What Food Organizations Need to Know Before Outsourcing

With product innovation and development moving at a more rapid pace than we have ever seen in the industry, outsourcing services together with processing and packing has become an excellent option for many divisions in a food organization.

There are many motives for an organization to outsource activities, including:

• Accelerating the innovation cycle;
• Freeing internal resources for other project work, or utilizing the expertise needed for a specific task;
• Accessing technology, including process methods such as high pressure processing and different formats of packaging;
• Increasing production or personnel capacity;
• Accessing a geographic advantage gained from a strategic partner to open availability to a market or manage regulatory restrictions that can be imposed by import/export;
• Testing innovation for market success before investing in infrastructure; and
• Avoiding the investment in a manufacturing facility or contracting manufacturing to fully focus on brand development.

To be specific, outsourcing is the contracting of any service or process step, including packing, undertaken by another company. This requires a great deal of trust to be established and maintained in the outsourced partnership, especially when food safety and quality are essential. Success has been found in outsourcing all or parts of manufacturing, packing, product development, labeling, regulatory reviews, auditing, testing, and product evaluation. Outsourcing needs to be treated as an extension of your brand and your company.

When considering a partnership:

• Look for companies with compatible goals;
• Look for partners with special expertise or skill sets that you may not possess;
• Identify the best solutions for your need before cost considerations; and
• Check references! A great outsourcing partner will have clients willing to share their experience.

Developing a Positive Partnership

Food safety and quality elements are well established in the requirements for the Global Food Safety Initiative (GFSI) benchmarked standards. Specifically reviewing the British Retail Consortium (BRC) and Safe Quality Food (SQF) standards, the following trends can be identified in regards to outsourcing.

Legal. Ask the tough questions when drafting a contract such as: Who is responsible when a recall takes place? Who owns the formulation? Can substitutions of equipment or materials be made? Identify who is accountable for outlining the requirements for food safety and product requirements, including the product, ingredient, or packaging specification, and any relevant safety, quality, regulatory, or authenticity requirements. Has this contract been developed with the use of expertise in this field? Ensure changes to contractual agreements are approved by both parties, agreed with customers where necessary, and communicated to relevant personnel.

Risk. It is important to understand risk by having a defined set of food safety criteria with which to benchmark potential partners. Understanding that food safety management is a continuous journey, it is expected that the benchmark be reviewed and improved regularly. Is this benchmark certification to a GFSI standard? Are outsourced process steps/packing included in process flow diagram? Are the food safety risks fully managed?

Communication process. As a starting point, over communicate. Be reliable. Set and communicate expectations. Review results. Spend time to understand the strengths and limitations of each party. Internally, consider carefully who needs to be involved in setting up and managing the outsourced partnership. Share the expectations developed in the contract. Communication tools could include the contract, clear specifications, a regular meeting to review performance, and future needs and expectations.

Audit. For an ongoing partnership, audit at least annually by visiting the contract manufacturer to confirm its compliance with food safety and quality requirements. A regularly scheduled audit will also make you aware of any changes to the outsourced process, as well as to any new developments, innovations, and challenges the outsourced partner is managing. This may also be an opportunity to review plans for how the partner intends to manage any disruptions in its operation as these can affect its ability to supply. Current SQF guidance notes that in situations where the auditor feels there is product risk from the contracted facility, the auditor may require a visit to that facility to confirm compliance to the SQF standards and the agreed arrangements.