This year's Cashew Market Update at the recent Peanut and Tree Nut Processors' Convention ended with a segment that included a tongue in cheek version of financial acronyms, substituting their meaning with phrases illustrating the recent debacles in the cashew industry: CD = Contract Defaults, MBS = Might Be Shipped, etc. There were also joking references as to what constitutes a "Top Tier Shipper", "Medium Shipper" etc. - "a top tier shipper ships good quality product that arrives on time..." No mention was made of the standards adhered to by the facility itself, in terms of sanitation, Good Manufacturing Practices, etc. This is certainly not the time to simplify the supplier selection and screening procedure.
$40 Million in Lost Trade Differentials is No Joke
Although presented in the spirit of comic relief, the reality is not a laughing matter. The fact is that over 2000 containers of cashews were defaulted on last year, which resulted in over $40 million in lost trade differentials during 2008. The dramatic price increases that resulted caused added problems in our industry at a time when we did not need another obstacle to dissuade retailers from purchasing nut products.
We have seen how devastating it can be if we are unaware of conditions in facilities that directly affect the integrity of the food products produced (the recent peanut recall is an all too painful example). We have seen the result of purchasing based on pricing only, with limited information on the caliber of the facilities or the integrity of the supplier.
It's time that we started to learn more about where and from whom we source our food products. We need to know our suppliers, and be certain that the agricultural products we import and offer for public consumption are processed under acceptable conditions. The fact is, conditions in these facilities directly affect the integrity of the food products we offer to consumers. We also have a moral responsibility to do everything in our power to ensure that workers who produce the goods we import are fairly treated and compensated.
A More Holistic Business Philosophy
The business models that have been recently in fashion have emphasized the maximization of short term profits. Perhaps it is time to revisit a business philosophy that is more comprehensive, one that has a basis in psychology, sociology, economics, and statistics. I'm referring to the teachings of the late Dr. W. Edwards Deming, who is widely credited with being a major factor in Japan's amazing recovery and rise to becoming a world economic power after the devastation of World War II.
14 Key Principles and The Seven Wastes
Dr. Deming developed a management system based on 14 key principles designed to increase business effectiveness. He also cited seven obstacles to development "The Seven Wastes" which could cause a business or business sector to stall. Among the most important of the 14 principles is "Build quality into a product throughout production". Another key principle is "End the practice of awarding business on the basis of price tag alone; instead, try a long-term relationship based on established loyalty and trust."
Impromptu Fixes Are Costly
Increasingly, in the cashew business, price became the driving factor behind every transaction. Even when there were quality problems, even when there had been devastating defaults, the supplier who could offer the lowest price was the one who got the business. Quality problems were common, but were dealt with on a case by case basis. Infestation? Freeze it for two weeks and hope you don't miss the retailers deadline. Scorched? Do your best to fix it in the roast. Foreign material? Hope that your added production costs for unanticipated refinement don't eat too much into your profit margin. You've been advised that your supplier will not ship the cashews you contracted? Quick, try to find some on the spot market (probably at a significantly higher price), or devise a delaying tactic and see how long you can keep your customer at bay. It's impossible to guess how much these impromptu 'fixes' may have cost the industry, but we do know that the price tag for the defaults, which were mostly by Vietnam, was in the neighborhood of $40 million.
Stop Stamping Out Fires
The second part of Dr. Deming's management system,"The Seven Wastes" contains another principle that could have avoided the default disaster ; "One of the worst mistakes a company can make is to focus on short term profits, as opposed to long term goals." In the short term, "buy cheap" may look like the way to go. But the road to true success lies in developing a steady, reliable supply, and consistently delivering high quality to our customers.
It is outside the scope of this article to delineate Dr. Deming's management principles in their entirety, but they merit consideration. It would be appropriate to end this article with one of his best known quotes "Stamping out fires is a lot of fun, but it is only putting things back the way they were." Many in the cashew industry have become adept at dealing with crisis after crisis. Isn't it time we became proactive and improved things at the source?
Forging Strategic Partnerships
The CCC is a means to forge strategic partnerships with quality overseas suppliers. It empowers the buyer with the knowledge that their product has been handled responsibly at the source, and can be traced back with accuracy.
The CCC has come under a great deal of resistance from segments of the American importing community. The next time you are on the phone with your importer, ask the question "Why would you be against an initiative to support responsible sourcing from facilities that maintain good manufacturing practices and fair labor conditions?". Let them give you an answer and feel free to post it in this blog .
If you have any specific questions about our program, please feel free to call either David Rosenthal or Mary Smith at 804-745-2848.
Showing posts with label responsible sourcing. Show all posts
Showing posts with label responsible sourcing. Show all posts
Wednesday, March 4, 2009
Tuesday, February 17, 2009
The High Cost of Saving Money
Food safety expert David Troster contributed the following article, which illustrates a common scenario - what initially looks to be a cheap price turns out to be an expensive problem.
Cutting Costs the Right Way
The Buyer's Dilema - Keeping Costs Down
"Stop the line, there's glass in the product!"
Production, Quality Control and Factory Manager all run to the line to see what's happened. There it is,a piece of glass, colorless, hard to spot in the fruit, with sharp chipped edges.
Where'd that come from?" They all ask. Everyone was sure it was not their factory. They had glass control systems in place. "It's in the raw material so it's a buying problem." The buyer was shown the glass and he shrugged. The story unfolded: Always under pressure to keep costs down he'd done just that and purchased a cheap lot from a trader. The information he had was that the fruit was the right size and color, plus QC had received a sample case and approved it. All in all it looked OK and the price was right.
Factory Manager's Dilema - Cleaning up the Buyer's Bargain
The Factory Manager then started to put the buyer right. "First thing to remember is that testing is just part of a verification process where we make sure that the people before us in the food chain have got it right. Testing cannot and never will tell you the complete story. With the cheap price we saved $100/tonne but what of the costs of using that material? The whole lot is suspect so it can't be used in case there's a product recall. It will have to be dumped and that will cost money. We need a replacement lot and buying spot is not going to make the Directors happy. The line is stopped till the replacement stock comes, so who pays the wages while we wait for it? Then there's the loss of profit on top of it all. Cheap lots can be very expensive and high risk."
"If the primary processor has problems then we all do"
It's happened like this many times before, but the clever ones learn. In today's high speed manufacture one must understand in detail the whole of the food chain, and that starts with the farmer or grower, who needs to provide quality produce. Primary processors are very important since it's their task to clean up and pack the product. Unfortunately this is where foreign bodies sometimes slip in. Fruit on trees does not have mineral stones embedded in its surface, nor are there glass windows in a commercial orchard. If the primary processor has problems then we all do.
The solution is very simple. In addition to product testing, audit the supplier and identify the potential hazards, then work with that supplier to eliminate or reduce those hazards. In many instances what is needed is common sense, and it need not be costly. For example to keep out flying insects along with cats, dogs, and rodents - close the doors and screen the open windows. To prevent glass shards, replace glass windows with plastic, cover lights and only allow essential glass on site. The cost of these sorts of controls are nothing when compared to having to pay for a line being idle because bad product was supplied, or being faced with the costs of a product recall. The price of a product recall is your reputation and your business.
The True Cheap Option
Prevention is always the cheaper option. There may be costs involved in setting up the system, but long term customer relationships with happy satisfied shoppers make it worthwhile to start your preventive works today. The peace of mind alone is worth it!
____________________________________________
David Troster is a Food Safety Consultant with thirty years experience in many areas of the food and hospitality industries. David's areas of work include:
If you need more details or have a specific question then please e-mail David at troster@netone.com.tr
Cutting Costs the Right Way
The Buyer's Dilema - Keeping Costs Down
"Stop the line, there's glass in the product!"
Production, Quality Control and Factory Manager all run to the line to see what's happened. There it is,a piece of glass, colorless, hard to spot in the fruit, with sharp chipped edges.
Where'd that come from?" They all ask. Everyone was sure it was not their factory. They had glass control systems in place. "It's in the raw material so it's a buying problem." The buyer was shown the glass and he shrugged. The story unfolded: Always under pressure to keep costs down he'd done just that and purchased a cheap lot from a trader. The information he had was that the fruit was the right size and color, plus QC had received a sample case and approved it. All in all it looked OK and the price was right.
Factory Manager's Dilema - Cleaning up the Buyer's Bargain
The Factory Manager then started to put the buyer right. "First thing to remember is that testing is just part of a verification process where we make sure that the people before us in the food chain have got it right. Testing cannot and never will tell you the complete story. With the cheap price we saved $100/tonne but what of the costs of using that material? The whole lot is suspect so it can't be used in case there's a product recall. It will have to be dumped and that will cost money. We need a replacement lot and buying spot is not going to make the Directors happy. The line is stopped till the replacement stock comes, so who pays the wages while we wait for it? Then there's the loss of profit on top of it all. Cheap lots can be very expensive and high risk."
"If the primary processor has problems then we all do"
It's happened like this many times before, but the clever ones learn. In today's high speed manufacture one must understand in detail the whole of the food chain, and that starts with the farmer or grower, who needs to provide quality produce. Primary processors are very important since it's their task to clean up and pack the product. Unfortunately this is where foreign bodies sometimes slip in. Fruit on trees does not have mineral stones embedded in its surface, nor are there glass windows in a commercial orchard. If the primary processor has problems then we all do.
The solution is very simple. In addition to product testing, audit the supplier and identify the potential hazards, then work with that supplier to eliminate or reduce those hazards. In many instances what is needed is common sense, and it need not be costly. For example to keep out flying insects along with cats, dogs, and rodents - close the doors and screen the open windows. To prevent glass shards, replace glass windows with plastic, cover lights and only allow essential glass on site. The cost of these sorts of controls are nothing when compared to having to pay for a line being idle because bad product was supplied, or being faced with the costs of a product recall. The price of a product recall is your reputation and your business.
The True Cheap Option
Prevention is always the cheaper option. There may be costs involved in setting up the system, but long term customer relationships with happy satisfied shoppers make it worthwhile to start your preventive works today. The peace of mind alone is worth it!
____________________________________________
David Troster is a Food Safety Consultant with thirty years experience in many areas of the food and hospitality industries. David's areas of work include:
A practical approach to developing working HACCP systems integrated into your operating system.
Training Directors and Managers in Food Safety.
Supply chain auditing, identifying the hazards and helping you eliminate them.
Factory design.
Advice on European legal requirements.
If you need more details or have a specific question then please e-mail David at troster@netone.com.tr
Thursday, January 22, 2009
January 5, 2009, Responsible Sourcing - A MUST for the New Year
Commodity Concern Website Now Live
We have expanded our responsible sourcing, Track & Trace, and marketing initiatives to a broader range of imported nut and agricultural commodity categories with the creation of Commodity Concern Certification. Please take a moment to visit the new Commodity Concern website at www.commodityconcern.com.
Working Towards a More Responsible Way of Sourcing
This was a natural extension of the concept that began two years ago, when Cashew Concern Certification Inc. was established with the goal of offering a better and more responsible way of sourcing cashews. At that time, the world seemed like a different place. Who could have anticipated the events that have had such a negative effect on the global economy? The collapse of trusted financial institutions, the closing of well established retailers, and the real estate debacle highlight the fact that although conditions may seem stable, awareness of the reality beneath the surface is crucial. Commodity Concern was created to not only bring about awareness but to also take action to address vulnerabilities that can have such a negative impact on our seemingly secure situation.
The events and upheavals of 2008 shook the public's confidence in the institutions, both governmental and private, that had previously been considered pillars of society and stewards of the economy. As we enter 2009, there is a growing consensus that the system of checks and balances must be restored and reinforced.
Food Safety and Responsible Sourcing to be Priorities under New Administration
Food safety and responsible sourcing will be a priority for President elect Barak Obama's FDA. "He thinks this is a fundamental role of government to ensure that people's food is safe and he has been concerned that we are not in a position to ensure that," said Neera Tanden, a senior campaign advisor, in November 2008. Self regulation and effective communication with legislators who will create new food import regulation is key to establishing food safety and responsible sourcing initiatives that are accepted by both government and private industry.
Commodity Concern has developed a system that not only brings about awareness but also takes action! We look forward to positive changes in playing an effective role to create a healthier food importing industry.
We have expanded our responsible sourcing, Track & Trace, and marketing initiatives to a broader range of imported nut and agricultural commodity categories with the creation of Commodity Concern Certification. Please take a moment to visit the new Commodity Concern website at www.commodityconcern.com.
Working Towards a More Responsible Way of Sourcing
This was a natural extension of the concept that began two years ago, when Cashew Concern Certification Inc. was established with the goal of offering a better and more responsible way of sourcing cashews. At that time, the world seemed like a different place. Who could have anticipated the events that have had such a negative effect on the global economy? The collapse of trusted financial institutions, the closing of well established retailers, and the real estate debacle highlight the fact that although conditions may seem stable, awareness of the reality beneath the surface is crucial. Commodity Concern was created to not only bring about awareness but to also take action to address vulnerabilities that can have such a negative impact on our seemingly secure situation.
The events and upheavals of 2008 shook the public's confidence in the institutions, both governmental and private, that had previously been considered pillars of society and stewards of the economy. As we enter 2009, there is a growing consensus that the system of checks and balances must be restored and reinforced.
Food Safety and Responsible Sourcing to be Priorities under New Administration
Food safety and responsible sourcing will be a priority for President elect Barak Obama's FDA. "He thinks this is a fundamental role of government to ensure that people's food is safe and he has been concerned that we are not in a position to ensure that," said Neera Tanden, a senior campaign advisor, in November 2008. Self regulation and effective communication with legislators who will create new food import regulation is key to establishing food safety and responsible sourcing initiatives that are accepted by both government and private industry.
Commodity Concern has developed a system that not only brings about awareness but also takes action! We look forward to positive changes in playing an effective role to create a healthier food importing industry.
October 27, 2008, The CCC Announces the Formation of Commodity Concern Certification
October 27, 2008
THE CCC ANNOUNCES THE FORMATION OF COMMODITY CONCERN CERTIFICATION
Cashew Concern Certification, Inc. is proud to announce the formation of Commodity Concern Certification. We will apply the same basic principles of responsible sourcing, Track & Trace, and marketing initiatives to a broader range of imported nut and agricultural commodity categories. Our new website will be on-line soon.
EVEN IN DIFFICULT TIMES, RESPONSIBLE SOURCING MUST REMAIN A PRIORITY
Our country is in the midst of an extremely challenging and difficult economic storm. During such times of crisis, it is all too easy to panic and decide that the only way to market our products is to cut the price. Unfortunately, this can backfire and is not a viable long term strategy.
Regardless of economic pressures, the public still demands and deserves assurance that the food products consumed by their families are wholesome, sourced responsibly, and free from contamination.
Recent issues in the cashew industry, including the present chlorophenol problem, have made it more important than ever to know the standards and procedures maintained by the facilities you buy from.
Being able to effectively market your responsible sourcing procedures to retailers and consumers will give you a competitive edge over companies who don't.
Having detailed support documentation to verify that your cashews were processed in overseas facilities that have high standards for manufacturing and sourcing raw material is vital, and will become even more so.
For the benefit of our industry, and in light of the increasing number of food safety bills submitted by legislators in Washington, clear procedures and standards must be developed and adhered to in overseas facilities. This is part of the mission of the CCC. We also offer a full traceability system, a seal of approval which can be displayed on the packaging, and a marketing program for responsible sourcing.
THE CCC ANNOUNCES THE FORMATION OF COMMODITY CONCERN CERTIFICATION
Cashew Concern Certification, Inc. is proud to announce the formation of Commodity Concern Certification. We will apply the same basic principles of responsible sourcing, Track & Trace, and marketing initiatives to a broader range of imported nut and agricultural commodity categories. Our new website will be on-line soon.
EVEN IN DIFFICULT TIMES, RESPONSIBLE SOURCING MUST REMAIN A PRIORITY
Our country is in the midst of an extremely challenging and difficult economic storm. During such times of crisis, it is all too easy to panic and decide that the only way to market our products is to cut the price. Unfortunately, this can backfire and is not a viable long term strategy.
Regardless of economic pressures, the public still demands and deserves assurance that the food products consumed by their families are wholesome, sourced responsibly, and free from contamination.
Recent issues in the cashew industry, including the present chlorophenol problem, have made it more important than ever to know the standards and procedures maintained by the facilities you buy from.
Being able to effectively market your responsible sourcing procedures to retailers and consumers will give you a competitive edge over companies who don't.
Having detailed support documentation to verify that your cashews were processed in overseas facilities that have high standards for manufacturing and sourcing raw material is vital, and will become even more so.
For the benefit of our industry, and in light of the increasing number of food safety bills submitted by legislators in Washington, clear procedures and standards must be developed and adhered to in overseas facilities. This is part of the mission of the CCC. We also offer a full traceability system, a seal of approval which can be displayed on the packaging, and a marketing program for responsible sourcing.
June 8, 2008, The High Cost of Non-Traceability
June 11, 2008
The High Cost of Non-Traceability
News of a few cases of salmonella in New Mexico and Texas hardly caused a ripple in the beginning. From April 23rd through June 1st there were 57 reported cases of Salmonella Saintpaul in those states - and on June 3rd the FDA decided the situation was grave enough to issue an alert.
Florida Tomato Industry in "complete collapse"
Just one week later, on June 10th, the Florida tomato industry has been brought to its knees in what has been described in the media as "a complete collapse". The FDA stated in its release on June 3rd that "the source of the contaminated tomatoes may be limited to a single grower or packer or tomatoes from a specific geographic area". However, as of June 10th, the only progress that had been made was to establish the areas where the problem was NOT present. Florida , the largest tomato producing state in the nation, has not been cleared, and according to Reggie Brown, executive vice president of the Florida Tomato Growers Exchange "We probably have $40 million worth of product we can't sell. We've had to stop packing, stop picking. It fundamentally shut down the industry."
Tomato Recall Affects Retailers and Restaurants
The magnitude of the tomato recall has been staggering. Businesses affected include McDonald's, Wal-Mart, Burger King, Kroger, Outback Steakhouse, Winn- Dixie, Taco Bell, Whole Foods, Trader Joes, Kroger, etc. Without knowing the exact source of the outbreak it is too great a risk to the public to keep offering the affected types of tomatoes to consumers. The recall has now spread to Canada and the Caribbean , and until the source of contamination has been found all tomatoes except for cherry, grape and on-the-vine varieties will be off limits.
Tracing Commodities to the Source
Now, more than ever, it is imperative for every importer, roaster, distributor and retailer to know and be able to trace the origin of the products they source. The CCC system will serve as a model for other commodities and offers a viable solution to legislators looking for improved food safety initiatives.
Cashew Concern Certification, Inc.
The High Cost of Non-Traceability
News of a few cases of salmonella in New Mexico and Texas hardly caused a ripple in the beginning. From April 23rd through June 1st there were 57 reported cases of Salmonella Saintpaul in those states - and on June 3rd the FDA decided the situation was grave enough to issue an alert.
Florida Tomato Industry in "complete collapse"
Just one week later, on June 10th, the Florida tomato industry has been brought to its knees in what has been described in the media as "a complete collapse". The FDA stated in its release on June 3rd that "the source of the contaminated tomatoes may be limited to a single grower or packer or tomatoes from a specific geographic area". However, as of June 10th, the only progress that had been made was to establish the areas where the problem was NOT present. Florida , the largest tomato producing state in the nation, has not been cleared, and according to Reggie Brown, executive vice president of the Florida Tomato Growers Exchange "We probably have $40 million worth of product we can't sell. We've had to stop packing, stop picking. It fundamentally shut down the industry."
Tomato Recall Affects Retailers and Restaurants
The magnitude of the tomato recall has been staggering. Businesses affected include McDonald's, Wal-Mart, Burger King, Kroger, Outback Steakhouse, Winn- Dixie, Taco Bell, Whole Foods, Trader Joes, Kroger, etc. Without knowing the exact source of the outbreak it is too great a risk to the public to keep offering the affected types of tomatoes to consumers. The recall has now spread to Canada and the Caribbean , and until the source of contamination has been found all tomatoes except for cherry, grape and on-the-vine varieties will be off limits.
Tracing Commodities to the Source
Now, more than ever, it is imperative for every importer, roaster, distributor and retailer to know and be able to trace the origin of the products they source. The CCC system will serve as a model for other commodities and offers a viable solution to legislators looking for improved food safety initiatives.
Cashew Concern Certification, Inc.
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