Developing a Food Supply Chain Risk Framework for APEC Economies
03/01/2013 8:14 pm
This article describes the outcomes and key messages from a project (1) aimed at reducing risk in food supply chains - in particular, those related to safety caused by factors, such as globalisation, off-shore manufacturing, supply chain complexity, reliance on third party manufacturing and logistics, and inconsistent regulation and standards.
Globally there are almost 870 million chronically undernourished people yet one third of all food is lost or wasted. (2) Food supply chains start with agriculture and end ultimately, with human consumption; if not handled correctly at each point of the chain food can perish or cause illness or death.
Food trade in APEC countries was estimated at around $US 759 billion in 2010 with just over 80% intra APEC trade. The APEC region has a mix of importers and exporters with Japan, Russia and China as significant importers and Thailand, Australia, Indonesia, New Zealand and Canada as significant intra-regional exporters. The United States accounts for nearly 10% of world trade in food, China nearly 5% and Russia and Japan each account for approximately 4% . (3)
Food wastage and related illness are preventable. However, if food safety risks are not identified and formally mitigated there are enormous implications for the businesses that grow, manufacture, distribute, transport and sell food. A stark example currently exists in China where local consumers are turning to imported food products as the local food manufacturing industry struggles with safety and quality issues. The risks associated with managing food supply chains have never been greater for the following reasons:
The Project
The Project was designed and delivered through a series of activities and workshops in Melbourne and Ho Chi Minh City. The workshops were attended by nominated delegates from government agencies in China, Indonesia, Mexico, the Philippines, Thailand, Vietnam and Papua New Guinea; the APEC Secretariat in Singapore also participated.
The objective of the Project was to reduce risk in food supply chains - from origin to destination /production to consumption - in particular, those related to safety caused by a range of factors, including: globalisation; off-shore manufacturing; supply chain complexity; reliance on third party manufacturing and logistics firms; and inconsistent regulation and standards.
The project developed a high level, generic Food Supply Chain Risk Framework which steps out the processes required to mitigate supply chain risk. The elements of the Framework include planning, execution of the plan, review and report, and improving performance. The Framework provides a foundation for future development in the harmonisation of standards, integration of risk response and mitigation strategies for food handling across the APEC region. Essentially the process involves development of an on-line repository to capture a map of the full supply chain, the risks at each point of the supply chain and control points for monitoring what actually happens.
Once the entire food supply chain has been mapped (as illustrated in Figure 1) and the risks and control points identified, risk mitigation processes can be triggered when monitoring indicates there is an issue. If an incident that poses risk occurs, the system automatically creates an incident report and alerts designated operators within each company about the necessary action to mitigate and manage the incident and /or problem.
Four case studies were developed that mapped poultry, lettuce, pork and shrimp supply chains against a generic supply chain risk template and identified key risks at the various points of the supply chain. Four delegates in the project nominated themselves to map out four food supply chains utilising the risk methodology presented during workshop one. They worked with experts in their own countries to map the entire supply chain and to identify and categorise the risks. The case studies provide an understanding of the processes and benefits of a cohesive risk management framework in food supply chains across various APEC economies.
As a result of monitoring, information is stored in a data repository at each stage in the food supply chain. If an incident that poses risk occurs, the ISES ® System 4 automatically creates an incident report and alerts designated operators with each specific company about the necessary action to mitigate and manage the problem.
Developing the case studies (once the mapping was complete) made the risks tangible. Examples of potential risks identified in food chains are a refrigerated export container being detached from the power source leading to product deterioration, or warehousing a product at a temperature below the product's storage specifications with food safety effected.
Not only were the risks identified and categorised in terms of likelihood and consequences, the supply chain risk maps were replicable and scalable. Completed risk plans can be used at other sites. For example, in the strawberry industry in the USA, the risks for one farm are fundamentally the same for all. Once one farm's processes and risks have been documented, a country's entire strawberry industry could benefit from the risk plan that maps out the best practice processes and mitigation plans. As the information is stored on the Internet, modifications can be filtered to the right people efficiently regarding changes to legislation or an outbreak in, for example, E. coli.
The project was, however, only a first step. The participants are now scoping a program to model effective regulation and best practice through a series of pilots to create tangible, quantifiable examples and encourage changes to reduce supply chain risk in the APEC region.
Uniformity in food safety laws and requirements (at each point of the logistics chain and between each party) is required.
America is leading by example with the Food Safety Modernization Act 5 which aims to shift the focus of federal regulators from responding to contamination to preventing it. The law was prompted after many reported incidents of food-borne illnesses. Tainted food has cost the food industry billions of dollars in recalls, lost sales and legal expenses.
Key Messages
The project identified that many companies involved in supply chains from the 'paddock to the plate' have limited understanding of their overall exposure and contribution to food safety and food safety risk. Specifically the risks are:
1 Developing a Framework for Supply Chain Risk Assurance for APEC Economies Project. The Project was developed by the Institute for Supply Chain and Logistics at Victoria University and Icon Global Link in cooperation with the Australian APEC Study Centre at RMIT University. The Project was funded by AusAID under the Public Sector Linkages Program and undertook to respond to the issues identified in Chokepoints 1, 2 and 8 of the APEC Supply Chain Connectivity Framework.
2 Randel, Lowell, 2011, Managing Food Supply Chain Risks in the Asia Pacific, Presentation at the Workshop for Developing a Framework for Supply Chain Risk Assurance for APEC economies – Melbourne, March 26/28th 2011
3 Brooks, Douglas H., 2011, ADB staff calculations based on COMTRADE, 2011 (presentation at the Workshop for Developing a Framework for Supply Chain Risk Assurance for APEC economies – Melbourne, March 26/28th 2011
4 The Integrated Standards Enforcement System (ISES®) facilitates a consistent approach to risk assessment and documentation. The software can be used to manage one or many of a multitude of standards such as ISO900x, Occupational Health & Safety, Environmental Management, HACCP based food safety, Project and financial risk management.
5 Signed into law by President Obama on January 4, 2011.
6 Imports 'safer' thinks China: Report. Chinese consumers are turning to imported food products as the local food manufacturing industry struggles with safety and quality issues, a report has found.
7 "http://www.foodsafetynews.com/2012/09/new-listeria-outbreak-already-figures-in-three-deaths/
03/01/2013 8:14 pm
- By Dr Hermione Parsons, Director of the Institute for Supply Chain and Logistics at Victoria University
- Joe Giblin, Director, Icon Global Link and
- Meaghan Siemensma, Institute for Supply Chain and Logistics, Victoria University
This article describes the outcomes and key messages from a project (1) aimed at reducing risk in food supply chains - in particular, those related to safety caused by factors, such as globalisation, off-shore manufacturing, supply chain complexity, reliance on third party manufacturing and logistics, and inconsistent regulation and standards.
Globally there are almost 870 million chronically undernourished people yet one third of all food is lost or wasted. (2) Food supply chains start with agriculture and end ultimately, with human consumption; if not handled correctly at each point of the chain food can perish or cause illness or death.
Food trade in APEC countries was estimated at around $US 759 billion in 2010 with just over 80% intra APEC trade. The APEC region has a mix of importers and exporters with Japan, Russia and China as significant importers and Thailand, Australia, Indonesia, New Zealand and Canada as significant intra-regional exporters. The United States accounts for nearly 10% of world trade in food, China nearly 5% and Russia and Japan each account for approximately 4% . (3)
Food wastage and related illness are preventable. However, if food safety risks are not identified and formally mitigated there are enormous implications for the businesses that grow, manufacture, distribute, transport and sell food. A stark example currently exists in China where local consumers are turning to imported food products as the local food manufacturing industry struggles with safety and quality issues. The risks associated with managing food supply chains have never been greater for the following reasons:
- The emergence of complex global supply chains. Food is moving more quickly and further with more entries and exits along the logistics chain and more opportunities for process variance and delays;
- Uncertainty is occurring as a result of natural disasters, climate change and epidemics;
- Terrorist threats place the food supply chain in a vulnerable position demanding a united pragmatic response to reduce food supply risk; and
- More pollutants and additives are making their way into food.
The Project
The Project was designed and delivered through a series of activities and workshops in Melbourne and Ho Chi Minh City. The workshops were attended by nominated delegates from government agencies in China, Indonesia, Mexico, the Philippines, Thailand, Vietnam and Papua New Guinea; the APEC Secretariat in Singapore also participated.
The objective of the Project was to reduce risk in food supply chains - from origin to destination /production to consumption - in particular, those related to safety caused by a range of factors, including: globalisation; off-shore manufacturing; supply chain complexity; reliance on third party manufacturing and logistics firms; and inconsistent regulation and standards.
The project developed a high level, generic Food Supply Chain Risk Framework which steps out the processes required to mitigate supply chain risk. The elements of the Framework include planning, execution of the plan, review and report, and improving performance. The Framework provides a foundation for future development in the harmonisation of standards, integration of risk response and mitigation strategies for food handling across the APEC region. Essentially the process involves development of an on-line repository to capture a map of the full supply chain, the risks at each point of the supply chain and control points for monitoring what actually happens.
Once the entire food supply chain has been mapped (as illustrated in Figure 1) and the risks and control points identified, risk mitigation processes can be triggered when monitoring indicates there is an issue. If an incident that poses risk occurs, the system automatically creates an incident report and alerts designated operators within each company about the necessary action to mitigate and manage the incident and /or problem.
Four case studies were developed that mapped poultry, lettuce, pork and shrimp supply chains against a generic supply chain risk template and identified key risks at the various points of the supply chain. Four delegates in the project nominated themselves to map out four food supply chains utilising the risk methodology presented during workshop one. They worked with experts in their own countries to map the entire supply chain and to identify and categorise the risks. The case studies provide an understanding of the processes and benefits of a cohesive risk management framework in food supply chains across various APEC economies.
As a result of monitoring, information is stored in a data repository at each stage in the food supply chain. If an incident that poses risk occurs, the ISES ® System 4 automatically creates an incident report and alerts designated operators with each specific company about the necessary action to mitigate and manage the problem.
Developing the case studies (once the mapping was complete) made the risks tangible. Examples of potential risks identified in food chains are a refrigerated export container being detached from the power source leading to product deterioration, or warehousing a product at a temperature below the product's storage specifications with food safety effected.
Not only were the risks identified and categorised in terms of likelihood and consequences, the supply chain risk maps were replicable and scalable. Completed risk plans can be used at other sites. For example, in the strawberry industry in the USA, the risks for one farm are fundamentally the same for all. Once one farm's processes and risks have been documented, a country's entire strawberry industry could benefit from the risk plan that maps out the best practice processes and mitigation plans. As the information is stored on the Internet, modifications can be filtered to the right people efficiently regarding changes to legislation or an outbreak in, for example, E. coli.
The project was, however, only a first step. The participants are now scoping a program to model effective regulation and best practice through a series of pilots to create tangible, quantifiable examples and encourage changes to reduce supply chain risk in the APEC region.
Uniformity in food safety laws and requirements (at each point of the logistics chain and between each party) is required.
America is leading by example with the Food Safety Modernization Act 5 which aims to shift the focus of federal regulators from responding to contamination to preventing it. The law was prompted after many reported incidents of food-borne illnesses. Tainted food has cost the food industry billions of dollars in recalls, lost sales and legal expenses.
Key Messages
The project identified that many companies involved in supply chains from the 'paddock to the plate' have limited understanding of their overall exposure and contribution to food safety and food safety risk. Specifically the risks are:
- Food supply chain standards: There is a lack of tight regulatory control and standards for food in the APEC region. Currently there is no overarching food supply chain risk framework or harmonised legislation. The need for regulation is indicated in China where local consumers are turning to imported food products as the local food manufacturing industry struggles with safety and quality issues. 6 Due to ineffective regulatory practice, China's milk industry is trying to restore consumer confidence after a series of human disasters, the worst of which was in 2008 when milk laced with the industrial chemical melamine killed at least six children and caused severe illness in nearly 300,000 children.
- Food safety: Food-borne illness outbreaks continue in the region. For example, a recent outbreak of Listeria monocytogenes in September 2012 infected a total of 14 people in 11 US States and the District of Columbia. All were hospitalised and three died. 7 Companies and governments need to work together to keep consumers safe.
- Uncertainty occurring from natural disasters, climate changes, epidemics and terrorist threats: In early December 2012, after Typhoon Bopha struck the Mindanao in the Philippines, officials struggled to bring in food and relief convoys through roads that had been blocked or swept away by floods and avalanches of rock, logs and mud. These factors are increasing in frequency and significance and place the food supply chain in a particularly vulnerable position. This question was addressed in the project: If transport is curtailed or some natural or political event stopped the flow of food shipments to your city, how many days could citizens in your country survive?
- Complex global supply chains: There are experts at each point of the supply chain but very few understand the product and information flows across the entire food supply chain. A comprehensive assessment of the processes and risks of the interconnected supply chains and the associated gap analysis is non-existent.
- Food security awareness: For many people, food security may not be their first priority. It is critical to communicate the message to industry and government before future food security and safety issues occur.
1 Developing a Framework for Supply Chain Risk Assurance for APEC Economies Project. The Project was developed by the Institute for Supply Chain and Logistics at Victoria University and Icon Global Link in cooperation with the Australian APEC Study Centre at RMIT University. The Project was funded by AusAID under the Public Sector Linkages Program and undertook to respond to the issues identified in Chokepoints 1, 2 and 8 of the APEC Supply Chain Connectivity Framework.
2 Randel, Lowell, 2011, Managing Food Supply Chain Risks in the Asia Pacific, Presentation at the Workshop for Developing a Framework for Supply Chain Risk Assurance for APEC economies – Melbourne, March 26/28th 2011
3 Brooks, Douglas H., 2011, ADB staff calculations based on COMTRADE, 2011 (presentation at the Workshop for Developing a Framework for Supply Chain Risk Assurance for APEC economies – Melbourne, March 26/28th 2011
4 The Integrated Standards Enforcement System (ISES®) facilitates a consistent approach to risk assessment and documentation. The software can be used to manage one or many of a multitude of standards such as ISO900x, Occupational Health & Safety, Environmental Management, HACCP based food safety, Project and financial risk management.
5 Signed into law by President Obama on January 4, 2011.
6 Imports 'safer' thinks China: Report. Chinese consumers are turning to imported food products as the local food manufacturing industry struggles with safety and quality issues, a report has found.
7 "http://www.foodsafetynews.com/2012/09/new-listeria-outbreak-already-figures-in-three-deaths/