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Food Safety Depends on Vendor Compliance

Fri, 09/25/2009 - 6:36am
Johann Heydenrych, Industry Solutions Director, itelligence Inc.

As food safety becomes more prevalent with each headline-grabbing recall, an increasing number of manufacturers have begun to accept the absolute necessity of implementing food safety programs. However, many organizations fail to grasp the full spectrum of activities and competencies needed to implement a comprehensive safety strategy. While being able to safely store, transport, source and process materials within an internal network of facilities is certainly crucial, intra-enterprise programs are by no means sufficient. Food manufacturers—and particularly those within the midmarket—must learn how to fully involve their supply-chain partners in order to confidently go to market with foods declared safe for public consumption.

Certain global food manufacturers have mastered food safety. These companies establish sourcing facilities throughout the world and staff the sites with highly trained personnel. Before shipping ingredients to stateside manufacturing centers, skilled safety workers test, check and validate every raw ingredient, in effect creating the entry point of a company-specific supply chain. After verifying the quality of goods at the sourcing center, the company can then track and trace from procurement to end-user receipt.

Unfortunately, few companies have the resources to establish international sourcing bases. Most food manufacturers rely on vendors for both ingredients and assurances as to the quality of those ingredients. However, certificates of conformity and specifications in and of themselves do not guarantee the safety of products. Manufacturers must be able to verify certifications by bolstering internal safety programs with an aggressive vendor-compliance component.

On-site audits are one element of vendor compliance. Prior to beginning an auditing program, food manufacturers meet with vendors and explain that in addition to certificates and specifications, the manufacturer will, unannounced, visit the vendor on-site twice a year to perform audits. Depending on the manufacturer’s particular concerns and goals, auditors will examine pest control measures, stacking techniques, the quality of packaging materials, the competence of staff and the merit of inventory management strategies. Auditors will also take samples from the vendor’s inventory. If tests show the samples to be in nonconformance with previously agreed-upon specifications, the vendor will receive an unsatisfactory evaluation, and consistent nonconformance will result in the vendor losing its preferred status with the manufacturer. 

Even if vendor compliance consisted solely of these biannual audits, manufacturers would already face a two-fold challenge: how to record and analyze the vast array of information gathered during each audit, and how to ensure that vendors remain in compliance between audits. While on-site visits give manufacturers invaluable insight into vendor procedures, manufacturers need a way to monitor compliance on a day-to-day basis. Enterprise resource planning (ERP) solutions present manufacturers with one option for maintaining ongoing vendor evaluation. By examining how ERP sustains vendor compliance over long stretches of time, we will see how the solutions also maximize stand-alone opportunities such as on-site audits.

A sophisticated ERP system will satisfy the first demand for ongoing vendor compliance: comparing purchase orders to delivered goods. After a vendor agrees on a purchase order, the manufacturer enters the specifications of the order into ERP. The system automatically calibrates parameters for size, allergen levels, strength, etc. Upon receiving the shipment, the manufacturer scans in the goods, which the ERP system immediately blocks from moving any further through the supply chain. Next, the manufacturer takes samples, which are tested in-house or sent to a third party.

After test results are entered into the system, the optimized ERP solution automatically compares the original specifications against the composition of received materials. If the goods conform to standards, they are released into the supply chain; if not, the vendor receives a nonconforming evaluation. Additionally, ERP systems allow manufacturers to document discrepancies in dates received and dates requested, prices negotiated and actual charges, and quantities requested and quantities received.

Armed with this information, even the smallest mid-size manufacturer can approach the largest of vendors to demand improved goods and transactional processes. If vendor performance continues to fall short of demands, the manufacturer has an impeccably documented case to present on record. Whereas today many manufacturers feel that they have no choice but to buy from bigger vendors and no recourse except to receive goods of uncertain origin, ERP-driven vendor compliance offers a means of empowerment.

However, vendor compliance does not aim to create an adversarial relationship. Quite the opposite, a robust ERP system allows manufacturers and vendors to integrate their processes to not only suffice safety demands, but actually enhance the business relationship. ERP functionality supports collaboration pools, in which both parties can better understand the origin of materials, required specifications and product qualities. Portals—another form of ERP-enabled virtual environments—allow manufacturers and vendors to look into each other’s inventories. This capability proves critical for not only understanding the location and amount of goods, but also the status of sampling, testing and verification. These functionalities allow vendors and manufacturers to see how their processes affect the overall partnership, which in turn allows for insight into ways to improve future transactions.

With these capabilities continuously streamlining day-to-day compliance, on-site audits now become much more beneficial. As auditors enter their findings into handheld devices, the ERP system receives information on packaging quality or stacking procedures and compares that data to preconfigured parameters. If, for instance, the vendor has agreed to follow HACCP, the manufacturer enters the relevant guidelines into ERP, which recognizes conflicts or conformities based on the auditor’s input. Thus, the ERP-enhanced on-site audit conflates reporting and analysis into a single action.

It is important to note that the ability of an ERP system to regulate vendor compliance depends on the willingness of the manufacturer to undergo change management prior to implementing the enterprise software package. Inspection plans, QA programs, sampling sequences, testing procedures, criteria for making quality dispositions and a host of other internal processes must be defined in order for ERP to regulate the enterprise’s relationship with vendors. However, once these processes have been defined and accepted, manufacturers equipped with a sophisticated ERP system gain an invaluable tool to streamline internal processes and seamlessly integrate vendor compliance into a solid food-safety program.

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