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Even if you admire horses and the idea of eating their meat is upsetting to you, it is certain that in a past life, at least in Europe, you have eaten a cooked plate that was partially horse meat.  The worst part of the recent Horsegate scandal is that Europeans may still have some on their shelves, especially canned food which can have 2 year longevity.

If you are not familiar with it, the Horsegate scandal began in January 2013 when horse DNA was found in foods that were labeled as beef in the meat coming from a frozen product company. Later, a speaker from the NVWA (the Dutch FDA) announced that a Netherlands trading company could have provided 50,000 tons of blended horse meat and beef labeled as beef between 2011 and 2013.1

But the real scandal for the European consumer is not purely a health problem. The scandal is that 13 years after the mad cow outbreak, we still do not know what we are eating.

WTO guidelines and modern telecommunication have allowed trading companies to operate their businesses across borders, which is beneficial when some meat is more valuable in some countries than others.  So the transportation of meat has expanded. Fifty years ago, people consumed meat from their local area. This is less and less true anymore.  The food on your dinner plate may come from another part of the world. This was the case in Horsegate where 7 companies were connected to the Romanian slaughter house where the horse meat originated and was sent to the Irish distributor including a French wholesaler, a Cyprus trader, and a Netherlands trader.

Between the February 7th when the British FSA discovered horse meat inside frozen lasagna and the February 28th, there was real panic.  Big names and great brands needed to withdraw huge quantities of product from their shelves.2 

But the most critical impact was the negative advertising.

The market for beef cooked frozen plates fell by 45%.  And the impact on the quality image of these companies will last long and may affect their growth. The biggest impact was for the company selling frozen food.  Just weeks before the scandal, they were still speaking on the radio about their focus on quality transparency.

What is also notable is the difference between the different companies’ withdrawal announcements.  Some announced the withdrawal of one or two batches of a product code, some a withdrawal by shelf life expiration date, and others only by product code.  This shows that all parties in the value chain were not able to access the same level of detail depending on the quality of their information system. And indeed companies that had a more precise system could withdraw their product without being obliged to go public as their research was narrowed.  Still the research was long and stressful.

Twenty-three years ago, Perrier had to withdraw all their water because Benzene was found in 13 bottles.  They had to destroy 280 million bottles of water worldwide, just because of a filter error at the source.3

Two years later, they were acquired by Nestle.

For companies to quickly respond in these situations, the best solution is a global batch traceability system which includes three major functions:

The base for this functionality is the ability to identify batches with quality checks embedded to facilitate research, and to have a quality measurement valid for all batches.

The second is the ability to follow the path of a batch that is in question. You can research all locations through which the batch was transferred, identify the origin of the problem by top down research, and then from that origin, retrieve the genealogy from a bottom up report giving you all stock positions and delivery places.

The third is to have a link with the external world to broaden the genealogy but also to alert you to a broken link in the supply chain, for example where you were to receive one product and in fact you received another one.  This is exactly what happened during Horsegate: products were unknowingly substituted.

A global batch traceability system enabling this functionality would have stopped the Horsegate problem at the start by sending a broken link alert to those who are connected to the process.  Also, if an alert is received late and product has already been dispatched, then the receiving companies can be informed and the product quickly retrieved from all locations that received the substituted goods. 

In the case of any sanitary crisis, the cost of a batch recall can be minimized by acting quickly.  And that can reduce the damage to a company’s image as the faster you act, the more likely you are to retrieve the product before it reaches the final consumer. And avoiding any damage to the company’s quality image can sometimes mean the survival of the company. Like a good sprinkler system protects you against the destruction of a fire, a good batch traceability system protects you against the image destruction of a sanitary crisis.

But even if you implement a batch traceability system, consumers will not have any confidence if your competitors do not follow same rules.  Even if your product and brand name are safe, you still might be penalized for the problems caused by other companies in your industry.  Experience shows it will take one year to recover volumes that are cut by 30 to 50% due to a sanitary crisis.

You may remember that in 1906, Theodore Roosevelt, after reading a report on the Chicago slaughterhouses, threw away the sausage he was eating and later created the FDA.  For Europe, we can wish the same:  that our European leaders will launch a standard to make batch, quality and global traceability a compulsory interconnection between organizations all across Europe, allowing the consumer to regain confidence in the food they eat.

Frank Marguier has 15 years of experience in the distribution and food industry.  He was involved in the early projects of meat transformers and traders running SAP.

Sources:

1 Express, 10th of April 2013

2 “Viande de cheval: la liste des produits incriminés”, 60 Millions de consommateurs, 2nd of April, 2013

    (http://www.60millions-mag.com/actualites/articles/viande_de_cheval_nbsp_la_liste_des_produits_incrimines)

3 “Perrier (eau minérale)”, Wikipedia  (http://fr.wikipedia.org/wiki/Perrier_(eau_min%C3%A9rale))

Other sources:

–   Le Parisien, 14th of February 2013

–   les echos.fr, 6th of March 2013

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6 Comments

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  1. John Morse

    A well written and insightful article many thanks.

    The points made here really sell the idea that branch tracking is critical in modern business regardless of scale.

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  2. K S

    Hi!

    powerful insight. And arent we using the back track system in automobile industries so efficiently? then why miss out on food? (unless of-course source of raw food is domestic or local)

    Thankyou tons,

    khushboo

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  3. Mike Wise

    This is a real wake up call.  This example shows our distributors just how important lot tracing is.  Whether it is food and beverage to ensure the quality of the food, or in this case, the right kind of food, or in High Tech where parts can fail and the distributor needs to find what items the failing part is in and recover the inventory. Lot tracing is a foundational capability for today’s distributor

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  4. Jürgen L

    I am not worried about having eaten horse flesh, I am actually more concerned about what the animals had eaten, especially if the the flesh comes from factory farming.

    Buying the flesh from the butcher in your town who gets the animals from the small farmers around is probably more save than any computerized globalized tracking system.

    I am sure that the farmers have not sold their horses as cattle.

    Keeping the supply chain short will reduce the entry points for the cheaters.

    All these extra subsidiaries, subcontractors and bogus companies are too often just used to relief a manager and the company from being accountable.

    Maybe  branch tracking could make it a little more transparent, maybe it makes the goods just so expensive that the butcher around the corner becomes real competitive again

    Only the thoughts of a farmers son who is seeing earmarks bigger than the calves ears when going into the barn nowadays. 😉

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  5. Paul Pretko

    This blog is very thought provoking. We don’t often consider SAP EHSM solutions as relevant in wholesale distribution. However, SAP Global Batch Traceability (A component of SAP EHSM) would allow distributors to completely trace tracked objects, for example, a batch, across both SAP systems and non-SAP systems. In the event of a recall or withdrawal, the solution ensures the timely compliance with legal reporting timelines. Furthermore, it helps you to minimize cost and corporate risk exposure.

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  6. Werner Baumbach

    Great blog Frank. I think your points are spot on.

    What has surprised me so far is how little “real” uproar there has been in the public. This is not the first food scandal (and most likely won’t be the last one) and whether it is frozen Lasagne, beef, poultry or fish – public concern seems to be only short-lived so far. And this is the part where something obviously went wrong. The “normal” process of using medication, addidatives and various other chemicals in food production is not even mentioned on the news normally. Initiatives to force food companies to label their products more comprehensively have so far been blocked successfully by lobby work. It seems that companies still benefit more from hiding information about their food (and spend money for marketing) than to jump on the waggon of real quality food. I think the market may have been relatively small so far, but with each scandal the number of folks that won’t just go back to business-as-usual will grow. And therefore, companies that implement some of the processes you mention may take the edge – for the better of all of us.

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