Food Safety and Traceability
Delta Partners was an exhibitor at the Food Manufacturing Summit held in Dallas, Texas, January 25th and 26th. The summit was billed as a learning and networking event for food and beverage firms of all kinds. Approximately 110 delegates representing firms that ranged from the giants such as Coca-Cola with 1 million employees worldwide, to some regional firms with 100 employees.
The challenges facing the food and beverage industry regarding food safety and traceability are daunting. There’s no shortage of reports of food and beverage recalls on a pretty much quarterly basis. Not infrequently, the food involved is the source of serious illness and even death. Regulators continue to augment regulatory and inspection regimes to little avail; in the end they must rely on producers to show progress on improving food safety.
The companies we met in Dallas are keenly aware of the importance of food quality to their brand promise, and the damage even a minor recall can wreak on an otherwise great brand. An awareness of need—combined with an overt desire—to improve, made for an atmosphere of enthusiasm that was palpable throughout the conference space.
Here are some of the highlights that I took away from the conference.
Food Safety and Traceability is the new Quality Standard
With the benefit of hindsight, I saw numerous examples of food manufacturing companies listening to stories of how the market is changing. While quality assurance measures and state regulatory standards have been around for quite some time, there are new demands from major retailers for safety and traceability systems COMBINED with quality standards that is raising the bar throughout the industry. The Global Food Safety Initiative (GFSI) is an European led initiative that is rapidly becoming the de facto world standard.
For example WalMart, with a goal to enter the European market, was the first major North American company to formally adopt GFSI as its compliance benchmark for all its suppliers. Coca-Cola, an early convert, demonstrates the strength of major retailers who push for enhanced food safety and traceability — as well as the importance of food safety to its brand promise. Coke is now requiring its entire supply chain to be GFSI certified by the end of 2012!
Another example is the coalition of retailers demanding quality and environmental sustainability by restricting seafood suppliers exclusively to firms practicing sustainable harvesting methods—an outcome of GreenPeace’s Sustainable Fishery Campaign.
Creating Competitive Advantage by Enhancing Food Safety
Confronted with these demands from major retailers, which is after all, merely a reflection of the demands they face in the market, food manufactures are presented with a number of strategic responses on the food safety and traceability continuum—positions which offer the opportunity to derive economic benefits from improved safety outcomes.
- Executives responsible for quality who report to the legal department are most obvious examples of Stage 1 firms in the above strategic continuum.
- Stage 2 firms also adopt a predominately “defensive posture with an added component of quality first in limited product areas.
- In contrast, stage 3 and 4 firms have an overt strategy to compete proactively on quality. Firms who adopt variants of the Stage 3 or 4 postures see the quality goal ahead of regulatory compliance in the belief that food quality and safety are primary goals—with customer satisfaction and competitive advantage as logical subsequent outcomes. Interestingly, Stage 3 and 4 strategy firms more typically have a C-level executive responsible for quality who is a member of the executive team.
The Search for Compliance Systems
Not surprisingly, many conference delegates were in the hunt for technical systems to manage their manufacturing controls, food recall, supply chains, quality compliance, and third party certification processes. And, I am happy to report that a brief review of the supplier roster provided ample evidence of the richness and innovativeness of solution offerings available.
Leadership and Employee Engagement
There is an emerging trend that is leading food manufacturing firms—and their customers—to make bold moves as they attempt to leverage enhanced goals of food safety and traceability. This represents a major shift away from compliance and moving toward competing on the basis of food quality as an overt strategic business objective.
However, for firms aiming to grow their organization into Stage 3 or Stage 4 maturity levels, investment in IT tools by themselves are unlikely to get them there. Performing at Stage 3 and Stage 4 levels requires a whole new level of leadership commitment. It requires engagement by leaders, employees, and supply chain partners. Benchmarking data from a variety of industries demonstrates that performance of best-in-class organizations typically register a ration of engaged to disengaged employees of approximately 10 to 1, while in average organizations the ratio drops to a ratio of 2 to1!
For many manufacturing firms who have already embarked on a lean agenda or similar program requiring extensive involvement, the change may be one of degree only. For others who remain embedded in a “command and control” model of leadership and management, they may well be faced with a adopting a whole new social technology more in keeping with a global economy where knowledge and speed are king.