From The Editor | March 24, 2017

Supply Chain Risk Management: Are You Doing Enough?

Source: Food Online
Sam Lewis

By Sam Lewis, associate editor
Follow Me On Twitter @SamIAmOnFood

Supply Chain Risk Management: Are You Doing Enough?

Supply chains in the food industry are more complex than ever before, and with that complexity comes greater vulnerability. Here, Greg Sommerville, Director of Supply Integrity at McCormick Global Ingredients, answers my questions about holistic supply chain risk management and the tools and strategies available to enhance it. Greg will be speaking at the upcoming Food Safety Americas 2017 held April 4-5 in Orlando, FL.

Food Online: What are a few strategies and tools food companies can use to begin understanding and assessing their supply chain risks?

Sommerville: The major strategy for risk assessment or mitigation is to ensure Power of People is part of your company’s culture. McCormick & Company expects that all employees respect supplier relationships, producers, other employees, and their communities — all of which can be seen in the quality of the flavors delivered. Ensuring all employees are empowered to question anything and stop a line, a delivery, or a transaction if there is an error is a key part of this strategy and ensures several lines of defense within your organization.

At the 2017 GFSI Conference in Houston, Hugo Gutierrez from The Hershey Company was speaking about food safety and stated people have to own it and live it — at all levels of the organization. McCormick has this ingrained into our culture.

Another key component of assessing supply chains is mapping your entire supply chain and knowing where each process, value-add, and critical food safety hazard is being completed. It is no longer acceptable to only understand tier-one suppliers or go back one step. Companies have to get back to the root of their ingredient, component, or recipe element to ensure a full understanding and risk in each part of the supply chain. At McCormick Global Ingredients Limited (MGIL), we are supported to visit the origin, understand the levers at every point of the supply chain, and assess where risks could and have occurred in the past. We work with suppliers that have the same values, and allow transparency within their supplier base. This helps us develop and maintain a trusted relationship that allows them to share with MGIL, at no risk to a loss of their business, their suppliers or their processes. They willingly partner with us and share proprietary technology and processes to ensure that the entire supply chain produces a safe, wholesome product.

Looking globally is important. What may not be happening in your market, yet, is happening in another market — it may be a local market, it may be a comparable market abroad — but companies need to keep a track on global scale to ensure they stay ahead of any risk. Working within industry and utilizing technology to move toward collaborative consumption is important. An industry can be compromised by just one flawed link in the chain and these entities need help so they are able to understand and are educated on the process,  wherever possible. There will always be organizations focused on profit and not building a brand, but understanding who they are is also key.

To simplify, and take an example from the herb and spice industry, the one point I always make clear in any presentation, no matter to whom, is that in agricultural commodities, a processed product cannot be sold cheaper than the raw material — that should be true in everything! A ground, treated herb cannot be cheaper than the price for which the farmer is selling the product. If nothing else, ensure you understand not only the cost in your supply chain, but the cost of the raw materials entering your supply chain.

Food Online: What are some of the supply chain challenges food companies are currently facing and what’s preventing them from being overcome?

Sommerville: Globalization can be seen as a massive opportunity and a considerable challenge. Products compliant in one market may not necessarily be compliant in another, yet distributors and unknown entities are shipping products around the world. This may not even be relative to food safety, but just historical development of rules and regulations. Global regulation in the food industry will likely not occur in my lifetime, but maybe it is something we should aspire to — making food safe and allowing it to be transported across borders without cumbersome global regulations.

It is important to find talent with the relevant knowledge base. Finding interested and qualified individuals to run specific tasks within the industry is becoming more of a challenge. The work force is fluid; people are switching job roles at a faster pace and high-performing talent wants to be treated equitably and fairly. Some jobs require such a specific skill set or soft skills/cultural knowledge within a subsection of the industry that it becomes tough to find and nurture that individual. At McCormick, our core items are herbs and spices, a subsection of the ingredients business, which make up only 10 percent of the cost of a dish, but bring 90 percent of the flavor. However, very few Millennials say they want to be in the spice business — spices aren’t a “hip” commodity, yet they are integral to flavor and world history. Within McCormick, we manage this with McCormick’s Power of People that shows a commitment to support employees by empowering them to think collaboratively, work at all levels, and be able to connect with other departments in global locations. Making jobs, tasks, and projects interesting is a key component of ensuring a stable workforce.

Technology — another double-edged sword — is a massive opportunity allowing access across the globe to all types of information. But on the other hand, the same advantage becomes a disadvantage as communication is so fast. Messages get out so quickly and companies have to stay ahead of the information curve. Think about the activities you read on social media and your belief structure. Validating the information you see, hear, and read no longer occurs readily and urban legends are born and die within days, hours, or minutes. Food safety issues are communicated throughout the internet in minutes, which is good, but issues that may not necessarily be true or valid are also shared multiple times across groups, individuals, and outlets. Think “fake news.”

Data goes hand-in-hand with technology. As technology access grows, the amount of data it generates increases substantially. Companies need to decide what to keep, what to analyze, what to discard, what to plot, and what to act on, how to keep this data, where to keep this data, who should it be shared with, and who it should be kept from. Don’t be overwhelmed, but the deluge of data needs control.

Companies need to believe food safety is not a competitive advantage and work collaboratively within the industry to ensure the industry as a whole is a safe place for consumers. This has been called collaborative consumption and technology is moving this way within the food industry space.

Food Online: What does a “holistic approach to supply chain risk management” mean and why is it important?

Sommerville: For me, it means many things. It means understanding, developing, and engaging the entire supply chain — farm to fork, seed to bowl, bolt to machine, whatever your company or industry wants to call it. It means understanding and mitigating the everyday risks, from controlling pathogens in food, to mitigating any unforeseen risks, such as political upheaval in an origin country, experiencing a trade barrier, or other exceptions, are key in reducing vulnerability. It means ensuring your supply chain is transparent, all stakeholders are involved, and that they understand the end product required and are working to that common end goal.

What should you be identifying and analyzing? A multitude of factors will encompass security, quality, integrity, people, politics, finance, natural disasters, strikes, and many more.

How do you engage the supply chain? Measure it, but measure relevant, up-to-date information. At McCormick, we measure OTIF and compliance to spec, and within my team we further measure mock recall times, audit scores, response to non-compliance issues, and we are presently trying to create an overall equation to give a single score.

In addition, McCormick is also reviewing individual certification bodies, schemes, and auditors to further understand risk and build confidence within origins. Giving each link of the supply chain a target and a measure they can self-evaluate, identify shortcomings, and be proactive in solving the issue, ensures engagement. Building a reward-based program helps further improve performance, which could be as simple as an industry or company recognition. Having trusted suppliers ensure they can be part of your horizon scanning and informing you of issues they know about with other customers, locations, their local industry or other origins.

Think globally and look at other industries, origins, or products. In the herb and spice world, something happening in the paprika business in Spain or China may quickly be taken into the red pepper business in India. A new practice in the herb or seed business in Turkey may quickly become a practice in Egypt, though you are dealing with it in Turkey. Always watch the industry, no matter where it is.

Having mitigation solutions in place is key so there is a solution or a process to follow if something does occur, versus reverting to panic mode when something happens. Plan for the unexpected and hope you don’t need it. The quote, “If you fail to plan, you are planning for failure” is true.

Food companies have to understand their supply chain in detail. It is no longer defensible for food companies to say, “We purchased it from this company here,” and have that be all they know about its origin. There has to be a true understanding of the routes the product took, the process it went through, the points at which contamination can be added, and assessment of value-add and risk. This is a complicated process and removing non-value-added nodes in the supply chain will reduce your risk.

Food Online: What does sustainability mean in terms of supply chain management and how can a company improve it?

Sommerville: If you show a sustainable business to your supply chain and offer assistance at each tier back to origin, you will gain a committed loyal supply chain that will work with you toward the end goal of ensuring limited risk. At McCormick, our metrics show we have assisted our source farming communities — 12,800 farmers positively impacted, 63,800 livelihoods improved, 800 and 600 farmers in India and Turkey, respectively, benefiting from new technology through demo farms, and 1,200 farmers in India using integrated pest management practices. These figures ensure our commitment and with this increasing global assistance, McCormick is ensuring better outcomes for our farmers and higher-quality products for our customers.

Food Online: Where can food companies find more information about systems and strategies to help manage supply chain risks?

Sommerville: GFSI needs to be a key tool in ensuring facility auditing, ensuring your suppliers understand the program, and have a developing program starting with the Global Markets Program and moving up the steps to full certification.

Reviewing global alerts and notifications — FDA recall notices, RASSF in Europe and understanding how these may affect you — is helpful.

Participating in direct industry events, for example the American Spice Trade Association annual meetings and allowing employees to take an active part in work groups and committees as part of their development will also benefit you and your company.

Understanding how technology can help — don’t be afraid of failure, innovate, and imagine what the future holds for the food industry.

Finally, you can gain and share experience by taking part in general industry events, such as Food Safety Americas on April 4-5 in Orlando, where I will be speaking on Tuesday, April 4. I will also be listening to the speakers and taking advantage of their insights and experience.

For more information about Greg Sommerville and managing risks in your supply chain, be sure to attend Food Safety Americas 2017 held April 4-5 in Orlando, FL. For more information and to register, click here.

About Greg Sommerville
Greg is the Director of Supply Integrity at McCormick Global Ingredients Ltd. (MGIL), a subsidiary of McCormick & Company that specializes in global herb, spice and oleo purchasing. Greg joined MGIL 15 years ago as a Vendor Certification Manager and over the course of his career with McCormick has built and developed a team that are responsible for origin based suppliers and products, risk assessments, vendor audits, quality root causes, key quality programs, strategic projects, horizon scanning and new vendor origin approvals.  He is passionate about how technology can make life easier, collaboration techniques and removing non value added tasks within the supply chain to reduce risk and increase value driven tasks.