Supplier Management Compliance: Best Practices for Food Companies
Jennifer Kinion
The supply chain poses inherent risks for the food and beverage industry. While supply chain management has always been a complex endeavor, supplier compliance has become an increasing challenge in light of regulatory changes that have taken place within recent years. To ensure safety, quality, and compliance, food and beverage companies are reexamining their supplier management strategies (like The 6 Pillars to Effective Supplier Management). This is especially true for companies that fall under the Food Safety Modernization Act (FSMA).
In recognition of the fact that many recalls have been triggered by the supply chain, the FDA introduced FSMA, which was signed into law in 2011. Since then, the FDA has released guidance documents to help facilities under FSMA navigate its multifarious supply chain program requirements. Here, we break down some of the best practices food and beverage companies can take to maintain a defensible and proactive approach against minimizing risks in the supply chain.
Assess Current Practices
To understand the ways in which you may need to refine or strengthen your vendor management activities, you must first analyze what your supply chain looks like now. Oftentimes, we think of the supply chain as linear, when in reality, it tends to resemble a web. While your facility may have visibility into its tier 1 suppliers, visibility is typically lost at tier 2 and beyond. The less visibility you have, the more difficult it becomes to control risk factors.
Thus, the next step is to identify who is responsible for controlling risks. Although every company takes a different approach to supply chain management, there are many similarities shared across the industry. For example, many facilities use audits to ensure their suppliers have comprehensive food safety programs in place. While larger brands may be able to perform second-party audits, most use third-party audits from sources such as GFSI schemes.
You may also choose to implement certificates of analysis (COA) to confirm that ingredients, products, or materials meet specifications. Typically, these documents include actual results obtained from quality control testing and can be used upon receiving inspections. While these measures are typically dependable, it’s important to review your activities periodically to ensure they’re as effective as possible.
Another common practice food and beverage companies use in supplier management is monitoring vendor behavior. If a supplier becomes less responsive, sends materials that are barely within specifications, or repeatedly miss deadlines, it warrants a reevaluation, as it could be time to find a new approved vendor. Check out our tips for seamless food supplier management!
Questions to Ask Regarding Current Practices
As you analyze your current supplier management practices, here are a few questions to consider:
Do we have a complete understanding of our supply chain risks?
Do we know who’s responsible for controlling risks in our supply chain?
Can we track all of the information our facility receives, including COAs and third-party audits?
Who is in charge of the supply chain?
The answer to the last question, in particular, can become quite complex. There may be many parties involved, including employees from R&D, procurement, product development, legal, and food safety professionals. Yet, answering these questions in completion is a necessary preliminary step that must be completed before you can actually identify supply chain risks.
Identify Supply Chain Risks
Not all vendors present the same risks, however, supply chain risks are essential to be considering in your risk assessment. David Acheson, President and CEO of The Acheson Group, a global food and beverage consulting company, explains that it doesn’t matter if you have five or five thousand suppliers – some ingredients will always be riskier than others. To ensure you’re using your resources most effectively, it becomes essential to weigh these risks. Of course, food and beverage companies should dedicate their resources to the areas that present the greatest risks.
Typically, risk factors can be organized into three categories:
Ingredient Risk: the inherent risks posed by the ingredient itself, including a recurring history of recalls, country of origin, etc.
Supplier Risk: supplier behavior, including the degree to which they control risks
Your Use of the Ingredient: how you use the product (i.e., cooking minimizes risks)
Some additional points to consider are whether the ingredient constitutes only a trace amount of a single product, or if it’s found within every product on the shelf; what resources will be needed to manage the risk; the potential for a recall; and, how you can tailor your risk management approach to fit your company’s budget and allocation of additional resources.
How to Identify Ingredient Risks
The simplest way to gauge risk factors for ingredients is to develop a questionnaire that you could ask about each. Does the ingredient originate from a high-risk area, or has it been found to contain contaminants in the past? You could also rank your responses as low, medium, and high risk. Vendor management software can help you assign numerical values to ingredient risks and keep track of the information so your risk management practices are data-based.
How to Identify Supplier Risks
For suppliers, repeat the same process described above for identifying ingredient risks. Compile a questionnaire to gather information about onsite audit results, previous supplier behavior, and qualifications or certificates. Again, this allows you to implement data-driven measures to manage your supply chain risks.
How to Identify Risks Based on Usage
Lastly, generate a list of questions based on your use of ingredients. Include how many products it affects, the volume of products it comes into contact with, and whether it is used in a product strongly linked to your brand identity.
Based on these findings, you can then compile a risk-based vendor management strategy tailored to the specific characteristics of your supply chain.
Refine Your Supplier Management Strategy
Once your risks have been identified, the next step is to refine your supply chain program. Of the major risks you’ve outlined, who is responsible for control? It could be your supplier, your own company, or your customer. If the customer is responsible for risk control, the FDA will require a letter of assurance stating so under the FSMA Preventive Controls Rule.
At the most basic level, the Preventive Controls Rule for Human and Animal Food requires affected food and beverage manufacturers to assess supply chain risks and verify risks are being controlled. The FSMA Foreign Supplier Verification Program (FSVP) is similar in nature, but it shifts the burden of minimizing risks to importers. The FDA expects importers to assess risks in the supply chain and verify risks are being controlled.
A robust supply chain control program compliant with both the Preventive Controls Rule and FSVP would encompass the following steps:
Conduct a hazard analysis and evaluate risks following the steps described in the previous section
Perform supplier verification activities to ensure vendors are mitigating any risks for which they are responsible
Use only approved suppliers, bearing in mind that the FDA may request to see your list of approved suppliers and the criteria you use to select and approve them
Perform corrective actions any time a supplier fails, and document these actions thoroughly
Build your program and maintain records, as detailed, organized recordkeeping is a critical component of every aspect of FSMA
Collaborate with Suppliers
A supply chain is only as strong as the links holding it together. In this case, the communication between your company and its vendors represent your links. To collaborate seamlessly with suppliers, make sure your facility is tracking their performance actively, vetting new suppliers thoroughly, and communicating any updates or changes to vendors in a timely fashion. Likewise, you’ll also need to make sure your internal teams are aligned. When new products are in development, have all parties on board – including R&D, procurement, food safety management, and supply chain personnel – to proactively assess risks. Identifying major risks in advance may help your company rethink its approach towards introducing new products or working with different suppliers.
Leverage Supply Chain Technology
After you’ve put the above measures in place, the final piece of the puzzle is utilizing a tool to streamline supply chain management. With supply chain software, your facility can support compliance efforts by replacing spreadsheets with supplier portals. These centralized online supplier systems reduce tedious tasks required by paper processes and complex spreadsheets, while also facilitating faster and simpler communication, collaboration, and adoption. Suppliers can log in and upload or update critical documents from anywhere, and at any time. You’ll also have access to supply chain analytics and mobile compatibility, allowing your teams to verify supplier shipments, prevent use of noncompliant ingredients, and compare performance data to identify your best and worst suppliers. Thus, you’ll have ongoing visibility into every aspect of your supply chain, helping you to make better decisions to support safety, profitability, and compliance for your brand.
Like many aspects of ensuring food safety and quality, supplier compliance is not a “one and done” activity. Once you’ve put supplier verification and management activities in place, the real work begins with continuous monitoring. By ensuring your supply chain management activities are working to prevent risks, you’ll be able to promote better compliance and food safety within your facility.
SafetyChain has a Quality Management Portal that helps process manufacturers improve productivity, profitability, and compliance with a flexible, user-friendly software platform that captures, manages, and analyzes real-time operations data.
