It never ceases to amaze me how many food companies still operate their food safety and quality management system using paper-based forms, word documents and spreadsheet alone. It is almost always a false economy, adding unnecessary costs and risks to the food business concerned. Perhaps part of the problem is that people are just to busy to change, too caught up in the heat of the daily battle to get the work done? Maybe it is down to a lack of knowledge of ‘what solutions are out there’? Or maybe it is just because people don’t fully understand the benefits and value of an integrated approach to food safety and quality. In this article I will try to explain some of the benefits and examples.
Whilst there is no such thing as a typical food business (every food company I have ever encountered is different in at least a few ways) there are a few generalisations and assumptions we can make if we were to profile a ‘typical’ food company.
Food companies generally have dozens of suppliers or more, this usually means they have dozens or even hundreds of raw materials and packaging supplies to purchase. Food companies are required to have a documented food safety plan (usually HACCP) in place and if they are operating to a global food safety standard. In these cases, they will have up to a hundred, or more, standard operating procedures and other documents that must be managed under strict document control. It is also important to manage corrective actions and customer complaints to validate the systems that are in place.
On top of these requirements there are requirements on traceability, the legality of labelling and raw material and finished product specifications to manage. Each of the above elements in a food business takes time to create, manage, review and keep up to date. In the case of supplier information like supplier and material approvals and corrective actions the management tasks are even more time consuming. Below is a worked example of the size of the problem.
I will use the following assumptions to illustrate why food companies are literally throwing money away by not digitising their food safety and quality management system.
Number of Suppliers: 25
Documents per Supplier: 10 (e.g. Certification, Food Safety Policy, Audit Reports, etc.)
Number of Raw Materials: 40
Documents per Material: 10 (e.g. Certificate of Analysis, Specification, HACCP plan, etc.)
Number of Finished Products: 20
Documents per Finished Product: 25 (E.g. Finished Product Specification, Certificate of Analysis, Traceability Record, Production Record, HACCP Plan, etc.)
Number of Employees in Technical / QA: 3
Average Salary of Technical / QA: £30,000 / $45,000
Number of Internal ‘SOP’ Documents: 50
Total documents to manage: 250 + 400 + 500 + 50 = 1200
Every hour an employee spends creating, amending, reviewing, approving and searching for documents costs money. Many technical and quality personnel spend a significant amount of time doing these tasks. A very conservative estimate of 20% of their time in our example means that the cost of this activity will be £18,000 or $27,000 per year for our fictitious food company. According to a report by PWC, up to 20% of the time spend managing documents can be spent just searching for documents in folders and in email. We’ve all been there, nothing is more frustrating or stressful when you have a deadline. Occasionally, these documents need to be re-created from scratch at an average cost of $122 according to PWC. Even on these basic figures, just being able to find information efficiently could save anywhere from £2000 or $3000 per year in labour costs in the technical and quality department alone.
This is not the whole story however; there is a very large and unquantifiable cost associated with the delays associated with document approval and review. This may result in slower than expected new product development or a critical project delay which directly affects time to market and therefore the planned rate of business growth. Sending printed documents for manual approval, or even by email, means that people need to stop what they are doing to give specific attention to these tasks. It interrupts their work flow, so people tend to put these tasks off until they can get a clear spot in their day. For many, the clear spot never comes. The result is delay after delay and the approval, or review, does not get actioned in a timely manner.
Then there is the cost of a document non-conformity at an audit. This is often a document that is out of date, staff using the incorrect version of a documented procedure or simply not being aware of the correct procedure and where to access it. These are all common issues that are picked up during audits. Such issues often result in meetings to discuss and correct the issue which costs time and money, tying up multiple member of staff and their valuable time.
Finally, there is the cost of storage of these 1200+ documents. Over multiple years this adds up to a significant sum. This is either in filing cabinet space, hard disk space on file servers or email servers and it will likely be in the range of thousands per year when you work it all out (which I am not going to do).
In our example, I would suggest that it is not unreasonable to conservatively assume that the cost of inefficient document management is likely to be at least £5000 or $7500 per year. For some businesses it will be lower, for others it may be a much higher number.
The Minimum Cost of Manually Approving Documents: £5,000 or $7,500 per year
At Primority, we have a lot of experience in this area. We know how long it takes to get a supplier and a material approval processed. I am sure you also know this is a time consuming, back and forth process, especially when it is all done by email.
Taking our example food company with 20 suppliers and 40 raw materials and the 650 documents that must be reviewed from them every year or so. If this task is being carried out by email where an excel spreadsheet, word document or PDF is sent to the supplier for completion then it may take weeks of back and forth to get a single approval. This is the case even in an electronic system.
Given that we require 60 approvals in total and need to review 650 documents, by the time we add in the chasing back and forth and then the collation, organisation, management, update and storage of the 650 documents we are looking at something close to a full-time job to manage this important task. If one is person working 60% of their time on this task can get the job done using a manual approach to the job, then this task could easily be costing the business £18,000 or $27,000 per year.
The Minimum Cost of Manually Approving Suppliers and Materials: £18,000 or $27,000 per year
The effective management of corrective actions is a critical quality and food safety process that is often tracked on spreadsheets and through email. This approach results in very high, often unrecoverable, costs that jeopardise the food business, puts consumers in harm’s way and jobs at risk. What is the real cost of a manual approach to corrective actions and how can we quantify it?
Corrective actions often originate from internal and external monitoring. Certification, regulatory and internal audits are designed to check if the food safety and quality management system is working according to the planned, documented system. Inevitably things can, and do, go wrong. This happens because people do not always follow the correct procedure. Sometimes this is due to a lack of training, a lack of procedural awareness or a poor food safety culture. Processes and technology also fail from time to time.
Outside food safety audits and inspections, things also go awry with suppliers and the materials they sell. Customer complaints occur, and production and procurement processes do not always go to plan. For example; engineering pre-planned, and ad hoc, maintenance procedures result in problems with the product and raw materials. These issues can be the root cause of an expensive and damaging product recall. To address the problem effectively requires an integrated corrective and preventive action management system.
Whatever the cause of a corrective action, a food company that wishes to achieve high standards needs to record and track corrective and preventive actions to deal with the issues and root causes and prove that effective action was taken. This is required by law and by industry global food safety standards. It is also necessary to learn from the trends that are occurring in the business, and its supply chain, and take preventive actions that stop future recurrence of such issues. Many food businesses currently do this in an excel spreadsheet or similar. Those that do have a software system often track corrective and preventive actions in a stand-alone software system that is not connected to up to date supplier and raw material information, documented procedures, or the staff concerned. This can be a costly mistake as recurring issues that are not dealt with effectively lead to delays in production, rejection of product by the customer and very costly product recalls and withdrawals.
The most important point about corrective and preventive actions is that it requires a collaborative approach by many different people in a food business. Sometimes these actions will need to involve suppliers, engineers, managers, supervisors, production staff and occasionally customers. In almost all cases, it will involve different people from different areas of the business to work together to solve key issues that otherwise can cost a food business significant amounts of money and result in brand damage, loss of business or even closure. Excel spreadsheets are simply not an efficient way to do this and this results in hidden damage to food businesses and consumers.
A good corrective and preventive action system will allow people to review documentation, carry out risk assessments, assign tasks and create projects. Most importantly, it will track management actions and outcomes, successful or otherwise. Without such an approach underlying problems cannot be solved permanently. Having visibility of all corrective actions and being able to risk assess and prioritise them in a collaborative way ensures that the business can focus on the most important and highest risk issues first. They can then make the best use of the resources they have available to them to resolve these issues.
Few of us could live without email these days, but the volume of email people have to deal with on a daily basis is at unprecedented levels. However, using email to manage and track corrective actions can be a recipe for disaster. Important issues can easily disappear down the long daily list of emails and be forgotten, until the consequences come home to roost at a later stage. When this happens, a reactive ‘firefighting’ mentality sets in and then people struggle to deal with one problem after another, often making the situation worse. Proactive prioritisation and visibility of the most important corrective actions by the entire team in a food business is required to be able deal with the main risks to the product and the business.
One way of quantifying the cost of poor corrective action management is by looking at the probability and cost of a product recall. In the USA, and in the UK, the rate of regulatory product recall has been increasing in recent years. A 2017 study by Rentokil noted that in 2016 US product recalls increased by 24%, whilst in the UK they increased by 29%. The top three root causes, accounting for 80-90% of all regulatory food product recalls, were identified as microbiological contamination (around 44-46%), product mislabelling (13-25%) and physical contamination (10-27%). There is no doubt that an effective monitoring and corrective action management system would significantly reduce the rate of product recall.
The cost to industry of regulatory food product recalls is significant. A report by the GMA, Deloitte and FMI which looked at product recalls in larger businesses put the average cost of a product recall in the USA at $10m per recall and an average of 22% reduction in share price, for public companies, within 2 weeks. 42% of the USA recalls analysed in the report were due to issues with raw materials, 17% were manufacturing errors and 19% were labelling errors. All of these issues can be dealt with through an effective corrective action management system.
In another report by the GMA 58% of the food companies surveyed has experienced at least one product recall in the past three years with 81% of the businesses surveyed stating that the consequences of a product recall were financially “significant to catastrophic”. A recent report by Lockton showed that 88% of companies saw a reduction in gross margin following a product recall and the effect was long lasting. This is because companies lose a critical volume of business as sales are affected negatively and they often need to increase marketing spend to bolster their brand and reach new customers to replace lost ones. The UK and EU has very similar issues with the average cost of a product recall being reported at £1.3m per recall by insurance giant Allianz, who process many product recall insurance claims.
The value of an integrated approach to corrective action management is clear, but this requires a level of teamwork and coordination which cannot be achieved without clear, real time visibility on who is responsible for what actions.
To give a real example; A spreadsheet system cannot send alerts when key issues occur or raise escalations when they are not being dealt with. Spreadsheets are simply not good at assigning and tracking tasks in a way that is visible, and easily reportable, to the management team and everyone involved in resolving internal and external technical, quality and food safety problems. You cannot upload a document into a spreadsheet and emailing a spreadsheet for others to update results in multiple versions of inaccurate and out of date information. These issues make spreadsheet-based corrective action tracking a major risk to any food business. Not dealing with corrective and preventive actions in an effective and efficient way can destroy an otherwise good food business. It allows a company to drift into inefficient, ineffective and dangerous practices that result in major one-off costs over the course of a year.
An integrated food safety and quality management system means that the documentation, processes and records for food safety and quality all exist in a single system and are available for people across the business to use and collaborate on. The information is a ‘single source of truth’ and is updated in real time sending out notifications when things are being completed and sending escalation alerts when they are not being completed on time. It leads to accountability, efficiency and transparency. An integrated approach helps reduce costs and risks.
For example; A production line has a start up procedure, a cleaning procedure and HACCP monitoring points that require data capture. It also comprises of many different pieces of machinery to operate and has multiple documented procedures for its safe and effective operation. When there is a production line breakdown, the engineer may be called to rectify the failure and get the line back up and running as quickly as possible. What could go wrong in this situation that an integrated approach to food safety management helps with?
If the engineer cannot easily access the technical information about the equipment that requires repair, then there will be a delay to production. If the engineer is not properly trained in good hygienic practices, there may be a risk of foreign body contamination onto the production line and into the product when the production line starts again. After the repair, the line supervisor must carry out pre-start up checks to ensure everything is clean and safe. The most up to date procedure must be accessible, be followed and a record kept that this was done. He, or she, may have to instruct the cleaning department to clean and disinfect the line first. Again, a record should exist for this. The breakdown, traceability batch information at that point in time should also be recorded so that if there is a later product recall that the affected or suspect batches may be more easily identified. This example clearly demonstrates why production, engineering, cleaning, quality and food safety staff need to have timely access to information and good procedures in place in addition to good data capture on the production line of all events that occur. Recording the breakdown and then reporting on this to identify trends is also important so that corrective and preventive actions may be raised and executed to reduce future delays and costs.
Earlier, we mentioned that foreign body contamination is one of the most common cause of costly product recalls. In many cases the root cause will be a disconnect between all the players in a production scenario like that above.
In a further example; The procurement team in a food business have a very important job to do. They are responsible for purchasing enough raw materials and ingredients from approved suppliers to meet production demands at the best possible price / quality point. In this scenario there may be issues with suppliers, or raw materials, which the quality department are aware of, but the buying team are not. Thus, it is easy to see how raw materials that do not meet the required specification may be purchased in error, resulting in a lack of inventory to meet production demands. The issue may be discovered too late by the quality team to be able to procure replacement inventory and therefore pressure increases to overrule the quality team and accept the risk. Alternatively, the procurement team may have to purchase raw materials at a higher cost from an alternative source to be able to fulfil customer orders. These scenarios are normally caused by a lack of communication between the buying team and the quality department. They are often caused separate systems that do not ‘talk to each other’ because the buying team have their own system for managing suppliers and the quality team have their system.
An integrated system would automatically update the buying team’s’ system with the supplier and material approval status so that a purchase from a suspect supplier can be flagged and the order can then be stopped. This approach can provide valuable time to buy from an alternative source at an acceptable price removing the necessity to use unapproved raw materials from a potentially unsafe source and reducing the risk of a costly product recall.
Implementing an integrated approach means getting everyone on to a single system or ensuring that the multiple systems that exist can communicate key information effectively. Its value to a food business is incalculable but investing in an integrated approach to corrective action management is very valuable because it directly affects the standards, communication, and profitability of a food business.
At Primority, our 3iVerify solution is an integrated food safety and quality management system. It can be applied to all of the above scenarios and provides an affordable way to realise maximum efficiencies in food safety and quality processes. Contact Us to discuss how we can help you take an integrated approach to food safety.
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