Functionally rich solutions strengthen product recall execution while minimizing costs

The US Food and Drug Administration (FDA) is influencing traceability issues for food and beverage manufacturers worldwide and not just in the US. Here we look at how best-of-breed warehouse solutions are able to provide assistance with traceability compliance by providing inventory control tools for multi-level holds, catch weight control, shelf life/expiration dates, quarantine, product traceability and environmental control of multiple inventory processes.

Food and beverage manufacturers in the US are called to heed existing federal regulations such as the FDAs CGMP (Current Good Manufacturing Process, 21 CFR Part 110) and the Bioterrorism Act of 2002. This includes adherence to the fourth and final adoption of the Act, section 306. Under this recent addition, manufacturers, processors, packers and importers must maintain records on human consumption foods for six months to two years, depending on shelf life as well as maintain records on animal feed for one year. These records identify the immediate previous source and subsequent recipient of all food received and released respectively.

These regulations however, are only part of a global effort to increase food safety and public health. Other global tracking and tracing initiatives include European Union (EU) Beef Traceability 2001, EU Genetically Modified Organisms Traceability 2003, EC Regulation 178 on Food Safety, Australian Beef Traceability 2001, and Japanese Beef Traceability 2003.

 Regulatory and business requirements for improved tracking and tracing systems continue to increase throughout the global supply chain.

While food and beverage Manufacturers focus on regulations for food safety and public health, there is additional concern over protection of the companys brand equity in the face of increased global competition and significant branding investment. Often, the greatest costs in product recalls are lost profits and expenses incurred to rehabilitate both brand and company image.

Between 1999 and 2003, 88 per cent of the 1307 food related class I and class II recall actions occurred from a GMP (good manufacturing practice) related problem.¹ As seen in figure 1 below, the top three specific processor level problems related to the recalls were incorrect labelling/packaging, ineffective employee training and failure to follow standard operating procedures.

A defective product and consequent recall not only hold the potential for class action lawsuit, but inevitably bring varying degrees of business interruption and expense.

Figure 1: Recall actions by specific processor-level problems.²

When product recalls arise, the first questions asked within the organization include:
Is the company prepared to execute a product recall?
How will sales be impacted by this temporary setback?
Is the recall covered under insurance?

Accidental contamination is the more prevalent cause for product recalls and is usually covered by the companys general liability policy.³ However, unless the company has a product recall policy, the logistical costs noted below most likely will not be covered. While these expenses can be significant, they can also be minimized if the enterprise has a feature rich, best-of-breed warehouse management solution to optimize the recall process.

Electronic tracking and tracing
Regulatory and business requirements for improved tracking and tracing systems continue to increase throughout the global supply chain. These include advanced food supply chain management solutions integrated with RFID technology and visibility products to replace traditional paper record systems. Best-of-Breed warehouse solutions provide FDA regulatory compliance assistance with inventory control tools for multi-level holds, catch weight control, shelf life/expiration dates, quarantine, product traceability and environmental control of multiple inventory processes. These tools help food manufacturers increase food safety and quality, reduce costs, increase productivity and satisfy growing FDA requirements. John Blanchard, Principal Analyst at ARC Advisory Group, said: Electronic tracking and tracing systems and plant security systems are proving to be a business benefit rather than a business cost.⁴

Advanced warehouse solutions contain data structures necessary to support the FDAs detailed record requirements. These include: specific vendor and supplier contact information and email addresses; type of food; brand name and specific variety; date released; quantity and type of packaging. Additionally, contact information for the immediate transporter and subsequent recipients is included as well as the ability to define how long they want to store transaction history.

Through quality control solutions, food and beverage companies are able to track and trace products from supplier to end customer, query food records globally via the web and track products by lot number, code and expiration date.

Best-of-breed warehouse management solutions addressing brand protection and inventory control include these features:
A comprehensive data model to manage the complex inventory control attributes of consumer-focused companies.
Real-time visibility to inventory by lot, batch and pallet anywhere across the extended network, enabling companies to reduce inventory levels and improve control and deployment.
Tools to automate quality assurance and product recall processes across the network, providing a level of control previously unachievable and enabling these functions to be completed in a fraction of the time.
Integrated transportation and warehouse management functionality that provide out of the box support for complex consumer-focused industry requirements.
Collaborative solutions that enable visibility and control of inventory across the supply network, including at the contract manufacturers and co-packers prevalent in consumer industry supply chains, enabling these third parties to operate as if part of the company's own network.
Powerful integration technology and certified adapters to SAP, Oracle and other leading ERP solutions that enable logistics solutions to easily complement existing enterprise applications.

The drive towards ensuring complete supply chain traceability is relentless. Retail giants are rolling out traceability mandates to all their suppliers, and the biggest of them all, Wal-Mart, is working out standards for all fresh products.⁵ For this retail giant and others, the driving forces behind these strategies are customer loyalty and trust. In driving traceability measures down the supply chain, they are ensuring that any problems resulting from product recalls can be contained quickly, without significant brand damage or loss of credibility.

Best-of-breed WMS vs. ERP
In a recent survey conducted by SupplyChainDigest, individuals that evaluated ERP and/or best-of-breed warehouse and transportation solutions in the past two years provided comparative ratings of the two solution types. The table below summarizes a fairly complex set of evaluative questions comparing ERP vs. best-of-breed solutions along a variety of dimensions. The rankings are based on a scale of 1 to 10, with 10 being the best fit or highest score that could be given.⁶

The results indicate a stronger appreciation for best-of-breed solutions over ERP, especially from non-IT personnel closer to the detailed functional requirements of the business. Interestingly, one third of those surveyed indicated the ERP module was the default choice, given corporate edicts to fully utilize existing ERP solutions. This poses a challenging dilemma for those close to supply chain operations that understand the impact of supply chain excellence. It has become clear that IT personnel need to see first hand, the sharp differences that exist between ERP and best-of-breed warehouse management solutions to understand the impact it can have on their businesses.

Summary
Side-by-side solution comparisons of ERP vs. best-of-breed warehouse management solutions, clearly demonstrate the distinct advantage best-of-breed provide in helping users more effectively track and trace product. An analysis of the costs to capture data without the use of solutions like RedPrairies DLx Warehouse, clearly favours the advanced technology that integrates warehouse, transportation and workforce performance management for a comprehensive solution that ensures compliance and optimizes operations.

Martin Hiscox is EMEA Leader, with day-to-day management responsibility for the business, and for developing and achieving the business plans for RedPrairies markets in the UK and mainland Europe. Prior to his appointment, Hiscox was the CEO of LIS and facilitated the companys growth in the market through acquisitions, start-ups and strategic partnerships. RedPrairie provides industry-tailored solutions for diverse markets, including consumer goods, direct to consumer and traditional retail, food and beverage, high tech/electronics, third party logistics, industrial/wholesale, automotive and service parts, and pharmaceuticals.

References
1,2.  U.S Food and Drug Administration, CFSAN/Office of Scientific Analysis and Support, August, 2004
3.  Daniel Torpey, Are You Ready for Total Recall? International Risk Management Institute, November, 2002
4.  The Bioterrorism Act: The Cost of Compliance, Food Engineering, Sept, 2004
5.  Food Navigator.com, November, 2004
6. Supply Chain Planning TechnologyMaking the Right Decision between ERP and Best-of-Breed, SupplyChainDigest, January, 2005