Don’t Risk the Whole Batch

The saying goes that “one rotten apple spoils the barrel,” and in the food and beverage industry in particular, a mistake made by one supplier can negatively affect the entire brand or sometimes several brands. Recently, the food industry has been dealing with a less than ideal global economy, which has put enormous pressure on both manufacturers and suppliers to significantly reduce costs and streamline operational efficiencies. To tackle this issue and keep everyone happy, companies are beginning to purchase raw materials from global suppliers and are outsourcing their manufacturing processes to contracted vendors. Although this method certainly helps to lower overall costs, it also increases the risk of a mistake by severely muddling the visibility into the supply chain and production processes.

Because a handful of companies are okay with cutting corners, it’s inevitable that some products that are below quality standards, wrongfully categorized or even deliberately fraudulent will find their way into the manufacturing process, supply chain, and in some cases into the hands of consumers. For example, it’s not unheard of that a supplier will illegally, and intentionally, substitute or mix a key ingredient with a cheaper alternate product, or label a product inaccurately or dubiously. 

This is an example of economically motivated adulteration, and it might occur more often than consumers or manufacturers would like to believe.

Reputations at Risk

We see cases of unknown allergens and pathogens popping up in products across the globe, but most of the time it’s accidental. In the case of the Peanut Corporation of America (PCA), unfortunately, there were dangerous and intentional decisions made with regard to the supply of peanuts across the country that ended up costing nine lives, and over 700 illnesses, just to save a few bucks.

If you don’t remember, the former CEO of PCA hid microbiological test results of the products that showed evidence of salmonella, lied about the unsanitary conditions of the production facilities and falsified reports to hide the truth. Even though many of the major peanut butter companies didn’t use PCA for their peanut supply, many consumers avoided all peanut products completely. This single supplier provided peanuts to 361 companies for more than 3,900 products, so this mistake cost the entire peanut butter industry to drop 25 percent in sales, equaling to approximately $1 billion lost.

Another infamous case of adulterated products tarnishing not one, but six separate brand names, is the “China Meat Scandal” in the summer of 2014. Essentially, a local Shanghai reporter covertly filmed inside Shanghai Husi Food – a subsidiary of American-based OSI group – which showed the supplier processing contaminated and expired meat products. During the investigation, this expired meat was found repackaged with new, fake expiration dates – 3,000 cases of which had already been sold and shipped off. The kicker is that Shanghai Husi Food not only supplied McDonald’s, but Starbucks, Papa John’s, Pizza Hut, KFC and Burger King throughout China. 

A spokesperson of the McDonald’s Japanese unit when asked about the incident said, “The scandal has led to a negative impact on sales and consumer confidence. Our sales and profit expectations have been reduced.” In other words, customers began searching for their hamburgers elsewhere.

Achieving Greater Visability 

According to a joint industry report produced by Deloitte Consulting and sponsored by the Grocery Manufacturers Association (GMA), Food Marketing Institute (FMI) and GS1 US, more than half (52 percent) of product recalls are attributed to issues with supplier and contract manufacturers. This begs the question: what must companies and manufacturers do to protect not only their consumers but their brand reputations as well? For starters, there needs to be greater visibility into the supply chain network. 

How do we achieve this increased visibility? Let’s start with automating quality processes across the supply chain. A supplier quality management system allows you to get a handle on all of the suppliers you do business with around the globe, down to the supplier site level, as required by FSMA. Another benefit manufacturers don’t have with most ERP configurations is the ability to ensure that all of the required food safety plans and documents are received from suppliers and always up-to-date. This enables risk-based supplier auditing – once again ensuring FSMA compliance – while allowing an organization to manage the cost of quality and eliminate redundancies and reporting errors by creating a single-pane view of quality data for a more smooth integration of systems and processes across suppliers globally.

Outside the four walls of an organization is where the complexity of the supply chain gets even more cumbersome. Each manufacturer has thousands of moving parts – hundreds to thousands of vendors as well as various global locations – to keep track of, and it only takes one of these to ruin a brand’s reputation. This is why quality checkpoints are necessary throughout the supply chain so that suppliers are held accountable to the standards set by the organization. Supplier performance reviews are also integral to keeping suppliers in-line with the expectations set for them. By tacking the progress of your suppliers with an automated system, it’s much easier to identify pain points.

A supplier quality management system inspires more collaboration and transparency between the supplier network and manufacturers, which has been proven to be a direct return on investment by cutting down costs, time spent and in the end, reducing recalls. 

Whether you have five suppliers or 5,000 across the globe, it’s important that you keep in mind the fact that one bad apple can ruin  your brand. Choose suppliers who are open to collaboration beyond traditional email, phone, and fax, and have a good track record, and once your supply chain is built out fully, keep them at an arm’s length (virtually) to avoid tarnishing your brand and maybe even others. 

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