High-quality, transparently produced products are the future of manufacturing. Food manufacturers, retailers and private label brands all feel the impact of poor product quality. In a 2016 supply chain resiliency study conducted by the UK-based Business Continuity Institute, 43 percent of manufacturers and 41 percent of retailers cited product quality incidents as the second highest ranked cause for supply chain disruption.1 Retailers and their contract manufacturers have limited visibility throughout the production process, making it challenging to address product quality issues before they occur. Supply chain visibility means understanding supplier risk, digitizing quality assurance processes and controlling product quality – which is what is most important to your customers and the future of your business. The winners will rise to stakeholder challenges, while managing their risks and obligations more effectively than their competitors.
Supply Networks Stressed by Dynamic Market Forces
Food manufacturers today face unprecedented challenges on all fronts. The industry drivers are powerful and inevitable. Some are well-recognized, while others may hit unprepared businesses when it is too late to act.
- Tightening of government regulations in response to emerging public health issues. The UK government’s sugar tax, which was much opposed, is now regarded as a success that will lead to similar action on other foods. The latest announcement is the proposed 14 percent tax on red meat and 79 percent tax on processed meats.2 Regulatory and third-party audit standards (such as SQF, BRC, ISO 22000 and IFS) require food manufacturers to maintain traceability one step forward into distribution, and one step back toward the source of the ingredients, but this falls far short of the due diligence that consumers and retailers now require.
- Brexit creates economic instability and anticipated global trade volatility. The full implications of the exit of the UK from the EU is not yet known, but there are some fairly certain impacts: prices of raw ingredients will rise, the EU may no longer be a cost-effective source of supply, there may be delays and therefore product wastage at the borders, and staff shortages in the business and supply chain could be significant. As UK regulation diverges, new product specifications and labeling requirements will be needed.
- Consumers want to be sure of the provenance and authenticity of their food. It’s estimated that food and consumer goods adulteration and counterfeiting cost the global industry $49 billion per year.3 Fraud in the supply chain has always been an issue, but several factors — today’s global and complex supply chains, organized crime facilitated by technology and price vs. demand pressures — have led to a significant growth in fraudulent activity that is large-scale and harder to detect. Products and packaging must be able to evidence brand claims and responsible behaviors. Enhanced supply chain visibility at each link in the supply chain is required to evidence, monitor, manage and control product quality and brand defense.
- Consumer trends toward lifestyle and health choices in their food purchasing are creating a myriad of product extensions and new lines that meet requirements for gluten-, allergen-, lactose- and antibiotic-free and organic products, as well as innovative niche products that align with specific consumers’ values and/or provide specific functional benefits. This increasing fragmentation results in more complex supply chains and ingredient substitutions.
Risks Exposed by Lack of Visibility
- Manufacturers are shouldering greater responsibility for liability. Each year in Europe, an average of 500 product recalls are initiated, 130 of which can be classified as severe. Thirty percent of these recalls are due to allergen contamination.4 Over half of the 200 manufacturers surveyed in the 2017 Lockton Food and Beverage Report expect to spend more on product liability insurance.5 A single source of truth is critical to business operations at every point in the supply chain — accurate, version-controlled product specifications, a batch-level certificate of analysis and supplier master data — to ensure that both suppliers and products are compliant at a point in time. It is essential that manufacturers are able to trace their ingredients, products and packaging materials both backwards and forwards.
- Responses to market pressures increase product safety and quality risks. Due to consumer demand, retailers are pressuring manufacturers on price. Manufacturers are cutting cost by shrinking portion sizes, sourcing low-cost ingredients locally and internationally, and outsourcing some or all of their manufacturing, increasing product quality risks. Constant product reformulation, iterative product specification management, supplier due diligence and strict quality assurance with contract manufacturers will become a fact of life for manufacturers to meet profitability targets while still producing safe, quality and tasty goods.
- As supply chains grow internationally, data management becomes more complex. The volume of data stored, velocity or speed of data generated, and variety of data formats — structured to unstructured — is ever expanding. Given all the data points at each step of the supply chain, data can grow exponentially. For example, a hamburger could have up to seven million data points to manage. Disparate systems restrain information sharing and collaboration internally and across supplier networks. Data is often manually stitched together for operations, increasing the risk of missing, erroneous and inaccurate supply chain data. The problem is compounded when multiple stakeholders upload this data to their individual systems, creating a ripple effect that compromises corporate data integrity.
Supply Chain Visibility Is Your Competitive Advantage
- Brand defense is provided by visibility of the supply chain back to the source. This includes availability of meaningful, accurate and actionable data to meet regulatory and voluntary commitments, and full traceability in the face of consumer pressure and product recall.
- It is critical to anticipate and adapt to trends — better than your competitors do. If future supply is limited, secure your competitive advantage. Innovative product formulations and effective marketing strategies present a huge opportunity for manufacturers. Leverage supply chain business intelligence to detect patterns and trends. Monitor emerging consumer demands you can take advantage of. Create a culture of innovation that improves quality assurance processes to meet consumers’ demand for ingredient transparency and product profitability.
- Digitization of the supply chain is critical to create an agile, resilient system that can flex to business cycles, innovate market trends, and meet new regulations and changing specifications. Software, such as TraQtion’s cloud quality and compliance platform, is a strong support to all business functions, by allowing companies to manage all aspects of safe product delivery to specification, new product development, and supplier quality and performance management. It forms a single repository of essential sharable information including policies, processes, specifications and service agreements, and enables effective real-time communications. Techniques such as DNA analysis provide certainty about authenticity and provenance, and smart (AI driven) remote monitoring and surveillance give real-time information about supplier operations. Blockchain technology enables complete verification of product movement from source to shelf and can also facilitate purchasing contracts direct with source suppliers. Such technologies will over the next few years no doubt become integral facets of manufacturers’ management systems.
Supply Chain Collaboration Is Your Accelerant
- Product stewardship is a team sport. TraQtion is designed to make internal teams and their suppliers more nimble, proactive and responsive. TraQtion improves collaboration and accelerates the exchange of information among stakeholders both inside and outside of the company’s four walls. Inside the company, QA, R&D, product development, artwork & packaging, corporate procurement and sustainability teams trust TraQtion as their system of record, enabling faster speed to market. Externally, suppliers, franchisees, co-manufacturing facilities, laboratories and technical consultants participate in creating a dynamic single source of truth. Collaboration and understanding of shared goals – across technical, procurement, operations, finance and marketing facilitates – progress more rapidly and efficiently, and time is money.
- Build trusted supplier relationships. Knowing the supply chain end to end is the single most important recommendation. The development of a stable, trusted, engaged and technically competent supplier base is key to generating an effective and secure supply chain. Companies must work with their supplier base to develop sustainable trusted relationships which goes way beyond GFSI-benchmarked audit standards.
- Monitor supplier performance to help all suppliers perform like your best ones. Find new ways for your suppliers to operate more efficiently. Institute supplier performance scorecards to measure actual performance against targets. Leverage the data-driven insights to have more productive supplier reviews.
1 Business Continuity Institue. Website: https://www.thebci.org/resource/supply-chain-resilience-report-2017.html
2 BBC UK NEWS. Website: https://www.bbc.co.uk/news/uk-46122227
3 Grocery Manufacturing Association. Website: https://www.gmaonline.org/blog/food-and-consumer-product-fraud-prevention-and-mitigation/
4 Food and Drink Federation. https://www.fdf.org.uk/publicgeneral/RSA_F&D%20WHITEPAPER_Product%20Recall.pdf
5 Lockton International. Website: https://www.locktoninternational.com/products/product-recall