Presented By:Date:
jadian enterprises, inc
April 30, 2010
A Risk-Based Systems Approach to Food Safety
Jerry Norris, President/CEO
“It is no use saying ‘We are doing our best.’ You have got to
succeed in doing what is
necessary.” —Churchill
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Agenda
Current Environment
Overview of Risk-based System
Real-Life Example
Next Steps
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Current Environment
“I’m not happy unless
I’m uncomfortable.”
—Jay Chiat
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Current Environment: Industry
Recent recalls costing millions upon millions & food-borne illness costs estimated at $157 billion annually
Purchase patterns impacted regardless of brand or involvement – limited recalls impact the whole market
Must demonstrate ability to identify and address food safety threats
Menu Foods - $45 M Cadbury - $40 M
Maple Leaf Foods - $20 M
Castleberry - $38 M
Kraft (Peter Pan) - $66 M
PCA - $1 billion estimated
57% of US consumers have stopped eating a particular food, temporarily or permanently, as a result of a recent recall
93% say food manufacturers, growers or suppliers should be held legally responsible for fatalities due to tainted product
61% of U.S. adults feel U.S. food recall process only fair or poor
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Simple Exercise
Read the paragraph and count the “f”s
Finished files are the result of years of scientific study combined with the experience of many years of experts
04/19/23 www.jadian.com 8
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Simple Exercise
How many did you get?
Finished files are the result of years of scientific study combined with the experience of many years of experts
04/19/23 www.jadian.com 10
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Current Environment: Government
Food Safety Systems (FDA/USDA) are under tremendous scrutiny from the general public and Congress
Strong consideration for single Government oversight body – even being supported by Industry
Result: Push for 3rd party certification
“If it works, it’s
obsolete.”
—Marshall McLuhan
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Why Continual Improvement?
Quality is exceeding expectations
Expectations are formed by Commitments, Performance, and Competition – they tend to rise
Therefore current performance must rise with expectations
Performance
Expectations
Competitive Advantage
Competitive Disadvantage
Commitments Competition Performance
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Current Environment: Compliance
Multiple food safety schemes / standards– Tug-of-war among large food companies and industry
associations
Questions regarding the validity / value of 3rd party audits
U.S. government (and some industry) movement toward risk-based inspections
– FDA Food Safety Modernization Act of 2009 (S. 510) requires “allocation of food inspection resources according to the risk profile of the facility and other important criteria”
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The Evolution of Accredited Certifications*
Adoption of Internationally-recognized Standard
*Very unlikely to occur without intense regulatory and/or industry pressure
“Typically in a mortgage company or financial services company, ‘risk management’ is an overhead, not a
revenue center. We’ve become more than that.
We pay for ourselves, and we actually make money for the
company.”
—Frank Eichorn, Director of Credit Risk Data Management Group, Wells Fargo Home Mortgage (Source: sas.com)
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Compliance & Risk Management Spending
Compliance & risk management spending tends to fall into one of three categories:
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Evolving Approach: Risk Based Product Performance Standards based on risk categories
– Risk based on: Product type, Micro, Chemical & Physical Risk, and Suppliers
– Manage supply chain by risk and performance levels
Natural next step: auditing for system elements/design auditing for system application/effectiveness
– Management System assesses the design and ensures the correct mechanisms are in place for reactive and proactive measures
– Inspections, sampling and testing, complaint management and recall management assesses the effectiveness of the implementation of the management system
– Risk based approach allows for proper prioritization of resources
Emerging Food Safety Issues*
Top Risks Anticipated in 2020
1.Bacterial Risks / Microbiological Safety
2.Supply Chain
3.Contaminants / Physical & Chemical
*JohnsonDiversy survey of top executives
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Overview of Risk-Based System
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Supply Chain Risk Management Objectives
Identify, assess, and quantify potential supply chain risk…
… in order to minimize risk exposure and reduce negative impact of supplier failures
Across Risk Categories Across Supply ChainsAcross Product Categories
“If things seem under control, you’re just not
going fast enough.”
Mario Andretti
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Simple View of Risk Calculation
Risk = Impact of Failure x Probability of Failure Occurring Risk algorithm incorporates any desired inputs, weighted by importance Collapses any number of inputs down to a single dimension that can be
managed e.g. High, Medium, Low risk suppliers or A, B, C, D level suppliers Based on company’s tolerance for risk / risk thresholds
Supplier Risk-Extremely High
-High-Medium
-Low
Impact/Consequence: Capacity to Cause Problems
Negligible Catastrophic
Probability: Likelihood Problem will Occur
Unlikely Frequent
Configurable Algorithm
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Multiple Data Points
• Management systems help to assure the integrity of the data
• Central system for a holistic view helps to assure all factors are considered– In most cases this
data will be collected in multiple systems
• The calculations must be flexible so that they can be changed as knowledge is gained
“There’s no use trying,” said Alice. “One can’t believe impossible things.” “I
daresay you haven’t had much practice,” said the Queen. “When I was your age, I always did it for half an hour a day. Why, sometimes I’ve believed as many as six impossible
things before breakfast.”
Lewis Carroll
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Leverage Data From Established Systems
QualityQuality
EH&SEH&S
OtherOther
ExecutivesExecutives
Suppliers/Staff
Suppliers/Staff
AnalyticsAnalytics
Central System
Consolidate & Analyze
• Escalated Risk Alerts• Online Dashboards• Performance Scorecards• Reports
• Automated Risk Alerts• Corrective Actions• Risk Mitigation Plans
• Best-in-Breed Analytics• More detailed analysis• Further reporting
• Audits & Nonconformances• Samples & Test Results• SPC data• Complaints
• Physical Security• Environmental/Emissions• Safety Assessments• Social Responsibility
• Security• Financial• ERP System data• Health inspections
Automatically pull required inputs from multiple, existing solutions via integrations
Risk updates dynamically as inputs are processed - to provide current, fluid assessment
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Risk Management Tools To Help Reduce Overall Costs
To start to reduce the cost of compliance, the company must begin investing more in prevention.
Compliance cost increases in the short-term because the failures are still occurring while prevention and appraisal efforts increase.
The risk model enables companies to direct resources to the most likely failure points.
After the system becomes effective and compliance failures, the appraisal and preventive measures can be reduced.
They should never be eliminated because an effective system requires a constant injection of prevention, energy, and performance evaluation.
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Overall View of Supply Chain Risk Suppliers can be plotted to view relative risk across the entire supply chain. The bubbles
represent the relative number of suppliers within each risk category Alerts and online dashboards can identify suppliers moving into higher risk categories Companies can focus their audit dollars where they count the most
Extremely High Risk
High Risk
Medium Risk
Low Risk
Probability of Occurrence
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Risk Drives Proper Actions
Extremely High Risk
Frequent review meetings30 day Audit Frequency
Pull 25 Samples / test extensivelyConsider supplier probation
High Risk
90 day Audit FrequencyPull 10 Samples
Test samples extensively
Medium Risk
180 day Audit FrequencyPull 5 Samples
Less extensive sample testing
High Risk
60 day Audit FrequencyPull 15 Samples
Test samples extensively
Medium Risk
45 day Audit FrequencyPull 5 Samples
Test samples extensively
Low Risk
Mitigation planAnnual Audits
Medium Risk
90 day Audit FrequencyPull 10 Samples
Test samples extensively
Low Risk
Mitigation planAnnual Audits
Low Risk
Accept 2nd or 3rd party auditsAccept certifications
Probability of Occurrence UnlikelyFrequent
Cata
stro
phic
Neg
ligib
le
Actions driven based on compliance level or risk factor … overall and/or by category For example, quality mitigation actions might include additional audits, more extensive sampling
and testing procedures, executive meetings and training
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Creating a Risk Based Approach
Put a management system in place as part of the process, not complete but evolving at least
Create the risk model that is right for you
Collect the right data and get it into a centralized system
Generate activities based on the risk levels
Save money and become more effective
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Real Life Example
“The problem is never how to get new, innovative thoughts into your mind, but how to
get the old ones out.”Dee Hock
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04/19/23 www.jadian.com 32
Commitment Model
Start
Hear about it
Understand it
Observe it
Support it
Practice it
Natural Behavior
Building commitment is a process, we must all under go
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International Food Safety Agency Example
Imagine this example… Supply chain is being monitored as defined previously In this example 180K food items, 240K premises, $4 Billion worth of food
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Operational-Sites/Suppliers-Applications
-Programs/Schemes
-Audit Scheduling and Assignments
- Sampling / Test Results
-Certificates-Complaints
Field Audits-Downloadable
assignments, checklists, addendums
-Supports multiple types of handhelds
-Any type of scheme or checklist
-Data synchronization
Supply Chain Mgt-Risk Assessments
- Audit Results- Noncompliances-Corrective Actions
Communication-Web Portal
-Automated Alerts-Online Dashboards-Integrations with External Systems
-Approved Supplier Lists
Knowledge Management
-Reporting / KPIs-Benchmarking
-Training-Consulting
Food Safety System Elements
Assure the integrity of the system - Audit Reviews, Internal Audits and Quality Assurance
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Summary
“If you don’t like change, you’re
going to like irrelevance even
less.” —General Eric Shinseki, Chief of Staff, U. S. Army
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Summary
To create an effective food safety system, limited resources must be optimized
– Risk bases approach– Preventive measures
• Supported with effective management systems
• Investment in the right technologies to make sure the system is transparent and effective