Small Food Manufacturers Face Regulatory Challenges on a Budget

Lower cost software solutions are available to help.

Published: Thursday, March 18, 2010 - 09:18

More than 90 percent of all food manufacturers have less than 200 employees. Yet, these small food manufacturers are held to the identical regulatory quality and safety standards as organizations with tens of thousands of employees. Surprisingly it is still not uncommon to find a small baked goods plant with someone taking inventory of bags of flour, nuts, and baking powder using a pencil and clipboard. While their methods may seem antiquated, the reality is that many technology solutions, which were designed to help food companies meet FDA and other regulatory compliance requirements, are over-priced for many small food manufacturers.

And it’s only going to get worse. Electronic traceability will become an industry requirement. On July 31, 2009, the House passed the Food Safety Enhancement Act, which has been touted as the most far reaching reform to food safety legislation in 50 years. The legislation outlines the requirements for all companies who produce, manufacture, process, pack, transport, or hold food to maintain full pedigree of product information and electronic traceability records. On Oct. 5, 2009, 55 food-service manufacturers, distributors, and operators launched the Foodservice GS1 Standards Initiative outlining the adoption of a common timeline for implementation of GS1 global standards for company identification, item identification, and product description.

Together industry initiatives and government regulations are driving the industry to:

• Drive waste out of the foodservice supply chain
• Improve product information for customers
• Establish a foundation for improving food safety and traceability

Electronic record keeping is a central element of the BioTerrorism Act and all food companies regardless of size must comply with regulatory chain of custody conditions. Among other things, in the event of a recall, it mandates that a company be able to provide a complete chain-of-custody of a tainted product within four hours or face fines and penalties. This rules out the use of paper records.

Technology exists to ease the regulatory burden. These solutions include electronic records handling to help streamline the handling of bills of material and work orders, as well as technology such as barcodes and labels for lot traceability and expiration dates. But this technology has typically been out of reach for the small manufacturer.

Bill of material

Everyone is familiar with the bill of material (BOM). It’s a list of the raw materials, sub-assemblies, intermediate assemblies, subcomponents, components, parts, and the quantities of each needed to manufacture the final product. It may be used for communication between manufacturing partners or confined to a single manufacturing plant.

A BOM can define products as they are designed (an engineering bill of materials), as they are ordered (a sales bill of materials), as they are built (a manufacturing bill of materials), or as they are maintained (a service bill of materials). The different types of BOMs depend on the business need and use for which they are intended.

An electronic BOM provides greater control over production costs. The ease in creating and editing an electronic BOM helps in maintaining product consistency and understanding product yield—the actual vs. expected product output.

In process industries, such as food manufacturing, the BOM is also known as the formula, recipe, or ingredients lists. Using BOMs ensures recipes are adhered to during production. In addition to the ingredients and yields, the BOM has production instructions and routing steps, including one that can be called quality control. You wouldn’t believe how many small companies keep their formulas and production notes on paper in a file cabinet (or in the owner’s head). Paper, or even basic Excel spreadsheet systems don’t allow companies to easily update and instantly communicate changes throughout the entire organization.

“Small food manufacturers need vital inventory and order management features to effectively track inventory quantities, production, and customer orders,” says Ian Benoliel, president and CEO of NumberCruncher. “From bill of materials for recipes to tracking expiration dates, these firms have the same compliance and operational requirements as larger companies. They need much, but not all, of the functional technology solutions [that are available to larger companies].” Too often this type of BOM functionality is found in costly software and hardware solutions.

Work orders

Paper work orders do not allow production data to be shared throughout a central database. Quality processes cannot be effectively documented and saved to create standard operating procedures critical to consistent food production. The ability to save and attach the batch and lot number being manufactured ensures quality processes.

The electronic work order is used to create finished product. Each step in the work order is completed before the work order can be finalized. Too often lower-cost technology solutions lack the needed custom fields required per work order that allow the quality control checklist to be integrated with all other functions, and retained in the same database as order and inventory information.

“Without the work order, the impact on quality will be significant, because the internal quality metrics cannot be documented,” Benoliel insists. “The work order is the internal document that manages production of a specific BOM for a specified quantity. The work order can track yields of raw materials and reworks.”

Barcodes

Just as they use clipboards to keep track of inventory levels, many small food manufacturers use a grease board, dry erase board, or a spiral notebook to track orders from suppliers, inventory, location transfers, customer orders, shipping information, work order picking, and inventory counts and adjustments. All of these can be done via mobile barcode scanning, but until now, many small food manufacturers have found this critical technology inaccessible because they were priced out of these solutions.

Using barcodes for ingredients ensures that the correct ingredients are picked and overall production efficiency increases. The level of efficiency and reduction of errors decreases by an average of 10 percent, according to Benoliel.

Lots and expiry

Expired or soon-to-be-expired raw material can be identified and made unavailable for use with many systems. The ability to track the lot and expiry for both finished goods and raw materials is essential, and lots must have customizable fields that can be used to characterize a specific lot (for consistency, acid level, and other metrics). “Having this information on the lot level can vastly improve quality,” says Benoliel. “For example, knowing the consistency specific lot may require production to add more or less water to the batch.”

Fortunately, software companies noticed the growing niche market and have developed leaner, lower cost tools designed for the small food manufacturer. They may not have all the bells and whistles, but they meet the most critical needs of those companies. One company, NumberCruncher, is one of the few low-cost inventory control solution providers that interface with Quickbooks, a common accounting program used by many small businesses.

NumberCruncher’s solution, All Orders, allows small food manufacturers to meet buyer and industry compliance requirements quickly and cost-effectively while providing retail and foodservice customers with controlled access to distribution, quality, and food safety information, when and where they need it. The result is the ability to improve operations with direct quality feedback from customers.

The BioTerrorism Act, the Hazard Analysis Critical Control Points (HACCP) plan, the ISO 22000 international standard, and a new roster of FDA regulatory compliance laws will squeeze the quality dollars out of every small food manufacturer. While there are no panaceas, even low end technology solutions allow small food manufacturers to generate the necessary reports required by these regulations and reduce recall losses by more than 95 percent. Grease board and clip boards as a method for accurate inventory control can be discarded in favor of cost-effective electronic technology solutions.

About The Author

Thomas R. Cutler

Thomas R. Cutler is the President and CEO of Fort Lauderdale, Florida-based, TR Cutler Inc., celebrating its 21st year. Cutler is the founder of the Manufacturing Media Consortium including more than 8000 journalists, editors, and economists writing about trends in manufacturing, industry, material handling, and process improvement. Cutler authors more than 1,000 feature articles annually regarding the manufacturing sector. More than 4,500 industry leaders follow Cutler on Twitter daily at @ThomasRCutler. Contact Cutler at trcutler@trcutlerinc.com.