Supply Chain Whitepaper

Why wait for a food recall to get your

supply chain under control?
 Introduction
Safe, quality products earn the trust of the consumer. This trust is easily lost in the event of product recall
due to contamination. Many issues contributing to food recalls are a result of supply chain controls that
have failed, with effective supply chain management being a common issue in the industry. Although the
initial cost of a recall can be determined, the long term impact from damage to brand and organizational
reputation may be difficult to regain.

The purpose of this paper is to define the impact of a food recall and the negative effects it may have on an
organization. In addition, this paper will look at supply chains and how their failing to manage their inherent
risks could result in a damaging food recall.

Food recalls and the damage to

your business?
A common misconception is that food recalls and
food withdrawals are similar processes. Food recalls are classified under the following categories:
• Microbial • Chemical or contaminant
• Labelling • Biotoxin
A food withdrawal is where an organization
• Undeclared allergen • Tampering
removes food from the supply chain for reasons • Foreign matter • Packaging fault
other than protection of public health and safety.
This is typically for product quality reasons, and
a withdrawal generally is conducted prior to the Food recalls may be initiated from a report or
product reaching the consumer. complaint from a manufacturer, wholesaler,
retailer, government department or a consumer.
A food recall is the removal of products that may It may also occur as a result of an organization
pose a health or safety risk from distribution, sale conducting internal testing and auditing.
and consumption. A food recall will be completed
for food deemed to be unsafe or if the food does A country’s consumer protection laws will have
not meet regulatory requirements. Examples specific requirements in regard to product recalls.
typically include products packed in the incorrect Food Safety Australia and New Zealand (FSANZ)
packaging, resulting in undeclared allergens, coordinates and monitors food recalls in Australia.
product contaminated with foreign matter, Recalls occur as a result of consultation between
products contaminated with food poisoning state and territory governments and a sponsor
bacteria and underweight retail products. (usually the manufacturer or importer of the
food product). In New Zealand, food recalls are
coordinated by the Ministry for Primary Industries.
Food businesses are responsible for ensuring that
the public is notified of a recall.

FSANZ have collected statistics on Australian

food recalls since 1990, including the causes of
all recalls and their domestic or overseas origins.
Between 1 January 2005 and 31 December 2014,
FSANZ was notified of 586 recalls. The average
number of recalls per year for the last 10 years is
59 recalls per year.
 Recall Reason 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Total
Microbial
18 22 21 15 28 14 13 25 12 26 194
contamination
Foreign matter 10 18 14 15 7 10 18 12 7 14 125
Labelling 1 3 4 2 1 1 1 2 2 0 17
Undeclared allergen 20 19 9 10 17 13 24 17 16 27 172
Chemical or
7 4 3 4 1 10 5 1 0 1 36
contaminant
Biotoxin 2 0 0 2 1 2 4 1 2 3 17
Tampering 1 0 0 0 0 0 0 0 0 0 1
Other 5 1 0 3 0 3 2 2 3 5 24
Total 64 67 51 51 55 53 67 60 42 76 586
Table 1: Number of recalls coordinated by FSANZ, by year and classification, between 1 January 2005 and 31 December 2014*

Microbial
In the past 10 years, the majority of recalls have
contamination
been conducted due to ‘microbial contamination’
Foreign Matter (~33% of all recalls during this period), and
‘labelling/undeclared allergens’ (~30% of all recalls
Labelling during this period). The number of recalls due to
‘foreign matter’ has fluctuated over this period.
Undeclared
allergen
The number of global food recalls has dramatically
Chemical or increased. The amount of recalls in the US alone
contaminant has jumped four-fold in just five years. There are
Biotoxin
multiple reasons for the spike in the number
of recalls, but contributing factors include the
increasing complexity of the food supply chain,
Tampering
the globalization of the food industry and the
increase in regulatory scrutiny.
Other

In today’s connected world, consumers are

0 50 100 150 200 more informed than ever of food recalls. Media
Graph 1: Total recalls coordinated by FSANZ, by classification, outlets and social media rapidly report and users
between 1 January 2005 and 31 December 2014* share the information through their networks.
The damage this can cause to a brand can be
A recall can put large financial strain on an organization, devastating.
and it can have both direct and indirect costs:
Direct costs Indirect costs
• Notification to • Litigation
regulatory bodies • Agreed or mandated
• Notification to the governmental oversight
supply chain post-incident
• Notification to • Loss of sales
consumers • Impact to market value
• Product retrieval • Brand reputation
(reverse logistics)
• Storage
• Destruction and
disposal
• Unsaleable product
• Additional labor costs
• Root cause analysis

*As per the food recall statistics from Food Safety ANZ: http://www.foodstandards.gov.au/industry/foodrecalls/recallstats/Pages/default.aspx
 What is a supply chain and how
does it affect your business?
A supply chain is a system of organizations, people, If a supply chain is not effectively managed, the
activities, information, and resources involved inputs an organization receives may be corrupted
in moving a product or service from supplier in some way. A supplier’s lack of diligence can lead
to customer. Supply chain activities involve the to undeclared allergens ending up in ingredients,
transformation of natural resources, raw materials, foreign matter ending up in a final product or
and components into a finished product that is packaging not properly sterilized against harmful
delivered to the end customer. microbes. Each of these flaws can go undetected if
a supply chain’s risk is not managed properly, and
Supply Chain Management encompasses the once discovered, this will force a food recall at the
planning and management of all activities involved cost of the business.
in sourcing and procurement, conversion, and
all logistical management activities. It includes In addition, if each product is not checked along
coordination and collaboration with channel every manufacture or packaging point of the
partners, which can be suppliers, intermediaries, supply chain process, it can be hard to track where
third-party service providers, and customers. In the issue has arisen, making it impossible to fix the
essence, supply chain management integrates problem without shutting down the whole supply
supply and demand management within and chain.
across companies.
Product safety, sustainability and quality criteria
With quicker and more efficient means of are all essential components to the food industry.
communication and transportation, the global A supply chain that works effectively will include
supply chain has witnessed unprecedented suppliers with likeminded corporate values. The
transformation. A number of everyday products best way to check if an organization in your supply
can now contain raw materials or elements chain is working towards your core values is to
manufactured from multiple global locations. In an have those organizations third-party assessed to
attempt to remain competitive, companies have your criteria. If this is conducted regularly, then
increased global outsourcing and offshoring and you can be sure that your inputs will be to your
this can be at the cost of the product’s reliability specifications, drastically reducing the risk of a
and quality. food recall.

Whether existing suppliers are in place or sourcing new suppliers, there are fundamentals
that all businesses should consider, such as but not limited to:
• Background – Do they meet all the necessary legal • Quality and food safety policy – What does the
requirements as a registered food business? Does the business’s quality and food safety policy actually state?
business have a history of legal noncompliance or Has it been developed with meaning and purpose?
product recall? How many times have they conducted Does this line up with your business’ objectives and
a product withdrawal? policies?

• Traceability and contingency – Ensure your supplier • Management systems and certification - What
is able to trace their own ingredients or products standards are the suppliers currently certified to?
through their process. Are they willing to conduct Are they independently assessed by an approved
mock recall exercises? Do they have contingencies certification body? Are they willing to allow you to
in place to ensure you’re adequately supplied if review their external audit reports?
something goes wrong?
 BSI/AU/FDSC/WPP/01072015
What can your business do to
drive Supply Chain excellence?
We live and work in the age of information and we There’ll always be new methods of criminal fraud,
have many resources available to assist us with but now we have information that can be used
our supply chain management. News sites and to identify if your raw materials or product could
social media allow us to become aware of how our be affected. Supplier compliance audits are the
supply chain members are conducting themselves. best way to ensure the inputs you receive meet
your standards, so you can produce safe quality
Food fraud and substitution has existed for products.
thousands of years, but developed rapidly in
scale in recent times, in the form of adulteration, Currently, it’s common industry practice to accept
tampering or misrepresentation. Companies announced third-party certification certificates
that don’t address these issues as a matter of as a way of approving suppliers. There has been
priority are leaving their customers and their a shift towards increasing unannounced second
brand exposed. Also, the reputation of suppliers, and third-party supplier audits recently. These
manufacturers and distributors is a key risk are conducted by independent bodies focussing
factor that requires comprehensive continual on specific criteria, and tests both the supplier’s
assessment. capabilities and the culture of the business and
its staff. If your business is capable of conducting
unannounced supplier audits, this should cover
the Global Food Safety Initiative (GFSI) and retailer
standard requirements, as well as the good
business practices your organization expects from
its suppliers.

The future of Supply Chains

Recently, some global suppliers have found themselves in the headlines for all the wrong reasons. Having
your brand reputation damaged is not worth the risk. That’s why it’s imperative to quantify supply chain
risk, so your company can trade with confidence and build lasting resilience with suppliers.

Today we move between domestic, regional and global supply that’s increasingly complex. Customers,
journalists, directors, Non-Government Organizations (NGO’s), shareholders and investors are interested in
your supply chain and how it’s managed against quality, safety, environmental and social issues. How would
your organization measure up to a stress test on public opinion against your supply chain?

As supplier management evolves, you can obtain better information. Through programs like Supply Chain
Risk Exposure Evaluation Network (SCREEN) you can identify risks from social, environmental and security
issues in real time. Using living heat maps of the world, you can evaluate which countries are reliable and
which ones are risky.

~Authored by BSI Food Safety Auditors, Domenic Rossitto and Richard Holohan

Looking to reduce your supply chain risk?

Contact us: info.aus@bsigroup.com
For more info: bsigroup.com/SupplyChain-AU