Product recalls across all US industries cost $20bn every year, and food safety technology can be revolutionised to lower this figure and exploit existing investments, claim researchers.
The paper Unlocking the Potential of Product Lifecycle Management from Wipro Council for Industry Research says this amount includes not only recalls’ direct cost, but also the knock-on effect on other products in similar categories.
The effects are long-lasting, says the study; “57% of customers, after a category recall, stop buying the product for at least a year”.
PLM “needs to transform” to reap profits
Sriniwas Acharya, one of the report’s authors, told FoodQualityNews.com that product lifecycle management (PLM) – monitoring the whole life of a product, beginning with its design – “needs to transform beyond the current ‘concept-to-design’ stage only.”
Data about a product’s compliance, quality, and customer feedback is often kept separate from PLM, said the paper. But by merging the information, companies can “cross-leverage” their spending in food safetyto “maximize returns from their existing investments”.
The paper advocates integrating PLM with data from Enterprise Resource Planning, a system which tracks orders and inventory in real-time, and Customer Relationship Management, which encompasses sales, marketing, and customer service.
“Such initiatives can help make these companies responsive to the varying consumer and regulatory demands and mitigate the risk of product recalls,” said the paper.
Food manufacturers can “be agile in identifying incidents (both from consumers and auditors) that trigger recalls,” it continued.
Recalls can be financially “catastrophic”
Research conducted by GMA, E&Y and Covington and Burling in 2011 showed the largest costs of product recall came from business interruption and product disposal. 81% of food companies deemed financial risk from recalls as “significant to catastrophic”.
If information is better recorded and processed during manufacturing, “it can provide real time insights to the line managers to do dynamic changes to the product ingredient mix,” Acharya told us.
For instance, greater visibility during the raw material stage of processing “can go a long way in optimizing food processing costs. Our view is that investments in food safety should not be viewed in isolation within the quality management process.”
This collaborative model could help prevent all types of recalls, not just contamination cases.
“We need to keep in mind that food recall may not necessarily be due to food contaminations only. In several cases, the ingredient level composition of the food product may also not be adhering to the FDA norms (e.g. nutrition levels, allergens, etc.),” said Acharya.
Investment is a “major obstacle”
One of the obstacles to developing food safety lies in senior management, since “food manufacturers often hesitate to invest in technology solutions that can deliver food safety capabilities,” said the paper.
Exectuives prefer manual food safety checks over “a more efficient system-driven approach” because of restricted budgets.
“It is hard to drive a strong internal financial business case for food safety,” acknowledged the paper. “Experts equate investments in food safety initiatives to investments in life cover—high premium with low returns. This makes it difficult for plant managers to obtain necessary budget approvals from senior management.”
The proposed model would require increased funding for data processing and storage. Acharya admits this has been a “major obstacle” in the past. “However, with the latest capabilities around big data and Cloud, this viewpoint is gaining strength.”