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Traceability laws a force of good, says KPMG

15-Mar-2004

Greater traceability in the food chain is a political issue that could add significantly to manufacturers' expenses and even claim some casualties. But the industry should still benefit in the long run, KPMG analyst Mark Baillache told Anthony Fletcher.

By the end of the year, food manufacturers in the EU will be required by law to prove that they can trace all their processes along the supply chain. This could have a dramatic impact on the industry. Escalating costs could drive some out of business, force some smaller companies to merge with larger ones and complicate the issue of EU accession for those countries whose systems are not yet up to scratch.

But despite this, Baillache, a partner at consultancy firm KPMG responsible for the UK food sector, believes that the move towards greater traceability in the food chain is something that, by in large, should and will be welcomed by the industry.

"This legislation is one aspect of a drive towards accountability, and, the people who will most welcome this will be the large food manufacturers who have always felt accountable," he told FoodProductionDaily.com. "But now each individual link of the food chain will be accountable, and this accountability is the key issue."

Baillache accepts that cost is likely to be a factor, and that some smaller companies might suffer financially as a result of having to install means of tracing their production processes. But he thinks that if any company goes under, the cost of ensuring traceability will be just one of a number of causes.

"It is possible that some smaller companies might also join up with larger companies as a result," he said. "They are less likely to have personnel dedicated to this issue."

Supermarkets have been a key driving force behind the issue of traceability. As Baillache points out, retailers have historically been the ones to bear the brunt of any public backlash over food safety, and Wal-Mart and Tesco are leading the way in demanding that suppliers provide them with full fully traceable stock.

"Wal-Mart is redefining the way people do business, and what they want they generally get," said Baillache. "But I think if you look at RFID (radio frequency identification), I thinks that this is ultimately the smart way to go. They are the future, and they will have a role to play."

Baillache believes that traceability, especially RFID technology, could be of great benefit to manufacturers as well as retailers. "This will help manufacturers when they need to see where their stock goes," he said. "It increases visibility: they can see when it hits retailers, and can therefore help them in their planning, supply and distribution."

Some manufacturers have already taken steps to improve the traceability of their processes. The control system of a feed production plant in Austria for example, has been converted from a traditional relay-based control system to a state-of-the-art PLC (programmable logic controller) system.

The new process control system manages materials, bins, scales, recipes, and production jobs and also records statistics and logs production data. The control system itself, which controls and monitors the process operations, registers production data, suppresses forbidden functions, and automatically executes control commands.

In any case one thing is certain - such is the public concern surrounding food safety that it would be commercial suicide for any food manufacturer or retailer to ignore the issue. The issue has always been of public concern, but as Baillache points out, food safety has been dramatically ratcheted up the news agenda on the back of some intense media coverage.

"In the UK you can't pick up a newspaper without some issue of food safety," he said. "Today, there are three pages on obesity in The Times. You have TV programmes such as Food Police, and there was about 15 minutes devoted to food on Question Time (a BBC current affairs programme). All these have helped to raise public awareness of the issue of food safety, and made it an issue you can't avoid." The spectre of terrorism gives yet more scope for fears over food safety. Bioterrorism - the act of contaminating the food supply - is a worst-case scenario that food companies have been aware of for a long time, but recent events have inevitably increased their fears of vulnerability.

"The threat of bioterrorism has always been there, the controls and checks are there, but the industry is in a state of heightened concern," said Baillache. "Look at what happened in Madrid - terrorists are looking at new ways of attack. The fear is that while in the past, an attack might have been aimed at a company, now it could be aimed at a large body of consumers."The pressure on the food industry, from above and below, is therefore clearly building. The elevation of food as a hot political subject means that everyone - the public, industry, the government - now see the issue as highly consequential.

"Where we end up, no one knows," said Baillache. "But the operating landscape is going to change. Most food companies recognise their responsibility to consumers, and recognise that if they fail on this, it will be difficult for them to recover. In the end, the consumer decides."