17 July 2013

Analysis

Track and trace security to stamp out a food scandal

The recent horsemeat scandal highlighted that retailers are unaware of much of what goes on in their increasingly complex supply chains. But, with the huge – and growing – number of software solutions on the market tailored to provide visibility from source to fork, there is no longer any excuse for this lack of awareness. Elly Earls investigates.

A growing number of companies across Europe, including Nestle and Findus, have had to recall beef ready-meals as they were found to contain horse DNA.

In January 2013, Irish food inspectors announced that they had found horsemeat in frozen beef burgers made by firms in the Irish Republic and the UK and sold by some of the biggest supermarket chains in the region, including Iceland, Tesco, Aldi and Lidl.

Since then, a growing number of companies across Europe, including Nestle and Findus, have had to recall beef ready-meals as they were found to contain horse DNA, while catering giant Compass Group and Whitbread, one of Britain’s largest hotel chains, have also discovered horse DNA in products supplied to them as beef.

This scandal has served to emphasise to both consumers and the food industry that manufacturers and retailers – no matter their size or reputation – are simply not aware enough of what goes on in their supply chains, and, in many cases, are unable to trace food products from their source through to the customer’s plate.

“Since then, a growing number of companies across Europe, including Nestle and Findus, have had to recall beef ready-meals.”

“The awareness is increasing, but there is still a long way to go,” confirmed Mikko Soirola, vice president, sales, Europe, at Liaison Technologies, which provides data and process integration solutions that allow companies to see in real time the supply chain of the goods delivered.

“The means to trace the origins are technologically there but since the supply chain is, in general, very distributed by nature, opportunities to hide the actual origins exist and the further down the chain one goes, the less visibility one has. Out of sight, out of mind, unfortunately.”

Yet, it’s not always a case of wilful blindness on the part of retailers. In fact, even if they do everything in their power to keep tabs on each and every link in their complex supply chains, there is very little they can do to prevent fraudulent activities, such as those that resulted in the horsemeat scandal.

“There’s a level of trust – that suppliers are providing what they contractually agreed upon,” said Nick Martin, senior vice president at Trace One, Northern Europe, which provides product life cycle management solutions to the food sector.

What retailers can do, however, is be proactive by putting systems in place to identify and recall compromised batches of products as quickly as possible. “With product recalls, whatever the cause, time is of the essence,” Martin emphasised.

“When the horsemeat contamination first emerged it was not possible to know that the cause of the problem was fraud, or how far back along the supply chain it went. For retailers with the right approach in place, once they were alerted they were able to conduct a database search, discover exactly which products were at risk, and contact their suppliers directly for assurances within an hour.”

Unfortunately, not enough food industry stakeholders have the systems in place to achieve this, a state of affairs, which has not only reduced consumer trust, but has also negatively impacted retailers’ bottom lines, as recalls are not being handled as quickly or efficiently as they could be.

“Retailers need to be more proactive in the management of supply chains,” Martin said.

Software solutions: not in short supply

Yet, with the huge – and growing – number of software solutions available in this space, there is absolutely no excuse for not being proactive in this area.

“There is very little they can do to prevent fraudulent activities, such as those that resulted in the horsemeat scandal.”

Enterprise applications and services supplier Infor, for example, provides a solution called M3 Graphical Lot Tracker, which offers complete visibility from the raw materials / batches phase right through to the semi-finished or finished products that are supplied to the customer.

So, not only are Infor’s clients able to trace products along the entire supply chain, they can also significantly speed up and simplify the process of recalling a problem item, with minimal impact on their business’s bottom line.

“You don’t have to pull a month’s worth of inventory or even a day’s worth of inventory back because you don’t know which products were affected,” explained Mike Edgett, director of industry marketing, process manufacturing, at Infor. “You know specifically what it was and you can pinpoint it all the way through.”

Of course, even with the best automated traceability systems, it is impossible to eliminate problems caused by food contamination or prevent fraudulent activities completely; there will always be an element of trust involved. However, accurate and transparent traceability can significantly reduce risk exposure by allowing companies to identify, isolate and correct the problem quickly and efficiently.

Moreover, says Marcel Kars, senior vice president for sales and marketing at Zetes, which provides cloud-based track and trace solutions specifically tailored to the food and beverage industry, software solutions like those offered by Zetes can also have a more direct impact on incidences of food fraud.

“A collaborative approach to supply chain traceability, taking advantage of cloud-based track and trace solutions, will help to build greater trust among stakeholders and foster stronger, longer term working relationships,” he said. “By having the ability to store product information virtually, within a secure, real-time data repository of traceability information, this gives all parties the ability to establish exactly what happened when, where, why and by whom, for any unique item or group of aggregated items.”

“Zetes believes that if suppliers, sub-suppliers, trading partners and logistics providers were obliged to store detailed information relating to their raw ingredient sources and record product movements across the supply chain, this would significantly reduce food fraud in their own supply chains. This is because individual companies involved would be more accountable and easily identifiable. In turn, this would improve levels of security within the supply chain and build greater trust between the different partners.”

Soirola agrees. “Being able to provide full visibility, and sharing that visibility with appropriate parties – authorities, consumers and trading partners – builds trust more than anything else,” he stressed, adding that, in an industry where supply chains are becoming more and more complex and international, software such as this is more crucial than ever.

Cost vs benefit: a no-brainer

So, why the reticence by many in the food industry to invest?

“With the huge – and growing – number of software solutions available in this space, there is absolutely no excuse for not being proactive in this area.”

“Cost pressure has put us where we are now and clearly has been the top reason for not investing in technology that would provide transparency into the food supply chain,” Soirola remarked. “It’s not where we want to be and something needs to change.”

Progress on this front is slowly being made, according to Martin. Indeed, he believes that technology is increasingly being seen as a tool that can help organisations reduce their costs, rather than as an unnecessary investment.

“Efficient consumer response is a movement among retailers to meet customer demands for better quality at a lower price. This movement is gaining momentum and collaboration throughout the supply chain is becoming seen as a key enabler of the objective,” he said. “This required collaboration, as well as this being seen as a long term initiative is actually driving investment in technology as the enabler for providing continually more and better products with the same or less resources.”

Indeed, the growing number of traceability software solutions on the market speak for themselves when it comes to value for money. Not only can investing in these solutions significantly reduce the costs associated with recalls, it also helps protect retailers’ and manufacturers’ positions in the market and with their customers, establishing trust and setting them apart from the competition.

“People used to look at software as almost like insurance – if there was a recall you’d be able to cover yourself. But that’s not the way you should look at it – really it’s an opportunity to optimise your whole operation from the supply chain standpoint,” added Edgett, who was keen to emphasise that, at Infor, the team generally has no problems explaining the value of the company’s solution to potential clients.

The recent horsemeat scandal had a huge impact on the food industry’s reputation, an impact that a sector operating on such tight margins simply cannot afford. But there is no reason that retailers and manufacturers can’t use this as an opportunity to come back stronger and better equipped to deal with food fraud than they were before, using technology as a key enabler.

“It is ultimately up to the industry to decide on how it improves transparency of information and regulates the international trade of food products,” Martin concluded. “But, at the end of the day, the relationship between retailers and manufacturers is key to the product creation process and software can help build and maintain this relationship more effectively.

“Better collaboration and effectively dealing with product recalls can help the food industry minimise the effects on consumers and preserve the reputation of the industry as a whole – a reputation which has so far been damaged by a visible minority.”