The city of Philadelphia is eerily quiet this morning. On the door of my favorite coffee shop is a “Closed” sign. There is no traffic on the streets. Only armed guards with dogs stand on the corners, strategically posted behind 8-foot barricades. Why? The City of Brotherly Love is preparing to welcome the Pope.
I live in Center City, Philadelphia. Today, the word security has a different meaning. Unfortunately, we live in a world where the need for security for a Papal visit turns a city upside down.
I love the energy, caring, and humility of Pope Francis, and I look forward to being one of the two million spectators lining the streets; but, the level of security in this city this weekend is an unprecedented experience. It is like living in a demilitarized zone. The number of guns make me uncomfortable. For me, it is irony at its finest. The pope comes in peace; but to prepare, we are in a high-security lockdown mode.
Rethinking Safe and Secure
As my yogurt maker whirls in the background, I am thinking differently about safe and secure. Ethics, and the new meaning of responsible behavior, permeates my thoughts. The headlines today are rich–General Motors and Volkswagen– with stories.
Today, I say a prayer for Stewart Parnell, the former CEO of the now-defunct Peanut Corporation of America (PCA). Sentenced to twenty-eight years in prison, I am sitting at my desk watching Stewart say that he was “sorry” on public television. This confession comes seven years after selling contaminated food. The food recall is the largest in U.S. history. In 2008-2009, nine died and hundreds became ill. The sentence is groundbreaking. Never before has a corporate executive been convicted of federal felony charges in a food safety violation.
Was it profits before safety? This is the discussion in the news. PCA lost their case in the court of public opinion in 2008, but the federal conviction is seven years later. While Stewart’s lawyers argue that the former CEO is not a bad man, and that he did not intend to kill customers, the jury ruled. Parnell, is now charged and convicted for selling adulterated and misbranded food into interstate commerce with the intent to defraud or mislead. He will spend the rest of his life in jail. The rules have changed. We are watching the redefinition of the principles of safe and secure supply chains and corporate liability.
What happened? Why did it take seven years to sentence? The investigation into the activity at PCA began in 2009, after the U.S. Food and Drug Administration and the U.S. Centers for Disease Control and Prevention traced a national outbreak of salmonella to a PCA plant in Blakely, GA. The magnitude of the case resulted in Congressional investigation. A poignant moment, that many will never forget, is when U.S. Rep. Greg Walden showed a container full of grocery products containing contaminated PCA peanut butter and asked Stewart to eat his own product. When he refused, the news sensationalized the fact that Parnell declined to eat his own product.
Learning from History
PCA was a small player in a complex supply chain of big brands. Founded in 1977 and headquartered in Lynchburg, Virginia, this is a story of a small company (90 employees and $25 million in sales). In 2008 the company manufactured 2.5% of the nation’s processed peanuts. PCA’s customers were larger food manufacturers. As a result, when the problem surfaced it was vast. The issue spanned across the value chain and impacted over 300 companies and 3,900 products. Recalling the products was messy due to the lack of multi-tier track-and-trace capabilities, and the growing dependencies on co-packer relationships.
Surprised when it happened, the downstream food processors (trusted consumer brand owners) were not prepared. PCA was a certified supplier based on an accepted industry certification methodology by AIB International. It was not adequate. This accepted certification failed to pick up a decade of PCA quality issues: holds, recall, and customer complaints. The manufacturers sourced the peanut butter primarily on cost. Seven years later, nine are dead and two PCA executives are in prison. Should the story stop there? I don’t think so. I think that we should pray today for all of the leaders of food supply chains in food and pharmaceutical companies. They are at risk of a similar fate.
Unfortunately, not much has changed in the industry. The ability to track and trace food in the industry is about the same. In the pharmaceutical industry, while mandated serialization is now the norm, it is compliance for the sake of compliance. Is this a ticking time bomb? A smoking gun? Yes, I think so. As we watch Parnell say goodbye to his family, I think that we should ask ourselves five tough questions:
- Serialization, and Tracking the Unit of One. Why Are We Not Making More Progress? Traditional supply chain practices track cases and pallets: not the “each.” Embracing and tracking the “unit of one” requires a redesign. Recently I coordinated an industry panel on serialization and tracking. In preparation for the panel, the executives, in private interviews, said they would state on the panel that they were supporting the adoptions of standards, but I needed to know that within the corporation there was resistance. Concerns of the impact on operating margin resulted in delays. In essence, their companies would mobilize only when mandated. I shook my head. It was clear. They were dragging their heels. Despite an operating margin of 25%, the company was only giving the serialization work and standards adoption lip service. I thought back to the evolution of the EPC codes and bar codes in the consumer goods industry two decades ago, and I remember the work of Danny Wegman of Wegman’s Supermarkets, Sandy Douglas of Coca-Cola and Tim Smucker of The J.M. Smucker Corporation. Each were leaders, both at their companies and within the industry. They drove the adoption of standards. When it comes to safe and secure supply chains, we need more industry leadership. Moving forward, it cannot be about standards for the sake of compliance. Next steps? I would put Stewart Parnell’s picture on the desks of all food, pharmaceutical, and retail leaders. I would ask them to say a prayer for an ethical, edible supply chain and push for action. We need leaders.
- B2B Visibility Is Inadequate. Why Are We Not Investing in Cross-Company Lot Code Tracking? We have automated the enterprise, not the value network. Connected by spreadsheets and email, the value network is fragile. In a briefing last month with SupplyOn (a value network in the automotive industry), I saw progress on the tracking of serial codes and quality information in the automotive industry. While TraceLink is assisting enterprises in pharmaceuticals to track serialization, and Savi Technology provides sensing capabilities in cold chains, the building of end-to-end value network tracking in food and pharmaceutical supply chains is an opportunity. What to do? Push value network providers like Elemica, E2open, GHX, GT Nexus, IBM, NeoGrid, OpenText (GXS), SAP and TraceLink to step up to the plate. We need to build a network of networks with interoperability of quality and lot code information to track and trace the unit of one. The industry has a long way to go.
- A Change in Incentives? The industry operates in traditional buy/sell relationships. This is a barrier. When I do workshops on driving data sharing across the industry, the sales group of the seller of products often calls me aside for a one-on-one talk. A focus on outside-in threatens current incentives. The salesperson is uncomfortable. Today, payment occurs on shipment receipt. There is no focus on payment based on outcomes or purchase at the point of consumption. If incentive redesign focused on consumption there would be more data sharing and ownership of the product through the channel. An example is the work on Performance Based Logistics (PBL). The A&D industries, through PBL, restructured incentives to move from selling aircraft to a focus on up-time and reliability. This improved the ability of the value chain leaders to work together against a clear standard. In the redefinition of healthcare and food safety, I think there is a need to have a focused industry objective tied to incentives: To tie payment to safe consumption and outcomes. Next Steps? Aggressively rethink payment structures between buyers and sellers, and look for opportunities to incent and align behavior to drive outcomes.
- Supplier Sensing. An Opportunity? The active monitoring of first- and second-tier suppliers is an opportunity. PCA is a clear lesson that certifications and audits are not effective. Instead, it take active sensing, tracking, and pattern recognition of shipping, chain of custody, and quality information. Only 21% of food and pharmaceutical companies are actively investing in the world of sensing, unstructured text mining, and analytics of quality and food integrity to thwart issues before they happen.
- Why Are We Not More Aggressively Investing in Social Sentiment Sensing? Last week I wrote on Anthony Volpe’s work at Lenovo to mine social sentiment and to sense quality based on user sentiment. Social text mining can help companies to sense an issue quickly, and take action. If a company builds a listening post to understand social and unstructured web data, the sensing of a customer issue is 6-8 weeks earlier than if the company relies on learning of an issue based on customer complaints. This allows the company to listen and sense based on questions that they do not know to ask. Let me explain why this is important through an example. When Kellogg had smelly packaging liners in their cartons of cereal in recalls of 2010, it would not have been a normal question for search. No one within Kellogg would have been actively looking for smelly liners. However, in social sentiment mining, companies can answer the questions that they do not know to ask. What to do? Build listening posts and establish cross-functional teams to listen to, and take action on, the voice of the customer cross-functionally. Reduce the latency to sense and resolve issues. It enables corporate listening to hear the issues that you do not know are happening.
Delivering on the promise of the safe and secure supply chain requires a shift in leadership. It cannot be compliance for the sake of compliance. The goal? The need is a focus on outcomes supported by inter-enterprise tracking. The industry has a long way to go. For all, it is a smoking gun. I hope that you feel as uncomfortable as I do watching Parnell go to prison on national TV.
Like the barrel of the gun that I see across the street protecting Pope Francis in Center City, Philadelphia, I think it is time for all manufacturing companies to rethink safe and secure. The answer is the redesign of the supply chain to protect the consumer. I think there is a need for prayer for the consumers who place their trust in our brands, and a need for a prayer for those who manage their supply chains.
What do you think? Where do you think we are on the ability to deliver on the promise of safe and secure supply chains? Raise your voice and make a difference.
Build a Guiding Coalition. Network with Others
Safe and secure, and the redesign of the supply chain to protect the consumer, is a part of the 2016 Supply Chain Insights Global Summit focused on Imaging Supply Chain 2025. Check out the Supply Chain Insights Global Summit site. The presentations, videos and pictures are now posted. Mark your calendar to join us next year. The 2016 event will be held on September 7th-9th, 2016 at the Phoenician in Scottsdale, AZ.
About the Author:
Lora Cecere is the Founder of Supply Chain Insights. She is trying to redefine the industry analyst model to make it friendlier and more useful for supply chain leaders. Lora wrote the books Supply Chain Metrics That Matter and Bricks Matter, and is currently working on her third book, Leadership Matters. As a frequent contributor of supply chain content to the industry, Lora writes by-line monthly columns for SCM Quarterly, Consumer Goods Technology, Supply Chain Movement and Supply Chain Brain. She also actively blogs on her Supply Chain Insights website, for Linkedin, and for Forbes. When not writing or running her company, Lora is training for a triathlon, taking classes for her DBA degree in research at Temple or knitting and quilting for her new granddaughter. In between writing and training, Lora is actively doing tendu (s) and Dégagé (s) to dome her feet for pointe work at the ballet barre. She thinks that we are never too old to learn or to push an organization harder to improve performance.