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From: Food Quality & Safety magazine, February/March 2009

Be Safe, Use a Trace

Avoid global food processing slipups with electronic tracking and logistics experts

by Simon Kaye

Today’s global food processing industry is estimated to surpass $2 trillion in annual sales, some one-quarter of which directly involves international import or export sourcing. Poorly constructed logistic processes for foodstuff shipments, however, can expose food processors to a host of problems, including spoilage, failed regulatory inspections, and litigation over foodborne illnesses.

Food processors purchasing from overseas suppliers must ensure not only that those responsible for shipping the goods are intimately familiar with the regulations of every country through which freight will pass, but also that they understand the associated service parameters and costs. Designing a logistics system for food processors to meet these parameters requires a quantum leap from past shipping practices. The inescapable conclusion is that traditional supply methods are no longer adequate for the industry to meet competitive needs and regulatory requirements. Electronic tracking technology and the use of logistics experts are two necessary solutions.

Supply Challenges

China offers a case study of the complex global issues involved in today’s food products supply chain. While the European Union, Canada, and Mexico still top the list of food exporters to the United States, China’s share is growing rapidly. In the past decade, the value of Chinese food imports has more than tripled to over $2 billion, according to U.S. Department of Agriculture statistics.

Added to the typical complexity of inspecting these imported products, the Food and Drug Administration is charged under federal bioterrorism laws to oversee a “track and trace” standard that requires almost every business in the U.S. food supply chain to keep detailed records on receipt and shipment of goods—where they come from, who they’ve been sent to, lot numbers, and more—and to be able to supply that information four to eight hours after it is requested.

Perhaps surprisingly, the most common issues behind systemic supply chain problems do not involve failure to follow routine regulations, but rather arise from a lack of historical information on natural disasters, customs issues, and other unforeseen delays.

Anticipation is crucial for an effectively constructed food supply chain. Food processors that source globally can only be effective if they know exactly how and why a supply chain can go wrong, as well as how to build chains that stand a better chance of weathering typical problems. Supply may seem to be functioning correctly, but a minor problem at one end can snowball out of control, resulting in immense delays for the end processor. A delayed shipment or one that is mishandled with regard to temperature and humidity can render foodstuffs useless. Additionally, many jurisdictions have their own inspection and licensing requirements. These present some of the greatest challenges for both food processors and third-party logistics partners.

Information technology plays a central role in today’s evolving food production infrastructure. Computerized trace-back systems must provide an integrated information exchange platform that can be used across the supply chain, enabling companies to retrieve information at any stage once a product has been shipped to the food processor. It is essential that computerized trace-back systems provide an integrated information exchange platform that can be used across the supply chain, enabling information to be retrieved at any stage once a product has been shipped to the food processor. In addition, the system must be designed to be flexible, taking into account the highly varied documentation and quality standard requirements of multiple national food safety agencies. This will enable one central system to be adapted to many export markets.

Until recently, the technology needed to produce such tracking records had been incomplete at best. Common electronic information systems used to track products have included bar coding and radio frequency identification (RFID). These systems employ identification tags that are printed or attached to the product packaging to differentiate each product batch. In some instances, these unique identifications are used within the supply chain to document the composition of various ingredients and their processing history. Such information can then be updated and passed along the supply chain and to retailers to ensure proper compliance with regulatory requirements. But these physical tools do not, in and of themselves, facilitate state-of-the-art supply chain management, because they do not generate the kind of historical tracking data that can ensure that problems happen only once.

Moreover, such technology can still involve inefficiencies such as the physical keying of routing numbers. Not only is manual entry slow and inefficient, but it also leads to high levels of human error. This operator error could mean that the products cease to exist along the rest of the supply chain, forcing a company to stop everything and search—often with little success. InformationWeek’s 2005 estimate that as many as 75% of companies that touch the food supply chain are still managing their inventory with disconnected spreadsheets and paper documents points to an additional source of potential error.

Electronic Tracking

A food processor must always know the status of mission critical factors in its supply chain, even as it leaves the nuts and bolts of freight management to outside interests. That means knowing what has been shipped, what is in transit, what is due to be shipped, where freight is in the cycle, and how the shipment is performing against the stated timetable. The fundamental need is for best practices in transportation, stocking, and quality of compliance (particularly temperature and humidity controls), so that growers and shippers understand what is expected of them. This also includes installing processes for computation of cross-border tariffs and excise taxes, as well as for compliance with regulatory and licensing requirements. All of these factors demand integration into a comprehensive electronic tracking system.

An effective food supply chain uses cutting-edge electronic systems—through a freight forwarding agency’s comprehensive electronic tracking protocol—to ensure that supplies are delivered on time and with proper quality. Such a system allows a food processor to track freight as it moves around the world, reducing the pressure on its traffic department and improving both efficiency and cost effectiveness.

The ideal program shows what is happening at every step in the supply chain. Using links to the freight shipper’s own information, processors can cross check and validate the progress and timing of each shipment. The entire system should be password protected and encrypted for added security. Finally, the system should be interactive, allowing the customer to authorize and initiate both the original transaction and any subsequent amendments, with the system providing written confirmation of each authorization. Such systems have a number of other advantages (see “Working the System,” below).

This last point on the list below is especially crucial because free on-board (FOB) shipping terms offer more competitive freight rates and enhanced shipment control, and integrate perfectly with electronic tracking because increased supply chain visibility and control is a critical FOB benefit. By controlling the goods as they go on board at the overseas port of shipment, the importing food processor is better able to obtain accurate and timely shipment information by working with the third party logistics provider of its choosing. In this way, the processor is assured the freight partner is working for it, not the supplying vendor.

Use a Logistics Expert

Building a strong working relationship with a logistics expert is the final link in an effectively constructed global food supply chain. A proficient logistics company specializes in getting products where they need to be and is often able to find creative solutions where traditional supply chain handlers see obstacles. When it comes to challenges such as refrigeration, throughput, theft, customs, and other regulations, and product tracking, freight forwarders have consistently been able to solve problems in a nontraditional way that has, time and again, proven their value.

As global supply lines become more complex and concerns over the health and national security aspects of foodstuff sourcing expand, food processors will increasingly find electronic tracking systems—used in conjunction with logistics specialists—to be indispensable. The combination solves global supply chain problems by providing transparency and customization to ensure that supply needs are met without delays or surprises.

Electronic tracking allows any food processor to test its supply links, making sure each one is doing what it is supposed to do and that it will continue to hold as long as necessary. A company can save colossal amounts of time, energy, and resources, while eliminating the high, hidden cost of inefficiency. And the thorough documentation such a system affords is a distinct protection against liability in a world where food processing is a potential or actual target of terrorists, regulators, and plaintiffs’ lawyers.

Kaye is founder and CEO of Jaguar Freight Services. Reach him at (516) 239-1900 or simon@jaguarfreight.com.

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