Quality control survey: Food & beverage makers find product recalls expensive
On average, it takes food & beverage companies 14 days to sense the need for a recall and 34 days to enact it. By that time, less than 40 percent of the affected product can be collected because the rest either has already been consumed or thrown out. Lawson Software executives argue that food & beverage manufacturers could cut their product recall expenses by deploying Lawson’s traceability solutions.
A majority of food & beverage companies experienced at least one product recall in 2007, and more than half of those recalls resulted in losses of more than $10 million. So says a recent study conducted by Boston-based AMR Research .
The study revealed that on average, it takes food & beverage companies 14 days to sense the need for a recall and 34 days to enact it. By that time, less than 40 percent of the affected product can be collected because the rest either has already been consumed or thrown out, respondents said.
The AMR study, Traceability in the Food and Beverage Supply Chain , is based on 251 interviews conducted in May 2008. Respondents included companies within the food & beverage manufacturing industries in the U.S. as well as three European countries: France, Sweden, and the U.K. To qualify for the study, respondents had to represent companies with both a supply chain organization and annual revenue greater that $100 million (U.S. respondents only); or a currency equivalent to at least $50 million (European respondents only).
AMR developed the study in conjunction with Lawson Software , a supplier of enterprise software that offers solutions geared to process-oriented manufacturers, including food & beverage companies.
Naturally, Lawson executives argue that food & beverage manufacturers could cut their product recall expenses by deploying Lawson’s solutions.
"Despite a perception among food companies that they're doing a good job managing product quality, the staggering cost of recalls proves 'business-as-usual' isn't working," says Rob Wiersma, industry strategy director for Lawson. "Food producers can be much more proactive in managing food safety to improve product quality and reduce supply chain risk."
Wiersma says food & beverage companies would benefit by adopting traceability software like Lawson’s Trace Engine.
Lawson says this product helps food companies track information about every raw ingredient they use—e.g., when an apple was harvested, at what temperature it was shipped, and in which batches of which product it was used. By capturing this level of detail—down to the individual case or specific product—traceability software can help food manufacturers sense and resolve food safety and quality issues before products leave their manufacturing or processing plant.
Yet food safety is just one of many reasons that can trigger costly recalls. Traceability software also helps food companies quickly sense other triggers like a soup label with an incorrect marketing claim, or one that lacks an allergen warning. This improved time-to-sense enables food companies to address a variety of product quality issues during the manufacturing process to reduce losses associated with all types of recalls.
While the food & beverage industry has been slow to adopt modern traceability software, many companies recognize it may be time to change. More than three in four companies surveyed plan to spend money this year to reduce the time it takes to sense a quality issue and enact a recall. An equal share of respondents plan to invest in the improvement of supply chain traceability this year.
Companies that proactively manage product quality best, according to the AMR study, have five characteristics:
1. Multi-enterprise tracking;
2. Unit-level tracking;
3. Manufacturing automation;
4. Cross-functional team reviews of quality data; and
5. Mature supply chain teams.
One such company is Norway-based Marine Harvest , the world's leading seafood company and a Lawson Trace Engine customer. Marine Harvest produces one-third of the world's farmed salmon and trout with operations in 18 countries and customers in more than 70 countries. The company implemented Lawson Trace Engine in early 2008.
"Lawson helps us control product quality across the long growth cycles of fish like salmon," says Arnt Mjoen, IT manager for Marine Harvest. "It also supports end-to-end supply chain visibility, which ensures we consistently deliver fresh, high-quality products that meet our customers' specific requirements."