MITIGATING RISK IN THE FOOD SUPPLY CHAIN BARRY LEE, Principal - - PowerPoint PPT Presentation

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MITIGATING RISK IN THE FOOD SUPPLY CHAIN

6th IFC International Food Safety Forum Kyiv, Ukraine, March 15, 2017

BARRY LEE, Principal Industry Specialist IFC Manufacturing, Agribusiness & Services

ON SAFARI… THE ANTICIPATION!

Will we see the Big Five?

Ready and Waiting…

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THE ‘INFAMOUS’ WHITE ELEPHANT …

Unwanted Plant, Machines and Gifts!

• Obvious, Known and Unwanted
• Of No Value

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THE BLACK SWAN EVENT …

Feeling of Helplessness

• Highly Improbable, Unknown High Impact
• Difficult to Understand the Total Impact
• Eg, 9/11 2001, Russian Ruble Collapse 2014

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THE GREY RHINO EVENT …

Feeling of Power to Respond

• Highly Probable

and High Impact

• Eg, Flood, Fire or

Storm events

• Asian and Global

Financial Crises (1997, 2008)

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CONTENTS

• 1. FOOD SAFETY: THE LANGUAGE OF BUSINESS
• 2. GLOBAL TRENDS DRIVING GLOBAL FOOD SUPPLY CHAINS
• 3. RESILIENT SUPPLY CHAINS
• THE FOUR PILLARS
• THE THREE ENABLERS

4. WHAT DO WE MEAN BY A ‘FOOD SAFETY CULTURE’? 5. CLOSE: TAKE-AWAY MESSAGES

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• 1. FOOD SAFETY:

THE LANGUAGE OF BUSINESS

‘THE PROFIT AND LOSS’ (P&L)

THE BUSINESS CASE FOR BETTER FOOD SAFETY

Save on costs Increase sales/profits

Reduce risks

• Improved access to major retailers and

multinational restaurant chains

• Improved export potential
• Reduced production losses
• Lower costs on recalls, withdrawals, and audits
• Higher worker productivity and retention
• Protects your brand
• Builds consumer trust
• Ensure more efficient, sustainable suppliers

Source: client surveys; Investing Wisely in Food Safety: How to maximize the benefits and reduce costs

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• 2. GLOBAL TRENDS DRIVING CHANGES

IN GLOBAL FOOD SUPPLY CHAINS

“Amidst the predominant attitude that building trust is a necessary goal, the top two areas of importance for building consumer trust for both retailers and manufacturers were consumer health and wellness and food and product safety.”

• - KPMG Global Consumer Executive Top of Mind Survey 2015

FOOD SYSTEM TODAY

Source: John Floros, 2012

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MAIN DRIVERS URBANISATION

and CONSUMERS

• Growth of discerning middle class
• Health-conscious consumers
• Empowered and educated

consumers

REGULATION

• Scandals and increasing scrutiny
• Rising regulatory standards eg FSMA
• International Trade Agreements (aka.

market access)

GLOBALIZATION

• Global supply chains across national

borders

• Technology and science to detect

hazards and identify risks

• Resource scarcity and minimisation of

food waste

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• 3. A FRAMEWORK FOR

RESILIENT SUPPLY CHAINS*

• THE FOUR PILLARS
• THE THREE ENABLERS

* Source: Deloitte 2013

RESILIENT SUPPLY CHAIN FRAMEWORK*

VISIBILITY FLEXIBILITY COLLABORATION CONTROL PEOPLE PROCESS TECHNOLOGY

* Source: Deloitte 2013

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RESILIENT SUPPLY CHAIN FRAMEWORK:

VISIBILITY

Map, track and monitor supply chain processes in REAL time

• Capability to address supply chain issues before they become problems

VISIBILITY

FLEXIBILITY COLLABORATION CONTROL

PEOPLE PROCESS TECHNOLOGY

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IS THIS VISIBILITY?

• Mandated reporting for

radioactivity (Caesium-137, Sr90)

• Labelling law requirements for

irradiated foods

Was it a Black Swan or Grey Rhino Event? (But now a White Elephant…)

CHERNOBYL, 1986

Need for Traceability and Accountability of Food Supply

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IS THIS VISIBILITY?

• Supply Chain Processes? Farmers or Distributors?
• Melamine and/or Urea contamination
• Infant deaths: 6, Reported 300,000 victims

Was it a Black Swan or Grey Rhino Event?

THE CHINA MILK SCANDAL, 2008

Need for Traceability and Accountability of Farmer Supply

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IS THIS VISIBILITY?

• UNKNOWN causes of E.coli, norovirus, salmonella issues
• YoY2016/15 sales down $600 million
• Market capitalization loss $11 billion (!)

Was it a Black Swan or Grey Rhino Event?

CHIPOTLE MEXICAN GRILL (CMG), 2015

460.140 Large US Mexican restaurant chain

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MOMENT OF TRUTH QUESTION?

Have you got real time VISIBILITY in your supply chains?

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Adapt quickly in response to problems without significantly increasing operational costs

• Mitigates impact of business interruption

VISIBILITY

FLEXIBILITY

COLLABORATION CONTROL

PEOPLE PROCESS TECHNOLOGY

RESILIENT SUPPLY CHAIN FRAMEWORK:

FLEXIBILITY

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IS THIS FLEXIBILITY?

• Potential adulteration of product with lead oxide
• Unable to identify source of contamination
• Alternate supply from new farmers in a new region

Was it a Black Swan or Grey Rhino Event?

BANGLADESH TURMERIC RECALL, 2014

Product recall in the USA

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IS THIS FLEXIBILITY?

• Largest agri-business

insurance payment in Russian history

• Electrical fault and plant
• ff-line for 2 years
• Alternate supply required

for processed meat products 60,000 tons per annum

Was it a Black Swan or Grey Rhino Event?

PLANT FIRE IN RUSSIA, 2010

Plant Fire resulted in $83 million insurance payment

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IS THIS FLEXIBILITY?

• Total Cost of Recall

and Fines ca. $200 million

• Concerns about

Lead and MSG by Indian Regulators

Was it a Black Swan or Grey Rhino Event?

MAGGI NOODLE PRODUCTS INDIA, 2015

Maggi Noodles Banned

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MOMENT OF TRUTH QUESTION?

Have you got real time FLEXIBILITY in your supply chains?

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Work effectively with supply chain partners through symbiotic, trust-based relationships

• Avoid business interruptions for ALL PARTIES and

achieve common goals

VISIBILITY FLEXIBILITY

COLLABORATION

CONTROL

PEOPLE PROCESS TECHNOLOGY

RESILIENT SUPPLY CHAIN FRAMEWORK:

COLLABORATION

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• Common and Shared goals
• Demand Planning and Profitability

IS THIS COLLABORATION? The ‘Shared-Expectations’ Approach

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Company Suppliers Franchisees / Distributors

IS THIS COLLABORATION?

• Common and Shared goals
• Demand Planning and

Profitability

BIDCO KENYA: WORKING WITH FARMERS, DISTRIBUTORS AND CONSUMERS, 2013

Provides farmer training (GAP) and distributors with ‘business management’ systems (SAP) for sales & inventory

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IS THIS COLLABORATION? Braliwra increased maize sourcing from 300 farmers to ca. 5,000 farmers

BRALIWRA RWANDA: WORKING WITH MAIZE FARMERS, 2015

• Common and

Shared goals

• GAP, Supply

Management, Traceability and Profitability

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MOMENT OF TRUTH QUESTION?

Have you got real time COLLABORATION in your supply chains?

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Robust policies, monitoring and control mechanisms

• Procedures and processes which are IN PRACTICE and NOT IN

THEORY

VISIBILITY FLEXIBILITY COLLABORATION

CONTROL PEOPLE PROCESS TECHNOLOGY

RESILIENT SUPPLY CHAIN FRAMEWORK:

CONTROL

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IS THIS CONTROL?

• Illegal, Unreported,

Unregulated (IUU) fishing?

• Yellow Card – Threat
• f tuna export ban to

EU from Solomon Islands

Was it a Black Swan or Grey Rhino Event?

THREAT OF LOSS OF EXPORT LICENCE TO EU, SOLOMON ISLANDS, 2013

Weak fisheries management by Solomon Islands Government

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Container Packed in India Found to Container Rodents

Was it a Black Swan or Grey Rhino Event?

IS THIS CONTROL?

WHO’S LIABILITY? QUARANTINED CONTAINER IN ITALY, 2014

• Third Party ‘Packing’ of

the Container

• Product Quarantined and

Destroyed

• Can You ‘Contract’ Out

your Responsibilities?

• Lesson: ‘Duty of Care’

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• Annual audits of

rice farms in Asia eg Cambodia, Thailand

• Traders are

licensed to supply from audited farms

• nly

POLAND HEALTHY GRAINS COMPANY, 2016

IS THIS CONTROL? A large EU importer of rice for snack-breads and rice-cakes

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MOMENT OF TRUTH QUESTION?

Have you got real time CONTROL in your supply chains?

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The FOUR PILLARS are Thought, Word and Deed for people

• A Food Safety Culture … Do you need a Psychologists View?

VISIBILITY FLEXIBILITY COLLABORATION CONTROL

PEOPLE PROCESS TECHNOLOGY

RESILIENT SUPPLY CHAIN FRAMEWORK:

PEOPLE

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• 4. WHAT DO WE MEAN

BY A ‘FOOD SAFETY CULTURE’?

CHANGING ‘PEOPLE’ BEHAVIOUR

THREE REASONS

• 1. The workplace

culture does not encourage compliance

• 2. They don’t have the

knowledge

• 3. They do not have the

proper motivation

Source: Food Safety Culture: Creating a Behavior-Based Food Safety Management System by Frank Yiannas, 2010 https://www.youtube.com/watch?v=yAgf4MyOb9w

Was it a Black Swan

• r Grey Rhino Event?

Why people do not follow procedures:

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THERE HAS BEEN AN EVOLUTION IN FOOD SAFETY

HACCP

COMPLIANCE CAPACITY BUILDING FOOD SAFETY CULTURE

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PROFIT

• Award

incentives

• Share of

profits and benefits PROCESS

• Food safety

process KPI’s

• HR

workforce planning PE PEOPL OPLE E & & CU CULTURE TURE

• Staff talks
• Team

recognition

• Staff loyalty
• ‘Body & Mind’

THE BUSINESS OF FOOD SAFETY CULTURE

DO YOU KNOW WHAT YOUR STAFF THINK?

 DO THEY HAVE THE SAME ‘SHARED-EXPECTATIONS’?  INDUSTRIAL PSYCHOLOGISTS CAN BE CATALYSTS FOR A FOOD SAFETY CULTURE

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• 5. TAKE-AWAY MESSAGES

TO CLOSE

Messages From Today’s Forum:  Mitigate Risks: Resilient Supply Chain Framework  More Grey Rhino Events than Black Swans  …Plan to Respond to the Grey Rhino’s today!

DON’T BE AN OSTRICH… WITH YOUR HEAD IN THE SAND!

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CONTACT

BARRY LEE

Principal Industry Specialist, IFC Agribusiness E-mail: blee4@ifc.org

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