Globalization has been radically transforming markets and entire industries for long enough so that it’s no longer an interesting conversation.
However, the food and beverage industry moved more slowly than other manufacturers to embrace off-shoring of manufacturing and sourcing opportunities. Many people lived with the perception that their food was a domestic product. Those days are now long gone too.
A Trust Industry
Pharmaceutical firms work in a heavily regulated marketplace because governments recognize that their citizens are concerned with the safety and efficacy of the chemicals that they ingest. The drug companies also recognize that theirs is a trust industry. If the buying public comes to the conclusion that a company cannot be trusted, that they are willing to peddle medicines that might cause illness, then those companies will not survive for long.
Food and beverage producers are slowly coming to accept that they are members of this same trust economy. Unfortunately for many of them—the PCA executives come immediately to mind—they waited much too long before accepting this reality.
Now they are faced with a wave of regulatory requirements and customer expectations with respect to the quality and safety of the products they offer.
Globalization brings incredible growth opportunities, but the accompanying challenges cannot be ignored.
Tracing and tracking inputs and outputs throughout a complex supply chain and across multiple borders have resulted in much greater risk exposure and potential liability for food manufacturers. The increasing worldwide adoption of the Global Food Safety Initiative (GFSI) as the accepted standard for food safety compliance has also complicated the administrative burden for producers.
According to CERT-ID, a leading third-party food safety certification body, to achieve certification the applicant must demonstrate a significant range of capabilities including:
• Senior management that is fully committed to the implementation of the requirements of the Standard
• A well-documented food safety plan and Hazard Analysis and Critical Control Points
• Operations with well-documented sanitation and Good Manufacturing Practices in place
• An internal audit system that identifies non-conformances and provides corrective procedures and preventive action for resolution of non-conformances
• Clear and well-documented procedures for monitoring the performance of suppliers
• Traceability through documentation of every ingredient and final product and service
• Well-documented evidence of layout, process flow and segregation
• Operations with an incident management system in place
• A well-documented handling requirements for specific materials, for example, materials containing allergens and identity preserved materials
• Well-documented training procedures including records for employees
Minimal Effort Is Minimal Growth
Many food and beverage producers view these steps as a minimum effort that has to be met to achieve their GFSI and FSMA requirements.
In truth, a commitment to food safety and quality can provide these companies with a competitive advantage in the marketplace.
But most of these same firms lack the organizational maturity to lead their people through the challenge of changing the way they approach food safety either on the production floor or in their administrative processes.
Modern IT systems can resolve much of the internal pressure that results from intricate supply chains, complex regulations, and rapid turnaround times. But firms that attempt to integrate these systems without also developing the capacity of their human resources to properly use them will find that they are unable to capture the full value of their investments.
And the executive leaders of these firms cannot be fooled into thinking that they will make a few changes to their processes, gain their certifications, and slide back into ‘business as usual.’
There is no sector within the global economy that is not undergoing continuous, transformational change. The food and beverage sector has been relatively insulated from these pressures, but those times are gone forever.
Constant Change Is Reality
New interpretations of the requirements of the Food Safety Modernization Act emerge on a seemingly weekly basis. The GFSI guidelines will continue to evolve and mature with every passing year.
Continuous change is the new reality.
There is no sense in ignoring this. Accept it and move boldly into the future or deny it and slide quickly into obsolescence and the obscurity of history.
The job of the senior management team is not to direct their company through the requirements of GFSI certification.
The job of the senior management team is to lead a complex organization through the very difficult task of developing the maturity in their people and their systems that will allow them to effectively execute their strategy—within an ever-changing market and regulatory environment.
New technologies and new IT systems will continue to play a critical and expanding role in this new reality. But without the people to tie the technologies and the IT systems and the execution strategies together, no amount of capital investment will save these firms.
Companies must realize that corporate culture and organizational maturity will determine the ultimate success or failure of their investments.
Firms that accept this will recognize the need for an in-house capacity to implement the change management programs, the leadership development programs and the training programs that will allow them to maximize the impact of their technology investments.
And firms that can accomplish this transition can stop playing defense and benefit from their improvements in quality and food safety to give their business an advantage.
Geoff Schaadt, M.Sc., MBA, is a consultant with Delta Partners.>