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Food Safety: Managing your Risk to Protect your Brand and Customers

Deloitte Insights video

Foodborne illnesses have decreased over forty percent in the past decade thanks to a concerted effort to improve food safety across global supply chains.

Speakers

Mitch Gilgour, Senior Director, Sysco Corporation
Dr. Craig Henry, Director, Deloitte & Touche LLP

Transcript 

It is time for Insights, a video news production of Deloitte LLP. Now, here is your host, Sean O’Grady.

Sean O’Grady (Sean): Hello and welcome to Insights. Today, we will be discussing the safety of food as it passes through supply chains. Joining us in New York for this conversation are Mitch Gilgour, a senior Director with Sysco Corporation, the world's largest broadline food distributor, and Dr. Craig Henry, a past co-chair of the U.S. Department of Homeland Security's Food and Agricultural Sector Coordinating Council. He is also a Director at Deloitte & Touche LLP. Dr. Henry, I would like to begin with you drawing upon your 30-year career in the industry to give us some context and summarize what you feel is the current perspective of both consumers and companies as it pertains to food safety.

Dr. Craig Henry (Henry): Great question Sean and simply put engaged I think is the operative word. Both consumers and industry are very much focused on delivering the wholesome safe product to the marketplace. I think a number that is relevant that brings us into perspective is the Center for Disease Control of Atlanta 1999 issued their initial report on foodborne illnesses relative to morbidity. Those illnesses tallied 78 million estimated foodborne illnesses within the United States. In 2010, they reissued that report, some 10 years later, and in that report, the number has dropped to 48 million illnesses. That is a 40 percent reduction roughly in illnesses and a similar number in hospitalizations. Stakeholders at large need to really take a concerted effort and a very focused approach on improving their food safety systems not only internally, but across the supply chain. I mean, our real goal is to improve food safety across the global supply chain. So, companies need to be proactive. They need to do the appropriate GAP analysis and certainly try to move their programs for using the latest technology applied to their systems so that they are not only improving confidence in the consuming public, but they are also doing a very, very good job of brand protection across their enterprise.

Sean: Speaking of stakeholders, we have one right here between us. Mitch, my first question for you is similar to that that I just addressed to Dr. Henry and that is how is Sysco addressing food safety.

Mitch Gilgour (Mitch): Okay, we are committed to food safety. Food safety resonates with our company's mission statement to be our customers’ most valued and trusted business partner. Without adequate controls to minimize the risk of food safety, we could not be their most trusted and valued business partner. You know, our risk-based approach to mitigating food safety risk is important. And many of the controls in the distribution channel that provide optimal quality are also effective to reduce and minimize food safety risk. Warehousing practices, transportation models, and things of that nature must be set up to minimize risk. The use of temperature-controlled trailers and warehouse practices to minimize the risk of cross-contamination must be employed. The other thing that I would say is industry today must leverage technology. With our interconnected world, customers have higher expectations for response times and we must be responsible and responsive to meet those customer expectations, and the use of technologies, such as instant recall to simultaneously contact customers in the event of an adverse situation like a recall is one way that industry can be effective to mitigate food safety risk.

Sean: Well, thank you for the industry perspective Mitch. I would like to bring it back over to regulation though. It has been over a year now since congress and president Obama passed the Food Safety Modernization Act and there has been some critique that some of the implementation of that law has been slow in coming and so I am interested to know how is that law impacting your industry.

Henry: Well at this particular time Sean, it has not really gone much beyond the statement of the Food Safety Modernization Act. So, the law has been passed and what we are waiting on are the regulations. That has to go through an intensive internal review, not only within FDA, the Food and Drug Administration, but also through the Obama administration through the Office of Management and Budget. The long-term impact of this we believe is going to be quite significant, not only within the United States, but also external to the United States, because we are such a huge global trading partner with so many other countries. Globally, consumers look to government as the number one source for appropriate regulatory and/or legal oversight, especially in the area of food safety. With that in mind, if we reflect back just a little bit, since it has been passed just a year ago, people should be aware of the fact that that law, the new act, is coming into existence now. It has been over 30 years since such a far-reaching and deep effective program has been put in place. Now with that said, many people do not realize that this law is predominantly focused on the Food and Drug Administration and those facilities, which are amenable to their inspection. Now, the FDA or the Food and Drug Administration is responsible for 80 percent of the food produced and or imported/exported in the United States. The other 20 percent actually belong to the U.S. Department of Agriculture and is inspected through the Food Safety Inspection Service. Now, the Food Safety Inspection Service focuses on meat, poultry, and shell-less eggs predominantly. Industry now is preparing and has been working for quite some time on taking a proactive approach anticipating the regulations to come and going back and looking closely what the act is calling for and actually starting a reassessment of their food safety systems. There are actually an anticipated 12 regulations that will come from this new law. So to take a approach from a corporate stance, you really need to look across your internal programs and your external supply chain and you want to try and make sure that you have the right behavior or if you will corporate culture extending all the way down from the top management, from the CEOs, all the way down to the line worker within a company. By doing that, you are going to see a much more team effort in delivering not only what the consumers expect, but also what the regulatory compliance agencies are going to be looking for relative to the law.

Sean: Well, let us bring those thoughts right over to Mitch, because you are talking about proactivity, so I am wondering what is going on at Sysco that might be meeting some of the things that Craig is talking about.

Mitch: Our commitment to food safety was well in advance of the Food Safety Modernization Act. Sysco takes an approach to minimize risk by controlling the supply chain. Some examples of that would include auditing and approving all of our branded suppliers. We do that before we would purchase product from them. We also have a risk-based plant visit program to visit all of our suppliers to assess their food safety controls. We employ good agriculture practice audits of produce suppliers because they are higher risk and we support the Global Food Safety Initiative as a means of minimizing risks. Those are all efforts outside of the Food Safety Modernization Act. And Craig was right, the Food Safety Modernization Act is the most aggressive action taken by the regulatory in many years, and there are 14 of those that impact companies in the distribution business. Some examples of those impacts include the sanitary transportation food provisions, whereby distributors and processors must ensure that controls are in place to minimize the risk of cross-contamination of food products through their supply chain, as well as to ensure the products are distributed at appropriate safe temperatures. What companies can do in response to the Food Safety Modernization Act is to expand their preventive controls to continue to improve their food safety mitigation practices, so qualifying all of their suppliers in addition to branded suppliers. Because our brand is important, we have qualified our branded suppliers in the past and now we are going to qualify all high-risk suppliers for their food safety practices.

Sean: Clearly, it sounds like you have got a few initiatives. I am wondering, do you have something you want to add, Craig.

Henry: Yes, I think Mitch brought up an excellent point. The use of hazard analysis in critical control points, many people will realize that that program was started back in the early 60s, and it was actually developed in support of the astronaut program for NASA, because the worse-case scenario you could possibly have is have an astronaut thousands of miles above the earth that succumbs to a food borne illness. So you don’t want to have that going on and this program has now been used as a very effective tool in building out and assessing food safety systems not just within the United States but globally Sean.

Sean: It sounds like there are a number of initiatives going on in your camp, but I am wondering what are some others that you might recommend for others or individuals in your role, other ways to increase safety across the enterprise in that supply chain.

Henry: I think Mitch outlined a lot of excellent initiatives that they have taken. One of the things that I know is important to any of these ventures is to bring together subject matter specialists. You need to have the right team. It is the premise behind the hazard analysis program, but by having that team across the internal operation and then potentially external to the enterprise-wide function, you are able to capture all of the different perspectives that are necessary to identify, if you will, gaps relative to risk and then one step closer to identifying the appropriate or benchmark procedures that can be applied to bolster or enhance the food safety system. Again, ultimately, you are reducing risk as far as product to the consumer and you are protecting the brand. No matter what is done, I mean we are still dealing with natural products. Food is still very naturally derived, and you know you cannot completely eliminate all risks, but certainly by working with teams at large, both internal to the company and external to company, you are able to put together a program that will be highly efficacious and it has to be tide to, if you will, continuous monitoring and continuous improvement as time goes on.

Sean: My last question for both of you is about the hang-ups because clearly not everything is going to go right as we go about implementing these plans. So Mitch, we will begin with you and we can end that with you Dr. Henry and that is, what are some of the hang-ups that you in your organization have encountered and what might you be able to share with us.

Mitch: I think one of the biggest challenges that we are facing right now is higher expectations from customers. They are more educated than they were in the past. So, their expectations for their suppliers are higher. We have to be responsive to those challenges and their industry. Sysco is the leader. We have been the leader in this industry for many years and it is our responsibility to model the way for other companies. We will benefit from that as well. We will benefit by reducing risk in the food supply chain. We will benefit by providing food and related products to our customers that meet their expectations, and we will benefit by having safer food products in the marketplace.

Sean: Dr. Henry, you have the macro perspective. I know you get to advise a number of different organizations. What do you see as the stumbling blocks here?

Henry: Well, I think what Mitch touched upon relative to his organization when you blow that up to a global perspective, allocation of resources is huge. The U.S. federal government moving forward with this act is certainly challenged as we all know by economic times, budgeting becomes an issue; so you have to have a relevant amount of financial resources to implement this. The original perspective for the implementation of the Food Safety Modernization Act is roughly 3 billion dollars. It requires a huge increase in inspection processes, that demands additional staffing, and many people do not realize that this is not just a federal solo practice, it is very much highly integrated with the states at large. All of states within the United States work very closely with the federal government for the implementation of food safety practices. So, if you are going to put a greater demand on the system, you also have to have a greater reliance on resources. Now that becomes a burden, if you will, for congress to find the appropriate financial resources, the FDA, or in this case the U.S. Department of Agriculture, should they engage here. They both need to be able to properly allocate this in order to meet the mandates set forth by congress under the act and I think one of the key issues that Mitch brought up is the consumer expectations. At the end of the day, we are supposed to be improving food safety for the consumer. So, the consumers’ expectation is to see some type of measurable response and certainly anyone that invests in this wants to make sure that they are being compliant and being viewed in a very positive light. So, as we move forward, the real challenge for top management within any company is to become fully engaged with this. Do not think that it will not have a positive impact or potentially a negative impact, if you are not prepared and you want to carry that forth so that you continually increase consumer confidence while enhancing and improving the consumers’ perception of that brand across the enterprise.

Sean: Definitely sounds like high stakes. Okay, we have been talking about enhancing food safety across the supply chain with Dr. Craig Henry, a Director in the Food and Product Safety Practice of Deloitte and Touche, and Mitch Gilgour, a senior Director with Sysco Corporation. If you would like to learn more about Craig, Mitch, or any of the topics discussed on this program, you can find that information on our website, its www.deloitte.com/us/insights.

For all the good folks here in Insights, I am Sean O’Grady. We will you see next time.

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