understanding food & drug recalls

Understanding Recalls in the Food and Drug Industry

“A food recall is when a product is

removed from the market or; a correction

is made to the product because it is either

defective or potentially harmful”

Recalls in the Food and Drug Industry

What is a Recall?A food recall includes any corrective action by a company needed to protect

consumers from potentially adverse effects of a contaminated, adulterated, or misbranded product. A recall is a voluntary action, and the recall decision is made by the company management. If the company does not initiate a recall, the government agency responsible for the particular product category may request that the company

do so. Recalls are conducted by industry in cooperation with federal and state agencies.

Purpose of RecallThe basis of the recall concept depends on a company’s food safety policies, ethical understanding, regulatory requirements, and financial constraints. A recall protects not only the consumer, but also the company. A smooth recall process can save a company’s name and prevent further damage due to negative publicity. Destroying, replacing, or altering the product are the three main corrective actions. A recall plan should strive to achieve the following goals:

Protect consumer health

Comply with existing rules and regulations

Minimize the cost of the recall

Regain and improve the company’s reputation

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Recalls ClassificationClass I - There is reasonable probability that eating the food would cause serious, adverse health consequences or death.

Example: Meat contaminated with L. monocytogenes; E. coli O157:H7 in raw beef; allergens such as peanuts or eggs (not listed on the label).

Class II - There is a remote probability of adverse health consequences from eating the food, or if the resulting condition is temporary or medically reversible.

Example: Presence of FD&C Yellow #5 dye in candy; presence of dry milk, a Class II allergen, as an ingredient in sausage without mention of the dry milk on the label.

Class III - There is no probability that eating the food will cause adverse health consequences.

Example: Mislabeling the product. Lower weight products than shown on the package label or improperly labeled processed meat in which added water is not listed on the label as required by federal regulations.





Role of Government AgenciesEven though a recall is a company management decision, a government agency can force the company to recall potentially misleading and/or hazardous product.

Two government agencies, the Food and Drug Administration (FDA) and the U.S. Department of Agriculture Food Safety and Inspection Service (USDA FSIS) share regulatory responsibility for food product recalls. Although all recalls are voluntary, these agencies may ask the company to initiate a recall.

To date, no company has ever refused a request from these agencies to recall a potentially unsafe or hazardous product.

However, if a company refuses to recall a product, the FDA and the USDA FSIS have legal authority to detain the product and to stop operations for good reason if the product constitutes a danger to public health.

The products under the jurisdiction of these two agencies differ. The FDA is responsible for domestic and imported foods. The USDA FSIS is responsible for meat and poultry. As an exception, responsibility for eggs is shared by the FDA and the USDA

On February 24, 2010, FDA launched its Advancing Regulatory Science Initiative (ARS) building on the achievements of existing Agency programs, groundbreaking efforts to transform the way medical products are developed, evaluated, and manufactured.





Recalls - When the Worst Happens

According the Centers for Disease Control (CDC), food-borne illnesses cause about 300,000 hospitalizations and 5,000 deaths every year in the United States [source: CDC]. Common causes are outbreaks of bacteria such as salmonella and E. coli. It seems every time the public starts to regain trust in food handling safety, a new story breaks about another massive food recall.

These outbreaks are not only blows to victims' health, but also the economy. In the United States, the economy losses about $7 billion every year due to these outbreaks [source: Washington Times]. The recall costs, which include getting food off shelves, handling lawsuits, revamping plants and repairing public relations, can be gargantuan for companies. And that's not counting the tainted reputation and loss of sales that can be difficult to monetize.

A salmonella outbreak in 2007 resulted in a 100% recall of Peter Pan peanut butter

In early 2007, consumers heard that they should stop buying and eating the popular Peter Pan brand of peanut butter. Apparently, an outbreak of salmonella had been linked to the product. When they discovered it, the company that made this peanut butter, ConAgra, engaged in a rare and massive 100% recall of the product.

The outbreak caused more than 600 cases of salmonella but luckily, no deaths. ConAgra spent around $78 million on the recalls [source: Nash]. These funds went into not only finding and getting rid of the products, but also notifying customers and implementing a toll-free hotline for consumers to contact the company. On top of shelling out this money, the company missed out on approximately $55 million worth of lost sales (Source:Hughlett). ConAgra then poured another $15 to $20

million into renovating the responsible plant.

The mere word “recall” can send a shudder all the way through a company, from receptionist to the executive team, to the boardroom and shareholders. Recalls are costly and risky and can threaten the existence of a company.





The Tragedy of Foodborne Illness: Much Is PreventableFood safety recalls are not predictable, they can happen at the best of times, or the worst of times. At any given moment, food companies must be able to quickly and effectively recall products that have been deemed unsafe for the market. How a company responds to these situations is critical; failure to handle a recall successfully (either voluntary or mandatory) can have serious economic and legal consequences.

It is becoming critical for food companies to have the proper Recall Management processes in place.

Unfortunately, few food companies today are ready to handle a recall, and are putting their company at risk.

This is not to say that all food companies must have end-to-end food safety ERP or recall management systems. In fact,

there are more food companies running on spreadsheets and manual paper processes than on industry-specific ERP systems. However, as these companies grow, as their business processes become more complex, as top retailers become more demanding, and as food safety protocols like GFSI and SQF keep increasing process standards the need for automation and ERP systems grows.





The 4 Variables of the Food Industry and ERP Functionality Quality Control

Tracking the quality of your products from your growers and suppliers to the receiving dock, through the production process and to shipment is critical to your business. SAP Business One (Food-ERP) lets you easily manage your quality control system with built-in features to help you assign grades, manage testing procedures, set-up auto-hold procedures, block failed lots from shipment, and increase inventory visibility, all vital to optimizing your operations.

Quantity

Any given day, food processors receive directly from farms or commodity processors and are required to adjust production to what is actually received each day, including the quality factors mentioned above. Having a forecasted demand for the week for example.

Expiration

Having inventory tracked not only by LIFO or FIFO, but also by FEFO (First Expired First Out) is critical. This, along with an allocation system as part of order management, is critical to ensure the right product and code dates are going to the right customers. This saves the processor not only in returns, but also reduces the need for selling product below market due to expiration dates.

Cost

Can vary monthly, daily or weekly depending on the ingredient. Commodity costs change daily and having an ERP solution that can manage various costing scenarios, production planning simulation based on cost and variable recipes that allow for substitutions, allow food and beverage manufactures to be nimble and make day to day changes to minimize cost and maintain margins and prices change.





About CeleriTechCeleriTech is a certified SAP Partner. SAP Business One is the world leading business management software for small and medium-sized companies. CeleriTech is focused on delivering integrated business technology solutions tailored to your needs.

Our solutions fit any industry sector and are based on leading edge technology using the best business practices. We have offices in Miami, Venezuela, Colombia and Peru, with local resources able to service and support at a local level in these countries.

We can help you:

Minimize risk of losing customers’ trust by professionally managing a possible recall of a defective batch

Minimize risk of non-compliance with food regulations

Enable effective batch-specific returns processing

Monitor materials planning, sales and distribution, procurement and production




understanding food & drug recalls

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