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May 01, 2012

Tainted Products and Traceability in the Supply Chain

Bob Ferrari reports that "the Taiwan High Court sentenced the owner of a food additive manufacturing firm to a jail term of 13 years for adding toxic plasticizers to clouding agents and selling these products to food and beverage producers. His spouse was also sentenced on the same charges." ["Taiwan Court Sentences Executive for Toxic Food Contamination," Supply Chain Matters, 28 March 2012] More disturbing is the fact that this couple was able to pull off their nefarious activities over "a period of almost six years." In the United States, the most recent scandal that has created headlines is the discovery of a fake cancer drug that made its way into the U.S. supply chain. According to Benoît Faucon and Jeanne Whalen, the "doses of counterfeit Avastin, like a batch that surfaced in the U.S. in February, traveled through wholesalers in the U.K. and Turkey." ["Fake Avastin Took Murky Path to U.S.," Wall Street Journal, 5 April 2012] The Organic Monitor reports, "Since February 2011, the USDA has reported 12 incidents of fake organic certificates; the origins of these fake certificates - Asia, Africa, Middle-East, Caribbean and Europe - demonstrate how international food fraud has become. ... The Food and Environment Research Agency (FERA) of the UK estimates that fraud could be affecting up to 10% of all foods bought by consumers." ["Food Authentication Techniques and Sustainable Supply Chains," 24 April 2012] Incidents like these are why regulation, inspection, and traceability are so important in the supply chain; especially, when food or pharmaceuticals are involved.

Ferrari points out that governments alone can't be trusted to detect and prevent tainted products from getting into the supply chains -- the private sector must get actively involved as well. He concludes:

"Sourcing and procurement teams need to insure that proper quality measures always exist up and down the supply chain. In this Taiwan incident, the existence of non-conforming product existed far too long without detection or investigation of consumer feedback. In the case of globally extended supply, producers, distributors and retailers must further have a keen eye to specific oversight and regulatory measures."

In the fake cancer drug case, Christopher Weaver, Jeanne Whalen, and Benoît Faucon report that experts are concerned "about the weakly regulated gray market in foreign drugs aimed at U.S. patients." ["Drug Distributor Is Tied to Imports of Fake Avastin," Wall Street Journal, 7 March 2012] Weaver and his colleagues report:

"Discovery of the fake Avastin has lent new urgency to a broader U.S. probe of foreign-drug importation that was already under way when the counterfeit cancer drug appeared. Regulators have long struggled to curb the trade in foreign-sourced, discounted drugs over the Internet, which is popular with U.S. consumers and difficult to police. It is a violation of U.S. drug safety laws to ship pharmaceuticals to the U.S. via international mail or courier, the U.S. Food and Drug Administration says. Only drugs approved by the FDA and manufactured at FDA-inspected facilities may be imported by their manufacturers. Third parties typically can't legally import drugs into the U.S. ... It is also illegal for consumers to buy non-FDA approved drugs over the Internet or otherwise but regulators generally haven't cracked down on individual use because of the logistical difficulties as well as the popularity of the purchases."

Bryan Liang, vice president of the Partnership for Safe Medicines and a law professor at California Western School of Law, told Weaver and company that "this problem is getting worse, not better." In another post, Bob Ferrari notes that he has long "questioned whether regulatory agencies were ill equipped to keep up with the pace of global outsourcing of pharmaceutical compounds and specifically getting a handle on the increasing occurrence of counterfeit or non-conforming products." ["Redux- Can Regulatory Agencies Be Expected to Solely Police Global Supply Chains for Tainted Products," Supply Chain Matters, 2 March 2012] He concludes:

"Is it really possible for regulated industries such as drugs and medicines to continue their current pace of global-based outsourcing without significant investments in counterfeit and non-conforming materials protection? Supply Chain Matters is of the point of view that evidence of the current pace of mitigation efforts related to detecting counterfeit materials seems inadequate. ... Investments in global based product pedigree, track and traceability and centralized supplier intelligence could have long been implemented with an investment cost far below the current costs of liability and damaged brand identities."

Simon Ellis, practice director of Supply Chain Strategies at IDC Manufacturing Insights, agrees with Ferrari that a lack of good traceability can impact brand reputation and consumer safety. ["Food & Beverage Traceability Impacts Brand, Consumer Safety," SupplyChainBrain, 9 March 2012] While Ferrari's comments are primarily directed at the pharmaceutical industry, Ellis' comments are directed at the food industry. He writes:

"IDC Manufacturing Insights places food and beverage manufacturers into its Brand-Oriented Value Chain (BOVC) – those companies that serve consumer markets (also including footwear/apparel, healthcare/beauty). BOVC manufacturers, and specifically those in the food & beverage category, grapple with many of the same concerns as other manufacturers – supply chain visibility, demand planning, and product quality. However, they also have to deal with unique issues, such as an increasingly global supplier network, brand and image retention, and compliance challenges."

Although footwear/apparel and beauty may be in the same category as food and beverage manufacturers, the consequences of tainted products in those areas pale in comparison to the potential for harm that is associated with food and beverages. That makes traceability in the food and beverage sector much more critical. In fact, Ellis asserts that "traceability in food & beverage [is] probably one of the most important business processes for a food and beverage manufacturer. He continues:

"A product recall of any size can cause huge implications throughout the supply chain and on the overall brand of the company. For companies in the BOVC the generally accepted definition of traceability is: The process and/or systems that provide the ability to identify all relevant data (and their relationship) for the materials used during production and distribution of finished products. Not an easy task – especially since it involves many facets, including people, processes, systems and technology. Currently, there are no universal standards for what organizations have to do in terms of traceability – particularly in regards to consumer safety or transparency."

I suspect that one reason that Ferrari believes that the private sector has to be proactive in assuring that counterfeit and tainted products don't make it into the supply chain is because there are no universal standards. From Ellis' description of the challenge, it's clear that technology has a critical role to play. Only a Sense, Think/Learn, Act™ system, like the one around which most Enterra Solutions products are built, that can identify all relevant data and their relationship and provide meaningful insights is up the task. It simply can't be done manually or through blind trust. Dennis Brandl, founder and chief consultant for BR&L Consulting, makes this point clear. Back in the winter of 2009/2010, he wrote, "Traceability in food and pharmaceutical products is an important issue. In fact it is a life critical issue." ["Cross Enterprise Tracking and Tracing," ISA, Food & Pharmaceutical Industries Division Newsletter] He continued:

"Traceability means that producers must keep track of where they obtained their raw materials and where they shipped their product. This is complicated because of the splitting and combining of lots that commonly occurs during production. For example, the end product on a store shelf will probably have come from several different raw material lots from several different sources. A single container of mixed-berry yogurt may have fruit from two sources, milk from a third source, and culture from a fourth source. A packaged meal may have meat from one source and vegetables and fruit from multiple sources. The vegetables and fruits may have been combined by the supplier from other different suppliers. Even the municipal water used in production needs to be identified by a lot number associated with the day or even shift of use. Complete traceability may require that multiple companies’ traceability information can be combined and that lot numbers are shared across the entire supply chain. Within a plant the main issue of traceability is to determine exactly which lots went into the final product. While lots may be assigned in drug manufacturing, in food and beverage production schedules do not specify which raw material lots are to be used and it is at the discretion of operators to pick the appropriate material lot for each batch. In-plant traceability requires identification of ingredients as they are added and identification of final products at lot boundaries. The problem of traceability does not stop at the plant door, in order to meet the real requirements for traceability and recall control, some method is required for cross-enterprise traceability. Cross-enterprise traceability requires that globally unique IDs can be assigned to individual lots, similar to globally unique IDs assigned to phone numbers, internet address, and vehicle identification numbers. Current standardized ID methods deal with identifying the product, not the specific lots."

Clearly, technology is essential if individual lots are going to be traced because of the complexity involved. Ellis continues:

"The government is involved at some level – the FDA, for example, will intervene when it comes to removing contaminated food product from our general food supply. However, they too have to rely on internal controls set up (or in some cases, not) by the manufacturers themselves. This could result in massive product recalls and dollars lost due to a lack of internal controls. One step forward in this area was the signing of the FDA Food Safety Modernization Act by President Obama back in January 2011. The potential for this law is to modernize the current food safety system to better respond to outbreaks and prevent food-borne illnesses in the first place."

Ellis reports that since the FDA Food Safety Modernization Act was signed "there has been some progress." He points out two efforts:

• A consumer-friendly search engine to look for food product recalls (April 2011) (Source: fda.gov)

• The FDA and the United States Department of Agriculture entered into an agreement to establish a competitive grant program for food safety training (July 2011) (Source: fda.gov)

Neither of those efforts really improves product traceability. Ellis concludes:

"The transparency in today's marketplace that the consumer now demands is not going away. Traceability in food & beverage helps to allow for this transparency and will be key to ensuring both consumer safety and brand protection. Legislation, and whether it moves forward or not in 2012, will be a primary driver of whether or not food and beverage manufacturers make changes internally as well."

It's a bit depressing for Ellis to conclude that legislation is required to motivate food and beverage manufacturers to improve. The editorial staff at SupplyChainBrain asserts, "Although the Food Safety and Modernization Act of 2010 was passed, ... and food and beverage companies have had a significant period of time to calculate and understand its impact, and implement traceability solutions, there are still many issues and processes to be resolved or implemented before food and beverage enterprises can be considered 100-percent compliant." ["Report Focuses on Food Safety, Traceability and Government Legislation," 15 March 2012] Brandl, whose report was cited from earlier, concluded:

"Our food supply chain is large, complex, and diverse. Some food products may have few components and a fairly simple flow from field to table, but still change many hands and come from faraway places. Other products have a complex processing route with numerous component ingredients. Current government regulations do not ensure that the links through the supply chain can be quickly traversed making the task of determining source issues in the event of a contamination concern extremely time consuming. Some vertical tracking systems are starting to emerge within 7 segments of the industry, but once cross segment components are mixed, like putting strawberries in yogurt or eggs in cookies, the links can once again become time consuming to trace. Without accurate information regarding which products might be impacted in a contamination concern, recalls fall on the side of caution and safety, often severely impacting entire product types which are later found to be unrelated to the actual issue. We need to do better for both the public’s safety and for the health of the food industry. An over-arching, global food traceability solution is needed that can link all food products and provide results in seconds."

What he concludes about the food industry applies equally to the pharmaceutical industry. Traceability in these two industries is particularly important because they are global and will remain so. All the technology that may be needed to ensure increased supply chain safety may not yet be available, but new breakthroughs are being made all the time. I believe we are on the verge of being able to finally get a handle on the complex challenges associated with food, beverage, and pharmaceutical supply chains.

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