Seventy-two years is a long time for a law to go without significant overhaul. Yet that’s precisely how long it had been since the U.S. Food and Drug Administration (FDA)’s food safety laws were significantly revised.
Considering the rising number of large-scale food recalls in recent years, diminishing consumer confidence, growing scrutiny from regulators and unprecedented demand for food from emerging nations, the Food Safety Modernization Act (FSMA) was long overdue.
A closer look at this new food safety law, however, raises some serious questions about the impact it may have on small and midsize regional food processors. While the feds have been dragging their feet on this issue for years, larger processors have been adopting and adhering to stringent industry standards for over a decade. As a result, many of them are better prepared to deal with the tsunami of requirements that is about to hit the industry.
Let’s take a closer look at how FSMA is changing the dynamics of the food and beverage industry and how it will create both challenges and opportunities for small and midsize food processors.
FSMA at a Glance
Essentially, the new regulations give the FDA extended powers. It will enable the administration to:
• Conduct more frequent inspections and set testing requirements of food facilities
• Standardize mandatory recalls and the closing of facilities
• Provide access to additional records and a more comprehensive collection of data
• Assist state and local governments in handling food emergencies
• Establish new regulations and ensure that imported foods meet the same standards
Interestingly, much of the language in this new law is very similar to that in the standards already set by organizations, such as the Global Food Safety Initiative (GFSI) and in Hazard Analysis and Critical Control Points (HACCP), both of which have been around for more than a decade.
GFSI is a collaboration among some of the world’s leading food safety experts from retailers, manufacturers and foodservice companies, as well as service providers associated with the food supply chain. HACCP, on the other hand, is a management system in which food safety is addressed through the analysis and control of biological, chemical and physical hazards—from raw material production, procurement and handling to manufacturing, distribution and consumption of the finished product.
In early 2008, WalMart became the first U.S. nationwide grocer to require suppliers of private-label and select food products to have factories certified according to one of the approved GFSI standards. Since then, a number of other retailers and food service organizations in the United States have begun requiring GFSI standards certification in order to be suppliers.
Small and midsize processors that don’t work with larger retailers haven’t had to worry about these standards. Under FSMA, however, all FDA-registered food companies will be required to develop and implement “HACCP-like” protocols by this summer (only very small businesses are exempt from this requirement).
The Harsh Reality
In many cases, this will present a challenge for regional processors not currently following these preventive requirements—especially if the processor is still using a manual tracking system based on paper records and spreadsheets.
Without an automated tracking system, finding receipts, purchase orders, bills of lading and other paperwork becomes a daunting process. In fact, for any processor that has multiple steps in its production processes, a manual system makes it nearly impossible to produce the necessary information within the 4-hour window the FDA already mandates.
So where does that leave smaller players? As harsh as it sounds, some companies simply will not be able to weather this regulatory storm. Others will undoubtedly suffer significant losses as they struggle to pass mock recalls required by their retail customers—a practice that is quickly gaining steam.
And yet other processors will be swept up by larger companies that already have the systems, infrastructure and processes to manage the long list of growing requirements.
Opportunity for Forward-thinking Processors
But it’s not all bad news. These challenges also present great opportunities for forward-thinking processors that can leverage the right technology for competitive advantage.
That is not wishful thinking. A number of regional processors have been gradually replacing their manual tracking systems with enterprise resource planning (ERP) technology that is specifically tailored for the food and beverage industry. These systems are automating and integrating traceability across their supply chains, improving reaction times, reducing costs and providing a greater measure of brand protection.
An ERP system that incorporates lot-tracing capabilities allows the company to trace back to the source of all ingredients and trace forward to the distribution of all food products made and sold. If a safety alert arises, the processor can access information about the grower, supplier and date range associated with the affected lots. Not only can this help prevent illness, but it can also keep the processor from having to recall product that is perfectly safe and salable.
Besides the obvious safety benefits, there is also a brand protection element at play here. Retailers are increasingly requiring processors to undergo food safety audits and mock recalls that require rapid access to accurate summary product lot information with detailed supporting results. The ability to quickly produce the necessary detailed information can make all the difference between earning the business and losing the account. Plus, it can engender confidence in auditors, regulators and inspectors.
The message is clear: ERP systems with integrated tracking and tracing technology are no longer a luxury for small and midsize processors. In an environment of tougher regulations, greater risks and increased retailer expectations, this industry-focused technology can create a competitive advantage that translates into higher market share among distribution channels and consumers.
Jack Payne is vice president at CDC Software. Learn more at www.cdccorporation.net/en/default.aspx.
Will FSMA Help or Hurt Small and Midsize Processors?
April 5, 2012