Closing Supply-Chain Risk Gaps through Teamwork and Internal Communication
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Good internal communication is a hallmark of a successfully run company. How many dairy processors realize the role that good internal communications play in supply-chain management?
When adding or changing suppliers, does your company have a formal communication process for relaying information between the quality assurance team, procurement and upper management? If not, an out-of-spec product could be the result, leading to a costly corrective action, FDA 483 warning letter, a product recall or worse.
Food safety plans are required under FSMA and have always been vital, but internal communication, recordkeeping and teamwork are just as critical to consistently producing safe, quality products – they also reduce insurance risk.
When advising a food processor on insurance options, a broker must emphasize the importance food safety plans play, not only in regulatory compliance but in the processor’s ability to obtain the best value from their insurance coverage. Insurance underwriters review food safety plans in hopes of insuring best-in-class processors while avoiding those with poor controls. Underwriters are particularly interested in reviewing food safety plans in order to gauge a processor’s ability to mitigate product liability and product recall issues related to suppliers.
In order for a food safety plan to be effective, strong internal communication must exist. Remember that your food safety team needs and wants to conduct supplier verification activities before a new ingredient is used or new supplier is hired.
If a supplier scores as a “significant risk” through Quality Assurance (QA), this information should be communicated to top management as well as your insurance broker. Doing so will enable your organization to financially control and mitigate risks by utilizing a wide range of insurance and non-insurance risk transfer methods.
Brokers may advise top management to require significant risk supplier to do the following:
- Name your organization as a named insured on their insurance
- Purchase increased product liability limits or purchase product recall insurance
- Purchase manufacturers errors and omissions coverage, rejected government shipments coverage or temperature errors and omissions coverage
- Include high risk suppliers, customers and service contractors in your mock recall exercises
Brokers specializing in food processing can even accompany their clients on external visits to the high-risk suppliers. When advising a food processor on insurance options, a broker must emphasize the importance food safety plans play, not only in regulatory compliance but in their ability to obtain the best value from their insurance coverage. Insurance underwriters review food safety plans in hopes of insuring best-in-class processors and while avoiding those with poor controls. Underwriters are particularly interested in reviewing food safety plans in order to gauge a processor’s ability to mitigate product liability and product recall issues related to suppliers.
How can a food processor systematically and accurately identify the suppliers that pose ‘significant risk’? There are tools available that help make easy.
Innovation Center for U.S. Dairy (IC) provides ready-to-use resources for dairy processors, including a risk assessment calculator and food safety guidance document. Both of these tools are available in the IC’s Supply Chain Toolkit
Risk Assessment Calculator
Using the IC’s Risk Assessment Calculator, one can assess supplier risk and develop a supply chain program to identify and close food safety gaps. It can expose a myriad of potential risks posed to a dairy operation beyond those presented by ingredients entering a facility and includes review of risks posed by suppliers such as:
- Service Contractors, including
- Pest Control
- Uniform Services
- Welders
- Transportation Suppliers
- Storage & Warehouse locations
- Contract Manufacturers
- Customers
This Excel tool provides a documented system of scoring supplier risks against a “minimum” and “better practice” criteria. Being risk-based, the tool links to hazard analysis and who controls the hazard. Depending on the risk potential throughout the supply chain, a supplier is assessed a nominal, moderate or significant risk and scored accordingly.
Food Safety Guidance Document
The Food Safety Guidance Document covers 23 areas, from allergen management to traceability. This risk mitigation document goes well beyond basic compliance and includes a minimum to best practices spectrum of suggested actions that a processor could establish for a supplier.
If a processor utilized calculator tool and the guidance document, the result is a highly organized food safety document which captures, in writing, reasons why corrective actions may or may not be required to control the risks posed by a particular supplier. As an added benefit, these tools also moderate your product liability and recall insurance exposures.
In Conclusion…
Ultimately, it is up to the dairy processor to be on top of the food safety risks. Through teamwork and good communication your organization’s upper management, food safety teams and insurance broker can close the gaps caused by supply-chain risks, making both your company better and your products safer.
M3’s Food & Agribusiness Practice advisors can help your organization develop a solid food safety plan.
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This blog post is an article by Jim Brunker, originally published by The Cheese Reporter in November of 2017. M3’s Food & Agribusiness professionals are regular contributors to the Cheese Reporter. Read the most recent M3 articles on cheesereporter.com.
