More on "The High Cost of Saving Money"

On February 17, 2009, we published an article by food safety expert David Troster entitled "The High Cost of Saving Money". We received the following comment from a concerned buyer.

L.M said...
"What happens when you pay extra and are assured that product is inspected multiple times? Is that still the buyers fault? Going to the top packers paying extra and still having a problem?"

David Troster responded with further clarification on why it is so important that high standards be maintained at each processing step, and how this saves both money and reduces risk to buyer and seller alike.

Here is David's response:

"Dear LM,

Thanks for your comment.

What I am arguing for is actually a reduction in expensive post production testing: "Quality Control" as it is known. Rather, we should be using systems of "Quality Assurance".

Quality Control vs. Quality Assurance

Quality Control by its nature is expensive and not very accurate. Example, in a container we may have 1600 x 12.5kg cartons. Let's say that one of those cartons contains a defect that would cause a recall. The only way to find that carton is to test all 1600 cartons. Result: You find the problem carton but you have probably lost the entire load – Wonderful? Sampling say five or ten cartons would probably not find the defect, so do you use that lot and risk your reputation? Of course not!

In Quality Assurance we look to:

• The systems of production;
• Identify real potential hazards;
• Make sure that proper preventative measures are implemented.

The way that you as a buyer would understand that these proper preventative measures are in place is to have your supplier(s) audited and to have a targeted regime of testing as verification that the systems are working.

Quality Assurance through Third Party Auditing

Your real problem is that without a third party audit you really have no way of knowing who are the good shippers in terms of food safety. I know many factories that are owned and operated by very good and honourable people. They never default, test result are always excellent. They are top packers, but their products still cause product recalls. Why? They may be good at business , but with regards to food safety they are only beginners.

Proper third party, independent auditing and the help and advice that can go with it can give both sides confidence. For the seller, they have increased confidence that their product is the right product for the buyer, and the buyer can understand that they have purchased the right product for them.

In many cases if I can get the factory 'sorted' the risk and therefore the associated higher costs can be eliminated without detriment to anybody's bottom line. So if we get it right, profits can be maintained or improved, costs lowered and that is a great help to sales. Not to mention happier consumers!

____________________________________________________________

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

The Cashew Market...Not a Laughing Matter

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.

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:

• 
  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

Action Plan for Food Safety and Responsible Sourcing

At the recent PTNPA convention, we gave a presentation entitled "An Ounce of Prevention or a Metric Ton of Cure". (CLICK to view) We would like to propose a solution. We have been working for the past two years on the development of a program that addresses the issues that make the nut and agricultural industry vulnerable, and offers a turnkey system to protect us from the kind of situation that has resulted from the recent peanut recall.

FDA Globalization Act of 2009

Although there has been heavy focus on domestic oversight, the fact is that we know even less about where and to what standards our imported food products are processed. Ignorance is no longer an excuse that will be tolerated. Legislators have come down very hard on the people they feel were responsible for ensuring public safety. Congressmen John Dingell, Bart Stupak and Frank Pallone Jr. have incorporated higher standards of accountability in their most recent draft of the Food and Drug Administration Globalization Act of 2009. This act can be viewed in full at the following link:
http://rs6.net/tn.jsp?t=v7awjxcab.0.0.987yumcab.0&p=http%3A%2F%2Fptnpa.org%2Fnews_pdf%2FDingell-Bill-HR.pdf&id=preview

Now is the time for industry self evaluation. Would our current system stand up to government and consumer scrutiny? It doesn't matter if individual companies have this ability. We need to set standards for the entire industry. We are only as strong as our weakest link.

The CCC Solution

The CCC system presents a preventative approach to responsible sourcing and food safety and addresses many aspects of the FDA Globalization Act.

Step One: Identification - The CCC system first identifies those suppliers who subscribe to good manufacturing practices. Companies that need help in establishing GMPs can utlilize our consulting services to assist them in bringing their facilities up to the necessary standards.

Step Two: Inspection - Through a third party audit by independent unbiased inspectors using industry experts who have a background not only in Quality Control and production, but also a working knowledge of the industries being inspected.

Step Three: Certification - Once the identification and inspection process is completed, these facilities will be certified under the guidelines of the CCC.

Step Four: Tracking - The CCC has developed a user friendly, comprehensive tracking system software called CONCERNTRAK©. During the inspection process our auditor interviews two key production personnel. These individuals are fingerprinted via a biometric identification procedure. To ensure a higher level of security, only these prescreened personnel can enter data into the system. CONCERNTRAK© enables the end user to trace lots back to the production line and produces verifiable documentation, making this process quick and easy. Each carton is labeled with the tracking number and sealed to ensure a tamper resistant box that can be cross referenced with all documentation.

Step Five: Promotion - Our logos for Cashew Concern Certification and Commodity Concern Certification enable manufacturers to convey the message to consumers that they have done their due diligence to responsibly source the food products under their brand name.

Step Six: Protection - The integrity of our industry is protected when we take steps to adopt programs such as that of the CCC, to ensure the safety of our food production through a system of self regulation. If an incident should occur, at least we have a system in place to present to the authorities. Having no viable system to ensure traceability and responsible food sourcing will highlight our deficiencies, and would present an embarrassment to the industry.

The "Ounce of Prevention"

We can no longer assume that it will be "business as usual". With the current climate in Washngton we can be sure that sooner rather than later our industry will be called upon to explain the procedures and systems we have put in place to ensure responsible sourcing. We have two choices. We can start now to develop these systems using countless hours of time and energy or, we can adopt a turnkey system, such as that offered by the CCC where two years of research and development have already been done. This is our "ounce of prevention". It will certainly be more tolerable than a potential metric ton of cure.

Identification*Inspection*Certification* Tracking*Promotion*Protection

Building a Solid Foundation to Establish a Healthy Future for the Imported Food Industry

Cashew Concern Certification Joins the African Cashew Alliance

Although Africa is an important source of raw cashew seed for India, Brazil and Vietnam, cashew processing in Africa has been sporadic and the potential has not been fully developed. The African Cashew Alliance (ACA) was formed in 2005 with the aim of
increasing cashew farmers' revenue, increasing cashew processing capacity, consistency and quality, improving the economic and regulatory environment of the cashew sector, and promoting African cashews internationally.

At the PTNPA Conference in the Bahamas, David Rosenthal and Mary Smith of Cashew Concern met with ACA representative Christian Dahm. We were impressed with the goals and methods of the ACA. The concept of developing the processing industry in Africa step by step by coordinating and leveraging resources, training and marketing is a logical and effective way of achieving a sustainable and responsible cashew industry.

We support the initiatives of the African Cashew Alliance, and are proud to be a member

Peanut Butter Recall Update

As the shock waves of the peanut butter recall reverberate throughout the nut and snack food industry, we are again reminded that there is no such thing as too much vigilance where food safety is concerned. As of January 27th, more than 500 people had been reported sickened, and the deaths of eight people in the United States and Canada have been linked to the outbreak, which has been traced to the Peanut Corporation of America (PCA) plant in Blakely, Georgia. The plant is now closed down, and its future is uncertain.

Wide Range of Products Implicated, Lawsuits begin

The recall has spread to more than 390 products, including cakes, cookies, brownies, crackers, ice cream, energy bars, ready-to-eat meals, and even pet foods. An updated list can be found at the FDA website.

The lawsuits have begun, as well. Relatives of a 72 year old Minnesota woman whose death may be linked to the outbreak have filed suit against both Peanut Corporation of America and its distributor, Ohio based King Nut. More suits are sure to follow.

Many Problems at Blakely Plant Detected

Federal health officials have reported that PCA failed to take some standard "Good Manufacturing" steps to prevent contamination within the plant. This was corroborated by Michael Rogers, director of FDA's Division of Field Inspection, who announced that an investgation had revealed numerous problems. Four different strains of Salmonella were detected, although only one strain was involved in the outbreak. The most serious finding was that Peanut Corporation of America had engaged in "lab shopping" - when salmonella was detected in samples sent to a contract laboratory, the company got a second opinion from another lab. After the secondary tests came back negative, the product was sold. The complete transcript of the January 27th FDA briefing is available at the following LINK.

Legislators Reaction

"Inspections are worthless if companies can test and retest until they receive the results they want" said Rep. Bart Stupak, D-Michigan, who was quoted in a recent Associated Press article. Congressman Stupak is heading a congressional panel that is conducting its own inquiry, and has introduced legislation to end such "lab shopping" and to require companies to submit all test results to the FDA.

Congressman John Dingell, D-Michigan issued a statement in which he affirmed that "People have reason to be angry about the quality of our nation's food supply" and vowed to introduce legislation to address these problems. "This legislation will grant FDA the proper authorities and resources it needs to ensure the safety of our food supply, as well as the safety of other products regulated by FDA, and restore American consumer confidence in the Agency. The American people deserve nothing less."
Food Safety Under the Obama Administration
If there was a chance that food safety and traceability would be ignored because of the overwhelming problems plaguing the economy, this high profile salmonella outbreak occurring in the first days of the Obama administration has put food safety and traceability back on the radar screen.

Now is the time to be sure we are implementing good manufacturing practices and sourcing our imported food responsibly. An ounce of prevention is surely better than a metric ton of cure

The CCC Exhibits and Presents at the PTNPA 2009 Convention

Commodity Concern Certification and the non-profit Cashew Concern Certification were very much in evidence at the recent Peanut and Tree Nut Processors Association convention held January 17-20 in Freeport, Grand Bahama. Over 300 representatives from the nut industry attended the event, which included two days of presentations and exhibitions and provided a forum to exchange ideas on the challenges and opportunities that lie ahead as we approach the end of the first decade of the 21st century. We would like to thank Russ Barker, president of the PTNPA, and his team for putting together a stimulating and informative meeting in a wonderful setting.

David Rosenthal, of the CCC, together with Merle Jacobs, president of The American Council for Food Safety, gave a presentation entitled "An Ounce of Prevention or a Metric Ton of Cure...It's Your Choice" during the General Session. David and Merle reinforced the importance of taking a proactive stance regarding food safety and responsible sourcing, and cited numerous industry examples to illustrate the devastating effects of product recalls. David Rosenthal's portion of the presentation can be viewed in full at The Responsible Source