Anchin, Block & Anchin LLPAccountants and Advisors1375 BroadwayNew York, NY 10018

Food for Thought:Impact of the Food Safety Modernization ActOctober 19, 2011

Copyright © 2011 Anchin Block & Anchin LLP

Agenda

• Introduction to Speakers• Overview• Key Provisions• Systems: S2K Enterprise • Next Steps

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Introduction to Speakers

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Greg Wank, CPAFood & Beverage

Services Chair

Anchin, Block & Anchin, LLP

Michael T. ConePartner

McCullough Ginsberg Montano & Partners

Joe Scioscia Vice President

of Sales

Vormittag Associates, Inc.

Agenda

• Introduction to Speakers• Overview• Key Provisions• Systems: S2K Enterprise • Next Steps

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“The U.S. Centers for Disease Control and Prevention estimates that more than 3,000 Americans die yearly from food poisoning and 48 million are sickened.” – Wall Street Journal

Overview

Overview

• It’s a brave new world for food companies…• Increased regulatory environment• Fear of bioterrorism after 9/11 increased

enforcement in food safety compliance• Ramifications of non-compliance

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Case Study: Topps Meat Company

Overview• Founded in 1940, Topps Meat Company was a privately owned family company based in

Elizabeth, NJ that produced and distributed frozen hamburger patties. In 2007, contamination of E. coli in their ground beef lead to one of the largest recalls in U.S. history, forcing them to cease operation shortly afterwards.

Timeline• In 2005, the USDA found that the plant had received meat tainted with E. coli. That same

year, the company was sued after a consumer became ill from eating a Topps burger.• On September 7, 2007, the USDA issued positive test results for E. Coli in the ground

beef. • Topps Meat Company waited 18 days before recalling over 21.7 million pounds of

contaminated meat.• On October 4, 2007 a class-action lawsuit was filed against Topps Meat and the company

was served a “notice of intended enforcement” by the USDA.• Topps Meat Company was forced to cease operations on October 5, 2007.• On October 7, 2007, 29 people in 8 states fell ill after consuming contaminated hamburgers

produced by Topps Meat Company.

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Case Study: Topps Meat Company

Key Thoughts• Waiting 18 days put them out of business• What would have been different had they had been compliant?• What would have happened had they had a written recall plan?• What would have happened had they done a review of the hazards in their

processes?

Agenda

• Introduction to Speakers• Overview• Key Provisions• Systems: S2K Enterprise • Next Steps

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Food Safety Modernization Act

• Impetus for Congressional Action• According to recent data from the Centers for Disease Control and

Prevention, “About 48 million people (1 in 6 Americans) get sick, 128,000 are hospitalized, and 3,000 die each year from food-borne diseases.  This is a significant public health burden that is largely preventable.”

#   Covers anyone who manufactures, processes, packs, distributes, receives, holds, or imports an article of food (excluding restaurants and certain small farms).

# Special considerations and guidance for small businesses.

Bioterrorism Act of 2002

• Registration of Food Facilities• Prior Notice of Import Shipments• Record-keeping Requirements

Food Safety Modernization Act

• Key Provisions: Overview• Food facilities must evaluate hazards and have a written preventative

controls plan• FDA must establish standards for the safe production and harvesting of

fruits and vegetables• Traceability enhancements• Increased frequency of inspections based on risk factors • Increased access to records• Mandatory recalls• Imported food under increased scrutiny with standards, certifications, and

testing requirements • Whistleblower protections and enhanced enforcement powers

Food Safety Modernization Act

• Key Provision: Preventative Controls • A recall plan, GMPs, allergens, environment, training, sanitation, etc.• Facilities must monitor controls, correct shortfalls, maintain records, and

self-audit through testing, etc.• Controls, corrections, and self-audit efforts must be reduced to writing• New standards for high-risk fruits and vegetables• Compliance required by July 2012• Exemption for small businesses that sell locally

Food Safety Modernization Act

• Key Provision: Traceability • FDA pilot programs to enhance traceability within 9 months• New traceability regulations within 2 years for high risk foods• FDA must solicit public comments and cannot require facilities to implement

specific technologies

# Facilities must keep records for two years

Food Safety Modernization Act

• Key Provision: Increased Inspection• Facilities classified as low or high risk based on the nature of the food, the

facility’s compliance history, preventative controls, hazard analysis, etc• High risk facilities must be inspected once within five years and every three

years thereafter• Low risk facilities must be inspected once within seven years and every five

years thereafter• 600 foreign facilities inspected in first year

# New fees for facility re-inspections and recalls: $224 per FDA domestic man-hour ($325/hr if foreign travel is required)

Food Safety Modernization Act

• Key Provision: Recalls • FDA now has authority to order recalls (previously recalls were voluntary

without a court order)• Failure to recall could result in fines up to $500K• Recalls allowed where there is a “reasonable probability” food is

misbranded and threatens human or animal life • Specific tasks for grocery store recalls, including posting recall information

in a conspicuous place

Agenda

• Introduction to Speakers• Overview• Key Provisions• Systems: S2K Enterprise• Next Steps

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Systems: S2K Enterprise

How S2K for Food Helps Companies Comply with FDA Safety Regulations

The Food Safety Modernization Act

• With 15 percent of the U.S. food supply being imported each year from other countries, the globalization of today’s food supply was the driving factor of the Food Safety Modernization Act (FSMA), which President Barack Obama signed into law Jan. 4.

• The FDA will be able to request records relating to the manufacturing, processing, packing, distribution, receipt, holding or importation of any suspect product.

• Enforcement of the new rules can include informal hearings, suspension of FDA registration — during which the facility is not allowed to import or export any of its goods internationally or domestically — and submission of a corrective action plan.

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How Can S2K for Food Help?

• Import Cargo Tracking• Automating the Receiving Process• Lot Control and Date Tracking• Quality Testing of Received Goods• Quality Testing of Finished Goods• Recording of Quality Test Results• Shelf Life Date Tracking• Automating the picking and shipping

process• Lot Recall Reporting

S2K for Food in Action!

SQF Certification

• Customers are increasing asking for verification that their suppliers have been certified to meet the standards of the SQF (Safe Quality Food) Institute.

• The SQF Institute has developed standards based on the Global Food Safety Initiative (GFSI).

• There are two programs SQF 1000 for producers and SQF 2000 for manufacturers and distributors.

• Obtaining SQF certification isn’t just about protecting consumers, food service providers and retailers. It’s also about protecting your business. Consumers don’t buy food they don’t trust. Food service providers and retailers pull products to protect their customers and themselves, leaving suppliers at risk of losing their customer base.

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S2K Enterprise for Food

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Designed for the Food Industry

• Catch Weight Processing• Broken Case Tracking• Chain Billing• Dynamic Sales Reporting• Route & Load Management • UPS Roadnet & Mobile Cast Interface• Flexible Cash Receipts • Bids & Order Guides• Dock Appointments• RF & Voice Warehouse Management • Hand Held Route Accounting

Distribution Management

Manufacturing Management

Retail ManagementEnterprise Management

Software

E-Business

Customer Relationship Management

Warehouse Management

Financial Management

Route Delivery

VAI Food Customers You May Know….

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Systems: S2K Enterprise

Lot Control Recall Tracking

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S2K Lot control features allows you to track individual shelf-life dates for each receipt of goods. During receiving the user will be required to enter in shelf-life information for each lot.

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In the item master file, S2K allows you to establish Perishable Days and the Minimum Number of Days for Receiving and the Minimum Number of Days for Shipping for each product. Should the user try and receive or ship a lot that is outside these date parameters, the user will get a warning message.

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The Lot Recall Report provides a detailed Report of all transactions for a specific Item, Lot or Transaction Date Range.

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Systems: S2K Enterprise

Warehouse Management

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Systems: S2K Enterprise

Quality Testing

S2K’s Product Quality application supports testing of both received goods and finished goods (manufacturing)

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Test can be flagged as Mandatory and can results can be Pass/Fail, Range or a Table.

36Users can note which test are to be performed for each item.

37When an item that requires testing is received the Lot is automatically placed on hold until the lot has passed the quality tests.

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All test results are entered. The lot will be released should item pass all the mandatory tests

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Systems: S2K Enterprise

Flow of Orders to Shipping

S2k for Food R47 Customer Orders to Route Manager to WMS Overview

Unit of WorkManager

RouteManager S2k WMSTransaction

Entry

Order Entry

Web Orders

EDI Orders

Show Orders

Handheld Orders(Opticon)

Route Manager

InventoryAllocation(optional)

Build Units ofWork Release to

Warehouse

Unit of Work(UOW)

Manager

Release UOW byarea to WMS

picking Device

WMS RF orVocollect Picking

Verification

Truck Loading(Optional)

UPS Roadnet(optional)

Manifest andInovice Route

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Systems: S2K Enterprise

Route Management

S2K will determine the next delivery date for the order based on the customer’s default scheduled routes cut-off date and time. During Order Entry the customer’s assigned route and stop will default to the Order Entry/Update header screen.

The Route Process Control screen displays all routes with assigned orders. Routes will be displayed in their current status. Additionally case quantities, cubic measurements and weights also display.

Users can change trailers assigned to a route by clicking the Change Trailer button. The trailer and chamber setup are important in determine how picking will be done. Information in the trailer setup is used to determine the size and nature of units of work to follow.

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VAI provides a standard interface to Roadnet for Truck Routing. By clicking on the Roadnet button a file is sent to Roadnet for routing. Once routed the file is then sent back to the Route Manager screen with the stops assigned.

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UPS Logistics Technologies 2008 47

Route Summary

Stop ListMap View

Roadnet

If system is set up to allocate inventory at picking time, the first status assigned to a route will be UNALLOCATED. To allocate the inventory select route(s) by highlighting and clicking the Allocate Inventory button.

Any orders that are shorted can be managed in the Allocation Maintenance program.

Short quantities can be cancelled, moved from one order to another, substitutions can be made, and items can be forced to picking (receipts coming later).

Users can print individual Pick Tickets, Bulk Pick Tickets and Load sheets.

Once the inventory is routed and allocated the next task is to select the route(s) desired and click BUILD U.O.W (Unit of Work) button; eventually the UOW’s are sent to an RF or Voice device for picking.

In this example, for the DRY area of the warehouse, a picker can pick up to 4 stops (orders) at one time, up to a maximum of 55 cubes.

Its important to note that the trailer assigned to the route controls how the UOW’s will be created. Within each chamber of the trailer, the size of the UOW is defined. Users can control by cube, weight and number of stops (orders), how much work a picker will be assigned at one time.

Once the UOW’s are create the user has the option to EDIT U.O.W. or accept what the system has created.

Example of editing Unit Of Work.

Once the UOW’s have been accepted they are handed off to the warehouse for picking.

Go to the bin at top of queue, scan bin, scan item, scan catch weight (if catch weight required), also lot will be prompted if lot number is required. Optionally, if a serial container barcode is on the product, it can be scanned in lieu of item, weight and lot.

Sample Case Label

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Enterprise Management Solutions

For More Information Visit the VAI Web Site at

www.vai.net

Phone: 1-800-824-7776Email: Sales@vaisw.com

Agenda

• Introduction to Speakers• Overview• Key Provisions• Systems • Next Steps

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Next Steps

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• It’s a new reality…• Get written preventative controls in place• Prepare a recall program• Monitor new rules as they are issued

Greg A. Wank, CPAChair, Food & Beverages Services Group

Anchin, Block and Anchin1375 Broadway

New York, New York 10018

212-840-3456

greg.wank@anchin.com

@AnchinFoodBev

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