A presentation by Matthew van den Honert B-tech, Owner, CereusSA (Pty) Ltd, South Africa. Delivered during the 38th annual SAPICS event for supply chain professionals in Sun City, South Africa. What is the risk of non-compliance to certification schemes and audit standards in the food industry? There are many certification schemes available on the global stage. Each of these have been designed to better the organisation, however many companies merely implement these in order to have a certificate. The risk of non-compliance is potentially catastrophic to the manufacturer. The presentation will look at a case by case basis where the effective lack of management and adherence to the management systems resulted in outbreaks which destroyed national and global supply chains, effected economies and sunk organisations.

1. Risk in the Food Supply Chain
Non-adherence to Management systems

5. What is in common with the
pictures?
• Three biggest recent food safety
outbreaks.
• Death
• Loss of revenue.
• Why?
• Non-adherence to management
systems.

6. Presentation Outline
• Management Systems
– Top down approach
– Customer Demands vs Honesty & Integrity
– Does size matter
– The buck stops with you
– Continual Improvement
• When things go wrong
– Local
– International

7. Religion, Politics, Race and Sex
• Systems, Management, Leadership
– Defined Agenda
• All religions (Marry their own; specific rules)
• Political parties (Specific promises to voters)
– A Leader
• The pope.
• Donald Trump/Hillary Clinton
– Defined member identity
• Racism (One thinks they better than the other)
• Gender Identity (Trans-gender & gay/lesbian
movement)

8. Religion, Politics, Race and Sex
• Differences in Agenda’s cause separation
– Denominations within religious groups
– Political parties splitting (ANC, COPE, EFF)
– Coups in government (Leadership change)
– Removal of members who do not conform to
the ideology of the group

9. Religion, Politics, Race and Sex
• The Point?
– All systems require momentum
– A leader
– An agenda
– A commitment
– A group of dedicated followers for
implementation. (Believe in the cause)
Defined by the Company culture!!

10. Top Down Approach
• ISO demands
– Senior management commitment
– Provision of resources
• Business pans to drive the process
Defines the direction of the organisation.
Provides the scope of the organisation.
Allows the allocation of resources to meet business requirements.

11. Conundrum
• Cost vs Quality?
– At what point is the cost of quality too high.
Quality is:
Right Product
(specification conformance + order fulfilment)
+
Right Quantity
+
Right Time

12. Food Industry
• Product specification built to:
– Produce a tasty product
– Packaged to be appealing
– Be safe to consume throughout shelf-life
• Management Systems designed to:
– Control all inputs
– Control processes
– Assure customer satisfaction/high quality.
Risk of Non-Compliance:
Unpleasant Experience
Illness
Death

13. Food Industry
• Cost implications
– Cheaper food (food security)
– Higher margins (Retailers)
– Increased agriculture costs
– Effect of exchange rate
Food for thought:
Where can we cut costs? Can quality and the safety of
the product be compromised on?

14. Food Industry
• Legislation
– CPA requires due diligence
• Ultimate responsibility
– Mandatory (Legal) and Voluntarily (ISO)
– Lies on the shoulders of the top management
to ensure system compliance

15. Customer Requirements vs
Honesty and Integrity
Greater Sales = Greater Production = Greater Profits
• Customer requirements differ.
• Export requirements differ.
• Demands from individual customers
– Specific audits
– Specific system requirements
– Product testing
– Rebates
Requirements:
To meet the needs of all customers, one needs to:
1. Provide system adjustments per client.
2. Complicate the systematic process at the whim of clients
to retain their business.
Leading to: Increase in Costs

16. Customer Requirements vs
Honesty and Integrity
• Demand for cost reduction
– Minimises resources
– Reduces system implementation ability
– Lends itself to not implementing the systems
correctly.
Question to be asked:
At what point should we implement the systems correctly to
provide a complete system or can we get by with a shoestring
budget often requiring system fabrication.

17. Does Size Matter
• Corner baker vs Coca cola.
• Equal
– Food safety risks
– Commitment from management
– Training

18. Scenario
Homemade sauce by
housewife
• Small client base
• 5 product lines
• Management is hands
on
Batch production of 2000
L per batch.
• Retail and restaurant
trade
• 305 product lines
• Often silo management
with many levelsIngredients:
Both use the same ingredients.
Contaminated with peanuts.
Allergic clients consume undeclared allergens and end up in hospital or die.

19. Scenario
• In both cases, manufacturers suffer:
– Brand damage
– Potential litigation
– Recall costs
– Could be shut down
– Huge financial implications
No Matter the size of the Organisation.

20. The Buck Stops With You!
• Trust is required between consumers,
customers and manufacturers.
• Management responsibility to develop this
trust.
• Honestly implementing the systems creates a
system which ensures safety.
• 3rd party audits confirm the status of the
system.
• Certifications thus provides trust with clients.

21. Continual Improvement
• Correctly managed systems reduce
possible risk to products and organisations.
• Systems do break down!
• Non-conformance and corrective action
systems in place to address systematic
breakdowns.
• Critical to identify the ROOT CAUSE of the
issues.

22. Continual Improvement
• Attention to detail when addressing the
root causes leads to a robust system.
• Honesty, integrity and resources assists to
address the root causes in their entirety.
• Successful system improvement.
• Continual assurance of safety.

23. THINGS GO WRONG!!

24. When Things Go Wrong.
• Systems do break.
• There is ALWAYS a reason.
• For the most part, reasons pertain to
senior management overlooking elements
within their systems.

25. Incidents
• Local
– Tiger brands (Tastic rice)
– Irish Cheese producer (Import cheese)
– WW Ice cream recall (Allergens)
• International
– Jensen Farms (Cantaloupe)
– Chipotle (Norovirus, E.coli)
– German bean sprouts (E.coli)

26. Local
• No legal requirement to record or publicise
outbreaks and recalls.
• Result = can protect brand but not making
it known.
• No mandatory medical records of further
investigation of food borne illness.
• Merely remove products off shelves to
minimise risk to consumers.

27. Tiger Brands
October 2014

28. Tiger Brands
October 2014
• 17000 Units
• Banned colourants (Methyl Yellow & Sudan Red)
• Known carcinogens
• Supplied from an approved supplier in India
• Have been using particular supplier for the past
20 years.
• Ingredients shipped post approval.

29. Tiger Brands
October 2014
• Cause
– Assumption that this batch was the same as previous.
– Batch released prior to testing.
• Root Cause
– Not adhering to system requiring batch testing prior to
use of the product.
• Correction
– Management decided to recall the batches affected.

30. Tiger Brands
October 2014
• Implications
– Cost of withdrawal.
– Cost of product.
– Lost manufacturing time.
– Logistic costs. (Safe return and disposal)
– Reputational Damage.
• Share price dropped 0,82% on day of recall
announcement.

31. Tiger Brands
October 2014
• How could recall have been avoided?
– Assessed ingredients prior to use.
– Reject consignment based on contamination.
– Regular assessment of suppliers particularly on higher
risk issues like carcinogens.
– Management insisting on proper SQA protocols.
– Consider the cost vs quality conundrum.

32. Irish Cheese Producer
Durban Port 2011
• 22 tons Cheddar cheese prevented to enter the
South African market.
• Ports authorities dumped cheese.
• @ 45 R/kg = ~ R1 000 000,00 Cost price.
• Cause
– E.coli O157:H7 contamination

33. Irish Cheese Producer
Durban Port 2011
• Correct decision by the Port Authorities
• Effect on Supply Chain
– Calls to suspend all dairy import from Ireland.
• Root Cause
– Food Product QC and release of product not robust to
pick up issues.
– Cold chain maintenance.
– Potential dumping of inferior stock.
– Product process control. (Was the pH correct during
manufacture)

34. Woolworths Ice Cream
October 2015

35. Woolworths Ice Cream
October 2015
• Voluntarily recalled 12 ice-cream and sorbet.
• Labelling incorrect.
• Labelling did not indicate product was
manufactured in a factory which processed
peanuts.
• Actual volumes were not quantified.

36. Woolworths Ice Cream
October 2015
• Costs
– Actual products lost.
– Logistics of returns.
– Dumping excess packaging.
– Redesigning of new labels.
– Non-availability of product of the shelves (Lost
potential sales)

37. Woolworths Ice Cream
October 2015
• Root Cause
– Communication between manufacturer and retailer.
– Oversite in allergen management program.
– Oversite in product development process
– Misapplication of regulations.
Management did not ensure that the labelling
regulations including the approach to allergens as well
as the label approval process were in place correctly.

38. International
• European and American authorities are more
ridged
• AGOA designed to stimulated trade.
• Global trade encouraging export.
• Need to comply to regulatory requirements of
exporting requirements.
• Required to publicise outbreaks and recalls.
• Governments investigate and manage recall
process much more closely.

39. International
• Legislation and programs require tight
control.
• Things still go wrong…

40. Jensen Farms
July 2011
• Biggest outbreak since 1927
• Cantaloupe Fruit
• Listeria monocytogenes
• 143 hospitalised
• 33 deaths
• 300 000 fruits across 9 states.

41. Jensen Farms
July 2011
• Costs.
– 66 lawsuits
– Filed for bankruptcy after litigation value
reached US$50 million.
– Owners were criminally prosecuted.
– Concern of fruit safety influenced demand of
fruit.

42. Jensen Farms
July 2011
• Root Cause
– Poor facility hygiene
– Old equipment
– Stagnant water in processing facility
– Not following cleaning protocol
– Not using chemicals
– Direct violations of best practises set by FDA
– Did not execute recommendations by the 3rd
party auditors

43. Jensen Farms
July 2011
• Litigation is focussing its efforts on the
auditing body which approved the facility.
• Auditing body is called into question as 3rd
party audits don’t have a mandate to close
facilities.
Honesty and integrity when applying food
safety principles would have mitigated all
food safety rirsk experienced at Jensen farms.
Balance Costs: Production vs Quality

44. Chipotle
August 2015 – January 2016
• In the period stocks decreased by 46%
– US$754.00 - US$404.00
• Group of various isolated food safety
incidents.
• Norovirus 151 students in Boston
– Employee infected with a virus.
– Virus transferred to food.
– Root cause: miss informed by the health
status of the employees.

45. Chipotle
August 2015 – January 2016
• 55 sick, 20 hospitalised due to E.coli O26
– Across 9 states.
– Source unidentified.
– This is particularly related to hygiene of
facilities of raw materials.
– Speculation suggests raw materials were the
cause.
– Systems pertaining to managing ingredients
to be improved on.

47. Germany
Bean Sprouts
• May 2011
• Biggest European outbreak to date.
• E.coli O157:H7
• 3 950 people infected
• 53 died

48. Germany
Bean Sprouts
• Sickness initially started in Germany.
• The Germany blamed it on Spanish
cucumbers.
• Cost Spanish exporters US$ 200 million
per week.
• Russia banned all imports of European
cucumbers.
• Consumers in EU warned against eating
cucumbers

49. Germany
Bean Sprouts
• EU farmers claimed losses of €417 million
per week.
• By 8th June 2011 (within 1 month)
– US$ 2.84 billion was assigned to industrial
human losses (Sick leave, etc)
– Cost of waste product was not quantified.
• Germany issued warning to EU not to eat
any cucumbers, tomatoes and lettuce.
• EU salad sales declined sharply.

50. Germany
Bean Sprouts
• Final values were not calculated.
• Runs into 10s if not 100s of Billions of
Dollars.
• EU farming in its entirety needed to be
stimulated by government funding.

51. Concluding Remarks
• Non compliance typically stems from
senior management not managing the
system.
• Systems require Honesty, Integrity and
resources to implement them correctly.
• Balance required between costs to
implement system vs costs of failure.
• Breaks in the system, in our global
network, could be disastrous.