Recent Recalls Provide Insight in Avoiding Future Contaminations

Another way to ensure product quality and safety is to sample and test incoming shipments. Ideally, the sampling and testing should occur before the product is introduced into the manufacturing facility so that if testing reveals a tainted sample, the defective product can be segregated and prevented from contaminating the production lines and finding its way into finished product. If all food processors observed these practices, much of the contaminated PCA product could likely have been prevented from entering the processed food supply chain.

Audit Your Auditors

As mentioned above, hiring a third party auditor to conduct periodic investigations and audits of the supplier’s facility and operations is one option. Even this practice should not be the sole method for ensuring the safety of supplied product, however.

During a March hearing of the House Energy and Commerce Committee’s Subcommittee on Oversight and Investigations, officials from major food processors that had bought product from PCA indicated that they had relied on third party audits, rather than conducting their own independent inspections. In particular, David Mackay, Kellogg’s chief executive officer, told the subcommittee that his company had relied on audits performed by the American Institute of Baking International (AIB), the country’s largest food inspection firm, to confirm the safety of PCA-sourced product. AIB conducted several scheduled inspections of PCA’s facilities and never identified any serious problems; in fact, AIB issued a “certificate of achievement” and gave PCA a “superior” rating last August, at the same time PCA was receiving internal laboratory results indicating the presence of Salmonella in its Blakely, Ga., plant.

By contrast, Nestlé USA, when considering whether to source ingredients from PCA, twice dispatched its own inspectors to inspect the company. On both occasions, Nestlé’s inspectors rejected PCA after identifying sanitary problems at the Georgia and Texas facilities, noting the presence of rodent droppings and insects and the potential for microbial contamination. While both Kellogg and Nestlé took additional steps to ensure the safety of their suppliers’ operations and ingredients, this example demonstrates that inspections conducted by third party auditors may not be sufficient to ensure the safety of supplier facilities.

Test Finished Product

The practices outlined above, if followed, should help to safeguard a food processor from receiving defective product. Implementation of these practices will not protect against the introduction of contaminants during processing, however. In addition to following good manufacturing practices (GMPs) as required by FDA regulations, one of the best ways a food processor can ensure that it will not ship any unsafe product to downstream customers is to randomly sample and test finished product before it leaves the facility. Identifying a potential food safety issue before a product leaves the facility will allow processors greater control in dealing with the issue before compromising the downstream supply chain and creating conditions that could lead to a recall.

Consider Recall Insurance

Many food firms rely on general liability insurance policies and supply agreements in which their suppliers agree to indemnify the firm and cover all costs in the event that they supply defective product or a recall is necessary. Unfortunately, a general liability policy will cover very few, if any, of the costs associated with a food recall, and indemnification clauses in supply agreements are unlikely to be enforceable if the supplier declares bankruptcy, as PCA did.

Given that most food companies operate with a net profit margin of approximately two to five percent, a recall costing hundreds of thousands of dollars could easily force a firm out of business. Accordingly, food processors should investigate whether food recall insurance is a viable option. In many cases, this analysis should not focus on whether a firm can afford to obtain the additional coverage, but rather, whether it can afford not to obtain the coverage.