In a new white paper published by TraceGains and HCL America, authors William Pape of TraceGains and Ravi Sankar of HCL Technologies Limited offer an analysis of the business implications associated with traceability as required in food safety legislation recently passed by the U.S. House of Representatives, H.R. 2749, and the U.S. Department of Agriculture’s National Animal Identification Scheme, NAIS.
In “The Business Impact of Food Safety and Traceability Legislation,” Pape and Sankar argue that there has been little food industry opposition to the passage of H.R. 2749 because the bill’s focus is food products regulated by the U.S. Food and Drug Administration (FDA), and:
FDA-regulated industries have been stung by an apparent, unceasing string of high-profile recalls, and the industry stakeholders for these commodities (fruits, vegetables, and manufactured foods)–throughout all production segments from the first mile to the retailers–seem to recognize that the status quo just doesn’t work anymore. They feel that something needs to be done . . .
There was, however, food industry opposition to NAIS, which impacted meat products–products not covered under H.R. 2749. Pape and Sankar state: “The level of willingness to change, and the strength of industry leadership, is the clear differentiator between the response to the two pieces of legislation.”
Other key differentiators cited by the authors include:
- H.R. 2749 is a Congressionally-initiated policy change, whereas NAIS was generated from within USDA
- H.R. 2749 puts most of the responsibility for action on downstream manufacturers and retailers, whereas NAIS placed most of the responsibility for action on upstream producers
- H.R. 2749 has broad FDA-regulated food industry endorsement and is in synch with a parallel industry initiative, whereas NAIS had little support from industry and did not parallel a detailed industry-driven program
Having established that there is industry support for one and opposition to the other, and that H.R. 2749 focuses more on traceability from entities downstream from the source of food products–burrito manufacturers downstream from tortilla manufacturers which are downstream from flour manufacturers–but that NAIS focuses more on traceability from a product’s source–the farm upstream from the slaughterhouse–the authors focus on the technology and maybe more importantly, business-relationship implications of the two.
After the Bioterrorism Act of 2002 was passed, food manufacturers were required to be able to identify which supplier they received specific ingredients from for any production batch as well as the immediate customers who received their finished products. Under U.R. 2749, each food producer must be fully able to trace any of the ingredients in a food-product back to its original source and to trace its food-product through every channel of distribution after the product leaves the producer’s control.
These new traceability requirements are cause for concern among food industry players looking to preserve existing business relationships. According to the authors:
Implementing full upstream and downstream visibility is possible, but unless this extended visibility is handled properly, it will destroy many of the existing commercial relationships that exist today. For example, the retailer who can look upstream to identify exactly which farms are growing the peaches they really want has the ability to bypass intermediate packers, processors, distributors, and brokers thus disintermediating the supply chain and creating substantial potential resistance to change.
Technology exists to prevent the disclosure of such proprietary information that would harm business relationships. Thus, food industry players will be able to implement tracking systems that will help in the event of a recall or other food safety issue if H.R. 2749 passes. From the authors’ viewpoint, the bottom line is this:
Those responsible for technology and information systems within organizations need to start providing and managing electronic data records; put systems in place to monitor food safety inside their four walls as well as outside their enterprise–across their supply chain as well as at their customers; and establish processes to showcase transparency and responsiveness in case of any emergencies.
Just last week, another product was recalled after it was discovered that peanut products from Peanut Corporation of America (PCA) had been used in its manufacture. The original PCA recall was issued nine months ago. Had traceability requirements like those proposed in H.R. 2749 been in effect last January, this producer could have known in real time that it had received potentially contaminated product and withdrawn its product in concert with PCA.