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September 13, 2013

Dealing with Difficult Traceability? ‘Invest or Spend’ Analysis

In modern times, it’s difficult to find a bakery or food production facility which hasn’t already invested financially in some kind of traceability process (to enable the tracking and tracing of ingredients used within their processes).  However, do any methods provide a return on investment (ROI)?  Is it worth investing in additional administration to setup a paper trail?  Should you gamble and wait to see what other companies are doing first? Is there technology available to provide seamless traceability and also prevent unaccountable ingredient losses in the production process?  SG Systems LLC investigates the 3 possibilities and analyzes each of them in addition to their associated cost benefit.

 It’s a given that in most cases, once ingredients are received into a food manufacturing facility, ingredient traceability takes four routes through a manufacturing process;

1.  Bulk Ingredients (delivered to a mixer directly through bulk delivery systems).

2.  Minor Ingredients (manually added to the mixer in the form of whole or part bags).

3.  Micro Ingredients (hand scaled and added to the mixer manually).

4.  Topping Ingredients (added post mixing to the divided and portioned batch).

How easy is it to track a finished product back through to a manufactured batch, through the bulk, minor and micro ingredient control systems and then back to the supplier?   Many systems offer part control of these processes and then still rely on a manual transfer of data through hand written records to form a paper trail.

Given that the FDA (America), Regulation EC/178/2002 (Europe) and many other standards around the world and some of the major retailers provide timeframes for ingredient recall of anything from 2 days to 4 hours and downward, is it really possible to track and trace ingredients through these stages of delivery when a single micro ingredient such as an enzyme could be weighed into literally hundreds of formulations and batches across many weeks of production and be present in possibly millions of finished products?  Definitely a food recall nightmare for the unprepared.

So, where’s the opportunity?  SG Systems LLC explores 3 common options and the pros and cons of each.

Option one – Do the minimum.

Doing the minimum requires compliance with many regulations; involving simple record keeping of goods received and shipped finished goods.  A manual process of paper records can achieve this, but you need to keep records from anything from 6 months through to 2 years, depending on the category of your goods sold.

However, in the event of a recall of a raw ingredient such as salt, if you don’t keep track of ‘when and where used’ then you have virtually no way of knowing who it was shipped to.  The only way to cope with this situation of recalling entire days, weeks or possibly months of production costing potentially vast sums of money and huge brand damage.

In commercial baking plants, it’s not unheard of for companies to be recalling thousands of finished products in a desperate attempt to keep their business reputation, but it may be too late…  Having no idea about where you used your ingredients is now a very high risk strategy and the return on investment from setting up a paper system and administration is definitely non-existing.

Verdict – Non-existent ROI, High Risk to Brand and Shareholder Value

Option Two – Spend heavily on manual record keeping.

Taking the regulations one stage further and investing in more paper trails to keep track of ‘where used’ in the production facility is the common approach to satisfying retailers looking for damage limitation during the ingredient or finished product recall process.  Manually recording ‘where used’ is often done by making operators complete paperwork to record which lot numbers have been used in each batch……

This administration allows a recall to be batch specific, limiting the recall times and providing the manufacturer with an opportunity to trace back where an ingredient has been used and more importantly, where and who it was distributed to.

However, the cost of implementing this administration is fixed and reoccurring.  Having teams of administrators filling in data is expensive, complicated, time consuming and problematic and makes powerful retailers and auditors squirm due to the opportunity for human error during the manual data recording process.

On top of this, being able to track the usage of an ingredient which has been used within hundreds of batches can involve many administrators and QA staff searching through hundreds or even thousands of batches to see if the ingredient had been used at all.

To counter this searching process, many companies are making their administrators and QA employees manually enter data into an ERP / MRP System.  This vastly reduces the recall times and makes retailers feel more comfortable. Why are they doing this?  Because ERP runs blind – assuming everything is running to 100% accuracy.

So, after the cost of ERP / MRP (purchase & implementation) and the QA Staff required to manage the process and manually record the data, organizations can be running into hundreds of thousands or even millions of investment capital of annually reoccurring costs.   This has a direct impact on profitability and absolutely no ROI, presenting a competitive risk.

Verdict – Non-existent ROI, Low Risk to Brand, High Risk to Shareholder Value (increased permanent costs)

Option Three – Invest Moderately in ‘Real Time’ Data Collection Systems

Taking the needs of compliance and legislation, the demands on the retailers to reduce recall times and also the desire to keep administration costs low requires some ‘out of the box’ thinking.  It also requires management teams who have the strength and willingness to lead change and embrace technology.

These leaders are often found in senior Technical or QA functions in the world’s most successful commercial baking companies.  But they haven’t got there through investing in technology unwisely; more investing in the right technology which produces fast ROI’s to make their companies appealing to Retailers & Shareholders.

So, having established that paper trails do the job, but are costly and deliver no ROI, how should you invest in solving the problem?  The answer to that question is to invest moderately in data collection.

SG Systems LLC has developed a system called V5 Traceability.  It’s a system which places the necessary controls on the production floor to capture and control inventory lot numbers and ingredient usage from actual production floor events.

V5 ensures lot numbers are captured at the receiving, weighing, mixing, portioning and shipping stages eliminating all paperwork and administration.  Usages at the bulk, minor and micro ingredient levels are recorded automatically as lot numbers are added into the mix (even controlling the weights added through the hand scaling processes to reduce waste).

Real-time data collection systems ensure lot numbers are captured at the receiving, weighing, mixing, portioning and shipping stages eliminating all paperwork and manual ERP administration.  Usages at the bulk, minor and micro ingredient levels can be recorded automatically as lot numbers are added into the mix (even controlling the weights added through the hand scaling processes to reduce giveaway in addition to correct inventory rotation).

So, Question – where’s the ROI?  Answer – It comes in 5 key areas.

  1. By controlling the micro ingredient scaling process enables exact weight to be hit and their lot numbers automatically recorded.  Integration with ERP / MRP means no manual data recording and usages can automatically drive down inventory (perpetual inventory system) to provide real visibility and enable accurate, prudent ingredient purchasing.
  2. Interfacing with bulk delivery systems enables lot number usages to be accurately tied to micro and minor ingredients added at the mixing process.  This control allows for ‘complete’ batch traceability without costly administration and manual ERP / MRP updates.
  3. Electronically interfacing with sales order processing allows manufactured batches to be linked to a finished product count (on the production floor) and the batch numbers allocated during the shipping process.  This allows shipped products to have a direct relationship with the manufactured batch and ingredient used.
  4. No recall administration!  V5 eliminates manual handling of ingredient data to have a direct financial impact on your bottom line profitability by significantly reducing the hours spent on ingredient traceability administration.
  5. Brand protection.  Having the tightest possible traceability means you can respond to recalls and pull your products in literally minutes.  Over and above the retailers traceability requirements.

Verdict – 6 month ROI, Low Risk to Brand, Low Risk to Shareholder Value.


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