Food-Safety Strategies How to Protect Your Company and Your Consumers

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by Melissa Hersh & Hester Shaw

Recent media coverage of deaths and illness due to the consumption of tainted food highlights a global problem: Despite modern technology, reported cases of foodborne illness are on the rise. An estimated 76 million illnesses and 5,000 deaths occur each year in the United States alone because of foodborne illness, and these numbers continue to rise at an alarming rate globally, according to the World Health Organization.

Consequences for growers, processors, distributors, retailers, and food-service entities are serious and can result in significant financial damage, including: cost of product recalls, decontamination and other recovery costs; lost sales; litigation costs; damage to brand and reputation; trade restrictions; and reduced company valuation or stock price.

Governments, consumers, and stakeholders expect unblemished safety processes from farm-to-fork, and they increasingly do not care where in the supply chain the failure occurs. If your company is part of the chain of custody, your reputation and financial performance are at risk. Retailers, once mostly shielded by their branded vendors from reputational harm, now face significant exposure through their own private-label brands. To minimize potential liability and financial damage, organizations need to be proactive and have demonstrable systems in place to protect their consumers by managing food-safety risks across their supply chain.

According to Marsh's Supply Chain Risk Management practice and Product Risk practice, food safety requirements should be addressed through:

• A comprehensive supply chain risk assessment and mitigation program focused on preventive actions both within a company's internal operations and at its supply chain partners;
  
  
• Documented processes and procedures to minimize the scope and likelihood of a recall due to contamination;
  
  
• Efficient product-recall processes that stretch from the initial identification of the issue to disposal of recalled product; and
  
  
• Brand-protection actions in the event of a contamination incident.
  
  

With ongoing and increased media coverage of deaths and illness due to the consumption of tainted food, can any company involved with food, food byproducts, protein, animal food, or animal feed afford to not address the upstream and downstream risks inherent in their endto- end supply chains? Moving to a new standard beyond the legal minimum and the limits of insurance is gaining importance not just for food manufacturers and retailers, but for all commercial operators in the food supply chain.

Regardless of the cause of the contamination, the outcome is the same: loss of reputation, loss of revenue, and potential loss of operational continuity. This holds true whether the incident is a consequence of poor product design; an intentional adulteration of products using potentially toxic chemicals to boost perceived quality (e.g., melamine added to dairy products to boost protein levels); inadequate processes; or substandard hygiene and safe handling practices.

Contamination can occur throughout the food chain, affecting a variety of fresh, processed, and frozen foods and beverages. The following are just a few examples of products that have been affected by bacteria and other pathogens resulting in foodborne disease:

• Fresh meat, eggs, poultry, processed food (e.g., deli meats): Listeria
  
  
• Fresh produce (e.g., sprouts, jalapenos, spinach): E. coli
  
  
• Processed food and frozen food (e.g., peanut butter, breaded chicken patties): Salmonella
  
  
• Fresh produce, milk, shellfish, cold cuts: Hepatitis A
  
  
• Dairy-based products (e.g., milk powder for infants, confectionary, frozen yogurt dessert, canned coffee drink, etc.): Kidney failure (from melamine)
  
  
• Fresh produce (e.g., peaches, apples, strawberries, celery, sweet bell peppers): Poisoning (from pesticides)
  
  
• Poultry, animal fat in meat, dairy products, and fish: Antibiotic resistance and toxicity from dioxins
  
  

Of recent concern has been the illicit use of an industrial chemical, melamine, in Chinese milk powder and milk byproducts. Causing several deaths and sickening nearly 55,000 people, this contamination resulted in one of China’s biggest milk producers’ stock price plummeting nearly 60% in Hong Kong a day after its products were found to be tainted. This contamination prompted a region-wide recall of milk products, including powdered infant milk, biscuits, candies, and chocolate, raising the social and economic losses associated with this incident and implicating at least 22 manufacturers, according to the World Health Organization. Due to milk product exports outside of the region, new investigations are turning up more contaminated products. This incident falls on the tail of a related incident in 2007, where melamine was found in pet feed manufactured in China and exported to North America, causing the death of a number of dogs and cats due to kidney failure.

Countries have experienced not only health and safety impacts for consumers because of food-safety incidents, but also significant trade disruptions. These include border closures, import bans, and the loss of hospitality and tourism dollars due to outbreaks of avian influenza, Bovine Spongiform Encephalopathy (BSE), and foot-and-mouth disease (FMD). These diseases have caused billions of dollars in losses globally in the past decade.

Complicating matters for both food safety and supply continuity is the increasingly global nature of growing locations, processing, packaging, and markets. Food supply chains are now exposed to more points of hazards, contaminants, spoilage, delays, disruptions, hygiene issues, and third-party participants. Decentralized food production, outsourcing/offshoring of packaging, foreign sourcing, and outsourced logistics operations that move and store food-related goods can increase risk exposure.

To combat the growing risks, all commercial operators in the supply chain should consider enacting more stringent controls and increasing their food-safety vigilance both within their internal operations and across their supply-chain partners.

Food contamination occurs due to biological, chemical, and physical causes. To secure the safety and continuity of the food chain, it is necessary to evaluate the critical constituents in the process, reducing risk factors across the areas of potential contamination and implementing proper points of control inside – and outside – your organization.

Local conditions set the stage for a pathogen or contaminant to enter the food supply. The health of the workforce, the health of animals, local sanitary conditions, process controls in the food production plant, water quality, and refrigeration control all play a role. Encouraging local and sustainable food sourcing with shorter supply chains does not by itself ensure an overall reduction in risk exposure to disease or illness-causing pathogens. Safe handling procedures and information and training resources in food safety are equally important for local sourcing and production.

To ensure safety from production to consumption, enterprises should be sure to include a focus on upstream sourcing (farms, suppliers, and suppliers’ suppliers) and on operational integrity across manufacturing, processing, and packaging operations. Contaminated animal feed, ground water, and animals raised for consumption can have detrimental impacts on both supply and demand just as the use of poisonous, unwholesome, or adulterated food does.

The modern food-control system shifts the focus of foodsafety strategies from response and recovery following a contaminated food product reaching consumer markets to strategies of prevention. It is critically important that organizations understand the shift underway in which the primary responsibility for implementing and monitoring food-safety strategies is now falling to industry.

Government regulations, best-practice guidelines, and other incentives aimed at industry have helped prevent supply-chain failures and encourage safe food production, but more needs to be done. For instance, industry selfimposed safety standards can serve multiple purposes, including: to safeguard consumers against the harmful effects of contaminants; to ensure access to safe sourcing impacting operational continuity for food producers; and to protect local production capabilities and trade relationships at the domestic, regional, or global levels.

Enterprises cannot rely on regulatory authorities alone to assure full application and compliance to safety standards. Importing and exporting markets may have different standards. For example, as has been reported during the 2008 Canadian Listeria outbreak, there are substantive differences in inspection and testing protocols between the U.S. Food and Drug Administration and the Canadian Food Inspection Agency. Companies with global supply chains, in particular, should seek to have the “highest common denominator” food-safety processes and procedures and apply them uniformly across all their operations.

Effective prevention strategies require the involvement of stakeholders and the integration of scientifically based risk assessments at all levels of the food-production continuum. Joint food recall plans developed by industry and monitored by governments reflect a secondary mitigation strategy. Primary contamination prevention programs, such as Good Hygiene Practice and Hazard Analysis Critical Control Points (HACCP), including biosecurity protocols, are not always universally applied, and the rapid globalization of food production and trade is increasing the likelihood of international incidents involving contaminated food.

Government regulators are shifting some of the foodsafety responsibility onto industry participants, and assigning them a major role in secondary prevention to enhance detection, verification, and recall capabilities. For example, food companies are best situated to deploy capabilities for rapidly detecting contaminated food products and preventing them from reaching consumer markets. Similarly, zoonotic emerging infectious diseases in livestock pose a risk to farmers and others in the agricultural production supply chain. Pushing the identification of risk up the supply chain to the source itself is becoming integral to managing zoonoses (e.g., avian influenza, BSE). Increased detection capabilities on the farm complement random sampling in food-production facilities. The earlier pathogens are detected the sooner interventions can be made available.

Knowing where to begin to strengthen food safety can be overwhelming for suppliers, manufacturers, retailers, and logistics operators. Best practices to follow include:

• Undertake a supply-chain vulnerability assessment. Use a structured approach to identify food-safety vulnerabilities throughout your supply chain. The assessment should cover the risk exposures within your internal supply chain and also those of your key suppliers, logistics partners, and other constituents. To gain maximum value, the supply-chain risk assessment process should be structured to deliver additional benefits by also identifying areas of opportunity for improving contingency planning, disruption prevention, and insurance protection that go beyond food safety. These additional areas can encompass: product diversion or theft; supplier delays; logistics delays; processing, packaging, or transport disruptions; natural hazards; labor strikes; government actions (e.g., export embargo); and so on.
  
  
• Enhance policies and procedures. Enhance food safety by updating the policies and procedures of both your internal operations and external supply chain, introducing routine and spot monitoring processes and audits. This should include designing and executing your company¡¦s risk strategy in collaboration with your key supply-chain partners and fostering business alignment.
  
  
• Strengthen supporting technology. Take advantage of the falling costs of technology to enhance and monitor processes in place, in particular in the areas of traceability and process control. Consider using RFID tagging for consumer units, traded units, or pallets to enable rapid traceability of finished products within the supply chain and thus save valuable time during a recall. This type of tag can also be used to transmit or record temperature data to act as an early warning alert to potential non-conformity in storage temperature. Optimize the effectiveness and control of thermal processes through use of new mapping technology. Investigate alternative processes to deliver safer products for the consumer; for example, consider improved heat-transfer systems for pasteurized or sterilized products. Consider new technology offerings during all development or redevelopment phases. The financial impact of investing in prevention and mitigation technologies and management systems in the short-term offers long-term benefits and could save your business from potentially catastrophic losses in revenue and reputation.
  
  
• Apply risk transfer at critical points. Uncovering ways to reduce claims through risk mitigation at all stages of the food supply chain can be done in conjunction with identifying the right insurance cover. Look at what types of risk-transfer options are available at key points within the supply chain to minimize financial loss in the event of contamination of your own product or a key ingredient. For instance, a contaminated products insurance program will cover both the direct recall costs (e.g., the cost of retrieving a contaminated product and replacing that product, as well as public messaging and communications initiatives alerting consumers to the recall) and the indirect recall costs (e.g., brand rehabilitation) if a recall is initiated due to a consumer safety issue. First party recall insurance (as distinct from covering liability to third parties), can provide cover for accidental contamination, malicious contamination, and product extortion. Additionally, the new Global Supply Secure insurance product can offer financial compensation in the case of a business interruption and could apply to food supply chain risks as well.
  
  Companies should also ensure they have sufficient marine cargo cover relevant to managing food risk. Cargo insurance that covers physical product damage incurred during transit can help reduce the financial motivation to put product that were potentially contaminated during transit into the market. Similarly, rejection insurance can cover the costs related to goods that you ship that are refused by your buyers or halted by a customs agency due to quality issues, labeling issues, or regulatory changes. Marsh also recommends that clients should be confirming that their forwarders and third-party logistics providers have adequate liability cover for the value of the cargo they are handling.
  
  
• Appoint a chief food officer. Many companies are turning to the appointment of a chief food officer or a food safety team responsible for centrally assessing and managing overall supply-chain risks related to food safety. This often includes overseeing quality-assurance and risk-mitigation systems and processes from supplier selection, production and processing controls, ERP systems management, all the way through to biosecurity processes. The benefits of developing and implementing a centralized approach across divisions and functions include improved stakeholder and consumer confidence and enhanced regulatory compliance oversight.