These systems give companies more control and visibility throughout the manufacturing process while systematically reducing risk across the organization.
But making the commitment—and following through on it—does require investing time and resources into the process.
As a result, many companies just don’t want to make the investment, viewing it as a net cost to the company. But the truth is, not having an FSMS is something that can ultimately prove more costly. Within this context, let’s examine 5 problems that cost more than an FSMS.
According to the U.S. Food and Drug Administration (FDA), the top three causes of food recalls in 2014 were Salmonella, Listeria and E. coli contamination. Over half of all recalls cost companies more than $10 million, with roughly a quarter costing upwards of $30 million. Costs include notifying regulators, supply chain partners and consumers, as well as the retrieval and destruction of contaminated product.
An automated FSMS reduces the risk of recalls by:
- Ensuring compliance with legislative and international standard requirements.
- Allowing you to incorporate risk assessment at every step of the food safety process, providing a closed-loop process that continuously reduces risk.
- Improving supply chain management, helping to prevent food safety issues that come from outside your facility.
2. Regulatory Penalties
A brief look at some of the fines levied over food safety violations in recent years shows that this cost alone easily outweighs any investment in food safety software. One food manufacturer in Texas associated with a high-profile listeria contamination scandal is now on the hook for as much as $850,000 in penalties.
Food safety software helps companies stay on top of the thousands of regulatory requirements that apply to food manufacturers, including:
- Safe Quality Food (SQF) Initiative.
- British Retail Consortium (BRC).
- Hazard Analysis and Critical Control Points (HACCP).
In addition to the recall costs and regulatory penalties associated with food safety incidents, companies must also brace themselves for the impact of litigation from consumers, investors and government agencies.
It’s not uncommon for judgments against negligent companies to reach millions or even tens of millions of dollars, in many cases leading to the company folding altogether. And let’s not forget the very real possibility for jail time in the most severe cases.
4. Loss of Brand Value
Chances are, the average consumer could give you a sizable list of food safety scandals that have occurred in the past. From frozen vegetables to ice cream to peanut butter, many manufacturers can only hope that customers will forget the actual names of the companies involved over time.
One of the most infamous examples is the 1993 E. coli outbreak associated with a major fast food chain, which sickened hundreds and led to several fatalities. The company struggled for years under the bad press, but the disaster was a major turning point in U.S. food safety policy that led to several new regulations.
It’s also worth pointing out that the company was ultimately able to recover, actually becoming a restaurant known for its high food safety standards. While the process took many years, it’s a testament of the power of an FSMS in helping to correct or reverse even the worst brand damage.
5. Hidden Inefficiency
Perhaps the most insidious problem associated with not having an FSMS is the potential for hidden inefficiencies to drive up costs. Consider the following examples:
- Document control: You send an outdated version of a document to a supplier, who then turns around and sends you product you can’t use. In addition to paying for the wasted product, you must order new materials while the production line limps along at partial capacity.
- Employee training: Several employees are overdue for training that incorporates new safety policies, but it often takes months to track people down and get them to complete required courses. During this time, employees make several avoidable mistakes.
- Corrective action: An employee performs a corrective action, but the lack of quantified risk assessment involved means the residual risk is still unacceptably high. You don’t find this out until the problem snowballs into a major food safety crisis.
It’s difficult to quantify the effect of hidden problems on the company. One thing that is clear, however, is that in today’s complex global marketplace, implementing an FSMS is a key strategy for reducing risk while protecting both consumers and company profits. Once you take the first step towards standardizing your processes and aligning them with best practices, the only direction to go is up.