Three Areas Where You’ll See the Greatest Return on Your FSMA 204 Investment
September 14, 2023
Organizations covered by FDA’s Food Traceability Rule often ask two questions: How much will it cost us to comply with the rule? And: Is it worth the risk to not comply?
The first answer: The costs will vary across organizations but they will be outweighed by the benefits of compliance.
The second answer: No, especially when you consider the risks inherent in being part of the global food supply chain. Consumers get sick, and some die, from foodborne illnesses. If your product is tied to an outbreak, your reputation and revenue may never be the same.
We have identified three areas in which you will likely incur some upfront costs, the amount depending on the size and complexity of your organization, but where you will also see the greatest return on your investment.
- Supply Chain Transparency
- Using Technology to Manage and Reduce Costs
- Forming a Cross-Functional Compliance Team
Supply Chain Transparency
One of the most significant benefits of the FSMA 204 compliance requirements is improved supply chain transparency.
By requiring all foods on the Food Traceability List (FTL) to be assigned a Traceability Lot Code (TLC) at Initial Packing (and again at Transformation, if applicable), our trading partners and FDA can more accurately track the food we eat, and consumers can feel more confident in its safety. The TLC, along with the Key Data Elements that are required to be captured, stored, and maintained for each Critical Tracking Event (CTE) help ensure full supply chain transparency.
The Right Tools to Achieve Full Supply Chain Transparency
Before seeing the benefits, you must set up your organization and supply chain network with the right tools and processes to achieve full supply chain transparency. Compliance with FSMA 204 forces enterprise retailers and foodservice companies with complex supply chain networks to evaluate their processes and fully understand where their products come from.
Once you better understand your supply chain network and the options available for capturing, storing, and sharing Key Data Elements (KDEs), you will need to evaluate your own systems. Process and management of compliance data is usually one of the first big tasks an organization tackles.
Most of the costs and time will come from these external and internal evaluations and the systems required to manage these new processes, but the impact does not have to be prohibitive.
The benefits of stronger supplier relationships and data transparency will be significant. For example, matching your supplier’s shipping data to what you actually received in real-time eliminates the risk of the wrong product sitting in a warehouse for several days before you realize there was a mistake. Those few days could be the difference between a sellable product vs. product that goes to waste because it cannot be used.
Using Technology to Manage and Reduce Costs
The FDA’s Food Traceability Rule does not require organizations to use one specific solution, but you do need to be able to quickly share KDEs with your trading partners.
Options for Capturing, Storing, and Sharing KDEs
A robust software solution may offer the most significant benefits and be almost necessary for enterprise organizations to confidently comply with FSMA 204 requirements, there are also options for smaller organizations that may not have the budget to implement more costly solutions to use what works for them. As long as you can capture, store and share KDEs with your trading partners and ingest their data, network collaboration is achievable and can fit all budget requirements or limitations.
You can do that in any of the following ways:
- Import a flat file with your suppliers’ data into your own system.
- Use ASNs to gather data ahead of a shipment.
- Use an API to exchange data between your system and your suppliers’ systems.
- Implement a cloud-based traceability solution that stores shipping KDEs in the cloud, and talk to your suppliers about doing the same.
There Are Advantages to Using Technology
Using a cloud-based traceability software solution might seem more costly upfront, but once your organization has implemented this new solution, you will have created new efficiencies that can save you time and reduce cost.
Having the right technology to manage product inventory, quality, and traceability processes within your facility will enable you to considerably reduce shrink due to mismanaged inventory, quality issues, and poor tracking of shipping and receiving data.
A recent article by McKinsey concluded that 2-3% of retailers’ revenue disappeared due to shrink, a small but impactful percentage because of razor-thin margins within the grocery business. Many organizations operate on a first-in, first-out basis, meaning that product received first is shipped out first, regardless of expiration or best buy date, quality, or shelf life. With newer technology available, like that offered by iFoodDS, there are ways to manage inventory that will help reduce shrink and food waste. Taking a first expired, first out approach can significantly reduce waste (and shrink) of food no longer edible or eligible to be sold.
Similarly, better management of food quality can reduce shrink, too. Having the right processes and tools to capture quality data can enable you to catch quality issues early on. Ensure your suppliers are sending product that meets your standards so that you don’t have to dispose of or sell food at a discounted price because of deteriorating quality.
Forming a Cross-functional Compliance Team
The new rule affects many roles within an organization, pushing many large organizations to create innovative, cross-functional teams to collaborate on compliance with the rule. To be most effective, a typical FSMA 204 compliance team should include staff from the following disciplines:
- Legal or Regulatory Compliance
- Food Safety
- Supply Chain
- Restaurant or Store Management
- Supplier Management
It is critical to ensure this team is knowledgeable about food safety and compliance. Efficient and well-thought-out decisions will make FSMA 204 compliance less costly overall.
Once you have this team in place, your organization will be set up to tackle other big projects requiring knowledge and skillsets across multiple functions. The time and cost to put this team in place will be far surpassed by the collaborative work this team can accomplish.
Non-Compliance Is Not a Viable Option
There are various actions the government can take if voluntary compliance is not forthcoming. These include civil or criminal actions in Federal court.
In fact, the most important cost consideration may be the cost of non-compliance. The risk of a failed audit, a costly recall, or a deadly outbreak can result in loss of revenue and costly fines, wasted product, a tarnished brand reputation, and more.
The most powerful ROI our industry gets from supply chain transparency is a faster response and resolution to food safety outbreaks, resulting in a healthier consumer community. Using and sharing data within your organization and across your supply chain can provide a level of transparency that enables proactive decision-making and a quick response to food safety issues
The FSMA 204 compliance date is just over 2 years away – we recommend starting now if you have not already. The sooner your organization is compliant, the sooner your risk will be minimized and you will start seeing a return on your investments.
For more information on the costs and benefits associated with traceability compliance, our colleagues at New Era Partners are also focused on this topic:
iFoodDS is here to help. Schedule a consultation to learn more.