quarantine it and determine who produced it. All this must happen quickly and according to strict procedures. Not only must the lab have a process for checking against current limits for a pesticide, for example, but also that analytical information must be tracked with the appropriate sample, and the method used to deliver the result must be consistent between different samples and users. Without an integrated informatics solution, adhering to these procedures, defending the quality of the data and making it usable would be nearly impossible.

The role of informatics Gathering the bits and bytes of data, following procedures and making the data useful enterprise-wide is important, but regulatory compliance is where most industry atten-

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tion is focused today. This is another area where integrated informatics provides significant benefits.

The need arises As noted, food industry growth outpaced regulatory oversight in the past decade or so. Globalization was rapid and inevitable, but so too were food safety breaches, and with progress came stories of tainted fruits, vegetables, meats, cereals, nut butters and more. Suddenly we had a trust issue. With a food chain that’s distributed across many borders and jurisdictions, how is the public’s trust best protected and by whom? From the Food Safety Modernization Act (FSMA) to EU Regulation No. 178/2002, we’ve seen a heightened regulatory focus, and the most common themes are traceability, authenticity and risk-based approaches. The common denominator here is food chain security. So what does all of this mean for food and beverage producers? It means having to conform to multiple regulatory requirements for each

distribution market, and there are often many. And this is a data management and reporting headache. Fortunately, however, common standards such as ISO 22000, exist that enable companies to standardize their processes enterprise-wide, achieving levels of operational rigor and quality that satisfy multiple regulatory authorities at once. So where do informatics fit into this regulatory compliance landscape? In a typical multinational food producer, a significant amount of the quality data is delivered by the laboratory. Raw materials are analyzed for pesticides, herbicides, nutritional content and so on. Packaged products are monitored for shelf-life compliance. Plant hygiene is monitored using microbiological samples taken from across the facility. Records from all of these distinct, but interrelated activities are critical for demonstrating compliance.

An integrated informatics platform provides access

to massive amounts of information

in a timely fashion, dramatically improving decision making. It does this by making information rapidly available to many stakeholders and by ensuring that it’s reliable.

Defending data The shift in recent years has been toward prevention instead of crisis

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INFORMATICS continued response. Regulators now focus on auditing food and beverage producers to assess their practices prior to any adverse event. For companies with good systems in place, time-consuming audits will be less frequent, so it pays to have systems in place that demonstrate that data is reliable and defensible. Audits can be daunting. The producer must prove that activities were carried out correctly, that records are properly collected and that supporting information is accurate. Auditors typically pick a starting point in a process and follow the trail. They may start by looking at the data associated with a released batch of product; perhaps quality assurance samples; follow the trail to cleaning validation and then review individual laboratory results, including entire methods, instrument calibration, user training, etc. At each point of the audit, producers must show evidence of compliance—even the smallest details. With an integrated informatics solution, all evidence resides in a single platform. Hierarchies and relationships within the data records are automatically recorded and retained. Everything—from relationships between lots or batches of material; the connection between methods, specifications and results; the history of an instrument configuration, maintenance and calibration; and user training records—is in one place for easy retrieval and reporting. Having one system of record not only codifies data capture, it also

An integrated informatics solution lets us map relationships between “child” and “parent” batches, information that can also come from integrating ERP or PIMS systems. By integrating all this information, manufacturers can trace a product back through intermediate products and raw materials and then forward again to any resultant batches that may be contaminated.

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• With an informatics solution,

information such as user training records reside on a single platform for easy retrieval and reporting.

helps labs create standard operating procedures (SOPs). Establishing SOPs does several important things. It ensures that all lab users are following the same process—no personal preferences for carrying out a specific test. It makes sure that all necessary data is collected—by enforcing a series of data entry steps, labs can prevent a method from being marked complete until everything has been entered. Labs can roll out updates to their processes by updating the method for all users at the same time. Managing lab execution activities in this way means that data is more consistent—it is being collected in the same way for all users. It is also prone to fewer errors because users move stepwise through each stage of the measurement process—they can stop a test whenever they encounter a problem.

Achieving traceability Traceability, the ability to verify the history, location or application of an item using documented information, has become increasingly more important for the food industry. And traceability is closely linked to compliance and data defensibility as described above. Fortunately, traceability is another strength of an integrated informatics solution. In practical terms, to demonstrate traceability we must be able to go either backward or forward within a set of process items and understand the complicated relationships. An integrated informatics solution lets

us map relationships between “child” and “parent” batches, information that can also come from integrating ERP or PIMS systems. By integrating all this information, manufacturers can trace a product back through intermediate products and raw materials and then forward again to any resultant batches that may be contaminated. In other words, with an integrated informatics solution, traceability is built in.

Brand protection Because of its size and fragmentation, the global food and beverage industry is a target for adulteration and counterfeiting. While the risk to consumers of adulteration can be deadly, much of the impact comes in the form of trust erosion and fraud. An example is Manuka honey. The entry of fraudulent producers into the market affects legitimate producers by creating uncertainty about all products, depressing sales and lowering prices. As it happens, however, honey has unique chemical markers that can be used to determine whether it has been adulterated. But isolating these markers involves complex analysis, including ultra- high-performance liquid chromatography (UHPLC) and methods that are highly specific, consistent and defensible. For the honey producers, an informatics solution can automate processes so that no non-conforming product is missed, establish compliance rules and checks for instrument calibration so that results are defensible, and standardize methods through built-in laboratory execution system capability. An integrated informatics solution is designed to address multiple business needs in the food and beverage industry, from compliance and data defensibility to traceability and brand protection. The complexity and scale of the modern food supply chain demands it. www.foodlogistics.com

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Global Supply Chain Solutions for the Food and Beverage Industry

GET THE RECOGNITION YOU DESERVE! Each year, Food Logistics recognizes individual and corporate leaders in the food and beverage industry. Plan now to enter your company — or a cutting-edge client or vendor — in one of these industry-leading recognition programs:

2016

2016

TOP GREEN PROVIDERS

TOP 3PL & COLD STORAGE PROVIDERS

In recognition of companies demonstrating leadership in sustainability in the food and beverage supply chain

Honoring the leading 3PL and Cold Storage Providers that support the food and beverage supply chain

FL100+ TOP SOFTWARE & TECHNOLOGY PROVIDERS

2016 TOP

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PROVIDERS

Nomination deadline: April 22, 2016 Winners announced in May 2016 issue

Nomination deadline: June 6, 2016 Winners announced in August 2016 issue

Recognizing top software and technology providers supporting the global food and beverage supply chain Nomination deadline: Sept. 26, 2016 Winners announced in Nov/Dec 2016 issue

O nline nominat ions open appr ox im a te l y e i g h t w e e k s b e fo re t h e d e a d l i n e s l i s t e d a b o v e . Awar d r esult s, inf o r m a t i o n a n d n o m i n a t i o n s p o s t e d o n :

FoodLogistics.com/Awards Nomination dates and issues may change. Consult the call-for-entries email and nomination survey for confirmation

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SPECIAL REPORT LABELING

BY JOSH ROFFMAN

HOW TO RESPOND QUICKLY TO

CUSTOMER AND REGULATORY LABELING REQUIREMENTS I A labeling solutions veteran explains how a centralized system can improve supply chain efficiency.

n today’s fast-paced global supply chain, it’s critical to be able to respond to customer requirements quickly and efficiently on a global scale. Failing to do so in a timely fashion results in dissatisfied customers and loss of business. Without implementing a labeling approach that enables rapid label change globally, companies are forced to maintain countless permutations of labels. This results in more expense in maintaining labels and a lack of consistency. Enterprise labeling, which offers centralized, dynamic, data-driven labeling, allows companies to limit the number of label permutations and increase supply chain efficiency throughout their global operations. Following is a series of questions and answers to address how to respond to customer and regulatory label requirements.

Q: Why is it important to ROFFMAN

Josh Roffman is vice president of product management at Loftware, a provider of enterprise labeling solutions based in Portsmouth, N.H. He has over 20 years of product management experience with enterprise software companies.

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change labels dynamically? Companies today are faced with complexities and variations in labeling that they didn’t need to deal with in the past. Customer requirements and regulatory standards are increasing and evolving at a rapid rate. Not to mention the fact that today’s companies are scaling globally with sites and partners around the world, where labeling is mission critical. This requires companies to address labeling on a global scale so that regional, language and other business requirements can easily be met. However, when companies are working to support countless labeling variations, they struggle with a

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staggering amount of label templates or designs, all which must be created and maintained separately. This obviously involves a lot of time and work to make sure that each and every permutation reflects necessary changes when updates are made. So the question is – how do you do this in an efficient manner without costing the company substantial time and money? Some older methods of supporting changing labeling requirements may work fine enough for small companies with lower volumes and less label complexity, but when you’re dealing with the type of increasing volumes that large, global companies maintain, it’s a different story. Managing the exponential growth of label templates and formats can create a significant burden on these types of businesses. An enterprise labeling solution that can easily and dynamically manage mass label changes allows companies to respond quickly to new requirements while maintaining labeling consistency across a global supply chain This type of data-driven labeling also enables these businesses to achieve greater responsiveness in meeting changing labeling requirements and offers a dramatic reduction in overall label maintenance.

Q: Why are standardization

and centralization important to achieve the benefits of labeling? Centralization is really important in maximizing the value of dynamic, data-driven labeling. By centralizing their labeling, companies are able to

use a common set of label formats across their organization that are configured to be dynamic with label content being driven directly by the sources of truth for label data. This approach offers the ability to have all the variations required in label output, accounting for the region, language, product, and brand information without using different label templates. It also enables companies to move from hard coding labels to a more flexible paradigm that enables the source data to drive what’s on the label. So the power is really in the simplicity of leveraging a small number of label formats or templates to drive a nearly unlimited variety of labels. Of course, standardization is also key to achieving these benefits. Many global organizations have hundreds of different locations with different divisions, groups and functions spread across the globe. When companies standardize and focus on a common approach to labeling that can be data driven, they are able to achieve labeling consistency and take advantage of dynamic, data-driven labeling.

Q: How is dynamic, data-driven

labeling critical to enabling consistency and simplifying label changes across a global supply chain? With dynamic, data-driven labeling, companies can make changes to data or images in upstream data sources which enable both large scale changes and labeling consistency at the same time. By driving labeling directly from sources of truth for

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data, companies are able to make any changes to data or images centrally and leverage their enterprise labeling solution to ensure that those changes can be reflected in all of the appropriate labels at the same time. This ability ensures that companies with multiple users at different locations have immediate access to labels and label data reflecting any mandated changes. This ability to make large-scale changes with immediacy is essential for companies that can’t afford labeling errors and when brand representation and labeling consistency is a must.

Q: How can this help

my global operations in the supply chain? Rather than resisting label change brought on by regulatory, customer, or business requirements, companies are able to embrace and even offer changes that will help drive efficiency and satisfaction with customers, partners and within the business. Maintaining an enterprise labeling solution which enables dynamic, data-driven labeling has many benefits. It improves customer responsiveness significantly, reduces maintenance and overhead, and streamlines overall supply chain operations. This allows companies to respond to customer requirements quickly and efficiently on a global scale, providing new opportunities to grow their business.

Q: Are there any specific indus-

tries, which would benefit most from this approach to labeling? Yes. Although this type of labeling

is important across all industries, it can provide special value in cases when you’re talking about a large, global organization with many locations and many different labels. Also, it is critical in industries such as food and beverage, pharmaceutical and chemical, where companies are dealing with evolving industry regulations and extensive variability in labeling. This approach also offers clear benefits in many highly-regulated industries where labels are subject to a validation process under U.S. Food and Drug Administration (FDA) guidelines. The process that companies go through in validating

labels with the FDA is onerous and, as a result, minimizing the amount of label changes that are made to the template is critical. Dynamic, data-driven labeling allows these companies to keep their labels static while only making a change in a single place, to the source data. This allows a single point of validation versus having to validate each and every label that uses a particular data element or image. Although some industries might not fall under the same regulatory oversight, the value of simplifying changes and ensuring consistency can still have a significant positive business impact.

To view the infographic full size, go to bit.ly/1oqhXaY.

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FOOD (AND MORE) FOR THOUGHT

BY CRAIG ADAMS

HOW TO CREATE A COMPANY CULTURE THAT

ENSURES FOOD SAFETY C ADAMS

Craig Adams is client director with NSF International, the Ann Arbor, Mich.based public health and safety organization committed to protecting and improving human health around the globe through the provision of assurance and certification services, training, testing and consulting services to the food, water, health sciences and consumer goods industries.

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reating a food safety culture is sometimes overlooked in favor of a short-term, standards led approach. Short-term targets are generally considered as easier to measure and achieve, but effectively understanding culture within an organization can instill long lasting rewards that drive standards, challenge the norm and result in an embedded philosophy of positive behaviors and attitudes. Recent high-profile food safety-related cases have resulted in food businesses across the globe reviewing their approach to food safety management and recognizing that the key to success is to evolve food safety management systems to focus on workforce behavior and cultural change. Increasingly, organizations are moving beyond viewing compliance as the goal and are adopting strategies where worker interaction and empowerment aims to underpin success.

Safety as a core value Motivations for wanting to change and improve standards vary across organizations, but whatever your organization’s goals, focus attention on what is required through encouragement of teams. A “little and often� approach in this area, demonstrating why food safety matters, why workers should be motivated to get behind it, and why it should influence their actions at work should also be considered. Successful food businesses ensure that food safety is a core value rather than a priority. Well defined policies will set the aims of objectives of the organization and assist in developing control over hazards and risks to food safety.

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Engaging colleagues is crucial to fully identifying the problems that you may face within your organization, effectively correcting the deficiencies highlighted and formulating new solutions to challenges experienced. It is frequently reported that initiatives developed in isolation and without consultation with key stakeholders result in limited longterm success. Therefore, getting your team onboard and making the workers part of the solution is likely to sustain the implemented systems and procedures in the long term, creating a legacy of good practice. Forums where food safety matters are routinely discussed, with the right blend of personnel in attendance, are encouraged. Too many technical representatives within a group may result in a skewed approach leading to impractical approaches that are set for failure. Equally, a meeting consisting entirely of operational staff may overlook or disregard key risk considerations. Effective communication of agreed-upon solutions, ensuring that they are fully understood and translated into practice, is fundamental to achieving the desired effect. Studies undertaken by NSF International have revealed that social influences can also present a major risk to development of a robust food safety culture. These studies asked questions relating to food safety knowledge, along with levels of confidence in that food safety knowledge. The results revealed that there was a group of people that were confidently wrong and that they were adversely influencing those who were correct in their responses, but lacked confidence in their own knowledge.

Identify team leaders Providing the skills that enable confident expression of the correct knowledge is core to ensuring that those who have the understanding can communicate the good behaviors to those who need to develop. Identify the members of your team who are the leaders and those who are putting the business at risk. Empowering staff to make conscious decisions and repeat their successful actions is paramount. When things go well, staff should be encouraged to practice these behaviors routinely. Equally, good practices can be rewarded through positive publicity and promotion of champions. Conversely, things do, and will, go wrong. The manner of the response to such situations is key to ensuring continued trust and provoking a positive long-term response. A disciplined and rational approach to a mistake and the ability to learn from the experience will highlight the maturity of the organization and its culture. Transparent procedures with well-defined consequences should be in place for dealing with those who do not comply, as there would be within other business functions, i.e., financial or human resources. Ensure that maintenance of food safety standards get the same importance as other areas.

Making it happen The extent you go to develop positive food safety cultures depends on many variable factors. However, with focused effort encouraging staff involvement, organizations can secure engagement and empower their workforce to deliver a sustainable food safety culture.

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Food Logistics April 2016  

Food Logistics is the only publication exclusively dedicated to covering the movement of product through the global food and beverage supply...