COVID-19 and Food Fraud Risk

COVID-19 and Food Fraud Risk

By Karen Everstine, Ph.D.

While foodborne transmission of the novel coronavirus is unlikely , the virus has significantly affected all aspects of food production, food manufacturing, retail sales, and foodservice. The food and agriculture sector has been designated as a “critical infrastructure,” meaning that everyone from farm workers to pest control companies to grocery store employees has been deemed essential during this public health crisis.^* As a society, we need the food and agriculture sector to continue to operate during a time when severe illnesses, stay-at-home orders and widespread economic impacts are occurring. Reports of fraudulent COVID-19 test kits and healthcare scams reinforce that “crime tends to survive and prosper in a crisis.” What does all of this mean for food integrity? Let’s look at some of the major effects on food systems and what they can tell us about the risk of food fraud.

Supply chains have seen major disruptions. Primary food production has generally continued, but there have been challenges within the food supply chain that have led to empty store shelves. Recent reports have noted shortages of people to harvest crops, multiple large meat processing facilities shut down due to COVID-19 cases, and recommendations for employee distancing measures that reduce processing rates. One large U.S. meat processor warned of the need to depopulate millions of animals and stated “the food supply chain is breaking.” (An Executive Order was subsequently issued to keep meat processing plants open).

Equally concerning are reports of supply disruptions in commodities coming out of major producing regions. Rice exports out of India have been delayed or stopped due to labor shortages and lockdown measures. Vietnam, which had halted rice exports entirely in March, has now agreed to resume exports that are capped at much lower levels than last year. Other countries have enacted similar protectionist measures. One group has predicted possible food riots in countries like India, South Africa and Brazil that may experience major food disruption coupled with high population density and poverty.

Supply chain complexity, transparency and strong and established supplier relationships are key aspects to consider as part of a food fraud prevention program. Safety or authenticity problems in one ingredient shipment can have a huge effect on the market if they are not identified before products get to retail (see Figure 1). Widespread supply chain disruptions, and the inevitable supplier adjustments that will need to be made by producers, increase the overall risk of fraud.

Figure 1. Reconstructed supply chain based on recall data following the identification of Sudan I in the chili powder supply chain in 2005. Data source: Food Standards Agency of the U.K. National Archives and The Guardian. Figure from: Everstine, K. Supply Chain Complexity and Economically Motivated Adulteration. In: Food Protection and Security – Preventing and Mitigating Contamination during Food Processing and Production. Shaun Kennedy (Ed.) Woodhead Publishing: 26th October 2016. Available at: https://www.elsevier.com/books/food-protection-and-security/kennedy/978-1-78242-251-8

Regulatory oversight and audit programs have been modified. The combination of the public health risk that COVID-19 presents with the fact that food and agriculture system workers have been deemed “critical” has led to adjustments on the part of government and regulatory agencies (and private food safety programs) with respect to inspections, labeling requirements, audits, and other routine activities. The FDA has taken measures including providing flexibility in labeling for certain menus and food products, temporarily conducting remote inspections of food importers, and generally limiting domestic inspections to those that are most critical. USDA FSIS has also indicated they are “exercising enforcement discretion” to provide labeling flexibilities. The Canadian Food Inspection Agency (CFIA) announced they are prioritizing certain regulatory activities and temporarily suspending those activities determined to be “low risk.” GFSI has also taken measures to allow Certification Program Owners to provide certificate extensions due to the inability to conduct in-person audits.

While these organizations have assured stakeholders and the public that food safety is of primary importance, the level of direct regulatory and auditing oversight has been reduced to reduce the risk of virus transmission during in-person activities. Strong auditing programs with an anti-fraud component are an important aspect of food fraud prevention. Adjustments to regulatory and auditing oversight, as necessary as they may be, increase the risk of fraud in the food system.

There is a focus on safety and sustainability of foods. The food industry and regulatory agencies are understandably focused on basic food safety and food sustainability and less focused on non-critical issues such as quality and labeling. However, there is a general sense among some in industry that the risk of food fraud is heightened right now. Many of the effects on the industry due to COVID-19 are factors that are known to increase fraud risk: Supply chain disruptions, changes in commodity prices, supplier relationships (which may need to be changed in response to shortages), and a lack of strong auditing and oversight. However, as of yet, we have not seen a sharp increase in public reports of food fraud.

This may be due to the fact that we are still in the relatively early stages of the supply chain disruptions. India reported recently that the Food Safety Department of Kerala seized thousands of kilograms of “stale” and “toxic” fish and shrimp illegally brought in to replace supply shortages resulting from the halt in fishing that occurred due to lockdown measures.

High-value products may be particularly at risk. Certain high-value products, such as botanical ingredients used in foods and dietary supplements, may be especially at risk due to supply chain disruptions. Historical data indicate that high-value products such as extra virgin olive oil, honey, spices, and liquors, are perpetual targets for fraudulent activity. Turmeric, which we have discussed previously, was particularly cited as being at high risk for fraud due to “‘exploding’ demand ‘amidst supply chain disruptions.’”

How can we ensure food sufficiency, safety, and integrity? FAO has recommended that food banks be mobilized, the health of workers in the food and agriculture sector be prioritized, that governments support small food producers, and that trade and tax policies keep global food trade open. They go on to say, “by keeping the gears of the supply chains moving and actively seeking international cooperation to keep trade open, countries can prevent food shortages and protect the most vulnerable populations.” FAO and WHO also published interim guidance for national food safety control systems, which noted the increased risk of food fraud. They stated “during this pandemic, competent authorities should investigate reported incidences involving food fraud and work closely with food businesses to assess the vulnerability of supply chains…”.

From a food industry perspective, some important considerations include whether businesses have multiple approved suppliers for essential ingredients and the availability of commodities that may affect your upstream suppliers. The Acheson Group recommends increasing supply chain surveillance during this time. The Food Chemicals Codex group recommends testing early and testing often and maintaining clear and accurate communication along the supply chain.¹ The nonprofit American Botanical Council, in a memo from its Botanical Adulterants Prevention Program, stated “responsible buyers, even those with relatively robust quality control programs, may need to double- or even triple-down on QC measures that deal with ingredient identity and authenticity.”

Measures to ensure the sufficiency, sustainability, safety and integrity of foods are more closely linked than ever before. In this time when sufficiency is critical, it is important to avoid preventable food recalls due to authenticity concerns. We also need to stay alert for situations where illegal and possibly hazardous food products enter the market due to shortages created by secondary effects of the virus. The best practices industry uses to reduce the risk of food fraud are now important for also ensuring the sufficiency, sustainability and safety of the global food supply.

Reference

Food Safety Tech. (April 24, 2020). “COVID-19 in the Food Industry: Mitigating and Preparing for Supply Chain Disruptions “. On-Demand Webinar. Registration page retrieved from https://register.gotowebinar.com/recording/1172058910950755596

*Foodborne transmission is, according to the Food Standards Agency in the U.K., “unlikely” and, according to the U.S. FDA, “currently there is no evidence of food or food packaging being associated with transmission of COVID-19.”

April 30, 2020

How Are Companies Impacted by Labor Shortages?

By Brian Sharp

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Food and beverage manufacturers are seeing the effects of the coronavirus when it spreads through their workforce. Recently, there have been multiple closures of facilities operated by meat processors, including Smithfield Foods and Tyson Foods as COVID-19 has infected hundreds of workers.

The backdrop of stressful operations and work: Employees now face increased questions before entering plants and feelings of isolation as lunches and breaks are now solo activities due to social distancing. All of these stressors are compounded when you think about what we’re asking them to do: Go into work and keep food on the grocery store shelves. This is a completely new way to operate, and it has a very real emotional effect on our workers.

We’ve received reports from customers where management is getting out of the back office and putting on hairnets to work the production line. The shortage of workers is a very real problem, and our customers are rising to the challenge. Plus, managing this overall labor shortage while doing more safety and sanitation checks than ever before to make sure transmission risks are eliminated is putting stress on everyone working in plants. It’s never been harder to work in the food industry.

In response to California Governor Gavin Newsom’s actions related to the pandemic, we stand behind any effort that is taken to accommodate the needs of these vital, valuable workers, including the executive order to provide supplemental paid sick leave. Such actions, both locally here in California and at the federal level, are critical to elevating the safety of our food manufacturing and distribution workers. Some heroes wear hairnets.

Temp Workers and Lack of Training Protocols

COVID-19 has had a significant impact on the availability of skilled workers in food facilities. Through all the layoffs stemming from the economic standstill, food manufacturers and grocery workers are reporting increases in hiring to help keep up with demand—and to mitigate the effects of sick employees going on quarantine for two weeks. For instance, Albertson’s, a large food grocery chain store, reported that it was hiring for 2,000 positions.

But hiring temporary workers is only half the battle. The task of training people who may have never worked in grocery or food manufacturing has become more critical in the face of new demands on sanitation and social distancing. With these measures in place, it’s no longer a case of a new employee showing up for work and shadowing another employee or supervisor. Technology can close the gap, especially in food production where the regulations and safety standards require strict adherence to processes. For example, software can facilitate shorter employee training in the areas of quality policies and good documentation practices.

Same Volume with Fewer Workers

We are working closely with customers and partners to cope with new guidelines for social distancing inside food facilities, providing the capability to do remote audits as visitor restrictions have increased. Our software is also being used to screen food manufacturing workers for symptoms of COVID-19 before shift work starts to help prevent the spread of the coronavirus to other essential workers.

In response to increased needs from customers, we have developed three solutions to address the impact of COVID-19. These solutions, which include a personnel screener, changeover manager and remote supplier auditor, can help food and beverage manufacturers efficiently manage physical distancing measures, symptom screening, and travel restrictions.

It can’t be stressed enough: The people who carry out food safety protocols are doing more checks and using more labor time to conform to regulations and guidelines for COVID-19. And, adhering to the systems, regulations and processes used to promote safe, high-quality products (in the same or even higher volumes) remains as crucial as ever. Simplifying these processes by leveraging software has been shown to cut 8 to12 hours of labor per day for a single facility. This is critical at a time when even one person being sick can cause lower throughput.

Plus, this isn’t like manufacturing a car where a line will be built to produce hundreds of thousands of cars over a two- to three-year period. Food manufacturers must often change a line over to produce a different flavor, package type or food type altogether, in as little time as possible to keep production going. Robots and automation can help, but in a crisis like this where immediate productivity gains are needed, software can make the much-needed difference.

April 29, 2020

Marzipan Or Persipan, That’s the Question

By Susanne Kuehne

Food fraud, almond tree — Find records of fraud such as those discussed in this column and more in the Food Fraud Database. Image credit: Susanne Kuehne

Both Prunus species produce similar flavor and sensory profiles, but have significantly different costs—the 50% cheaper apricot kernels are sometimes used as an adulterant, replacing almonds in products such as marzipan, almond oil or almond powder. A polymerase chain reaction (PCR) method shows that the DNA barcode of almond shows significant differences from other Prunus species and can therefore be used to detect adulteration of almond products.

Resource

Uncu, A.O. (March 2, 2020). “A trnH-psbA barcode genotyping assay for the detection of common apricot (Prunus armeniaca L.) adulteration in almond (Prunus dulcis Mill.)” Retrieved from Taylor & Francis Online.

April 27, 2020

COVID-19 Supply Chain Disruptions on the Horizon

By Kevin Kenny

On the one level, it’s still too early to see full supply chain stoppages, other than growing port and customs delays. While one does not need a crystal ball to see that significant issues are already on the horizon, it takes time for both positive and negative supply impacts to wend their way through the chain.

My company, Decernis, a FoodChain ID Company, provides a complete regulatory intelligence software suite that covers more than 100,000 global regulations in 219 countries, and as such, we have a unique global perspective on how the pandemic is going to affect the supply chain.

Among the countries to watch is India, which imposed a nationwide 21-day shutdown on March 25 and thus far is the tightest lockdown in the world. In the large cities, the lack of public transportation has forced newly unemployed to walk home, often over a period of days, to their home villages. This creates a challenge for the economy because India depends on seasonal migrant and factory workers.

Unlike most countries, pharmaceutical and supplement manufacturers, as well as food processors, are entirely shut down. While farm operations and their supply chains are exempt, there is no harvest without migrant labor. Moreover, truckers transporting frozen goods often are stopped en route due to uneven permit enforcement across states. Add to this the problem of export foods stuck in containers or ports with limited market access, combined with import/export restrictions, and a crisis is at hand.

And, while the Indian government has not banned rice exports, India’s Rice Exporters Association effectively suspended exports because of dramatic labor shortages and logistical disruptions. So, while buyers exist, there is no practical way to harvest, process or ship those exports.

Combine the lack of migrant agricultural workers with the closing of restaurants and schools in many countries and economies are left with a steep drop in demand. As a result, unprocessed food including pork, eggs, milk and early-harvest fruits and vegetables are being destroyed or “tilled under.”

Countries whose leadership is turning a blind eye to the pandemic (i.e., Brazil) will ultimately see a more significant impact.

Another major player to watch is China, where the tariff crisis initially exposed supply chain vulnerabilities. Combined with the current pandemic, businesses now see that sourcing can often be a more substantial factor than price.

Prior to COVID-19, the United States, among other countries, initiated a trend toward blatant economic nationalism, which significantly accelerated this year. In an effort to protect their populations and national security, countries (i.e., Cambodia, India, Kazakhstan, Russia, Serbia and Ukraine) halted the export of vital commodities. As a result, critical supplies have been diverted to more developed countries that can outbid and pay a higher price, leading to food security risks in smaller and weaker markets.

These factors will trigger a rethinking of supply chains in the medium and long term. The cost savings realized in China, India, Vietnam and Thailand will be weighed against the threats to supply chain stability. The result may be a subtle new form of supply chain nationalism, where companies prefer more reliable local production to lower-cost, more vulnerable foreign production. The recent sourcing trend for large multinationals to partner with fewer, trusted providers could reverse once the dust settles from this pandemic.

The decrease in air cargo capacity (due to the grounding of passenger aircrafts) has also played a significant role in supply chain disruption and will lead to dramatic short-term increases in the cost of air freight.

Last, but certainly not least, will be the fallout from obvious bankruptcies. As an early indicator, 247,000 Chinese companies declared bankruptcy in the first two months of 2020, with many more closures expected.

Obvious candidates include movie theaters, airlines, cruise ships, retailers, and hotels, but any company caught carrying a large debt load is also endangered. Pharma companies and those in oil, gas and petrochemicals will also be affected by a perfect storm of oil market collapse.

On a positive note, any supplement (i.e., Vitamin B, C and D) food commodity (i.e., blueberries, oranges) and processed food products (i.e., juices, yogurts) perceived to have immunity-boosting potential will likely see a short and long-term boost in sales. Botanicals, however, may soon have significant new sourcing problems.

As they deal with consequences of this pandemic, global companies will need to strategize for building a more durable and flexible supply chain. These unprecedented times are sure to spark more innovation and technological growth to address the challenges industry is facing.

April 23, 2020

How to Prevent Foodborne Pathogens in Your Production Plant

By Megan Ray Nichols

Foodborne pathogens, such as bacteria and parasites in consumable goods, can result in illnesses and deaths, wreaking havoc on residents of states and countries. The companies at fault often face severe damage to their reputation as people fear that continuing to do business with a brand is not safe. Moreover, if the affected enterprises do not take decisive steps to prevent the problem from happening again, they may receive substantial fines or closure orders.

Statistics from the U.S. federal government indicate that there are approximately 48 million cases of foodborne illnesses in the American food supply each year. Fortunately, there are proven steps that production plant managers can take to minimize the risk of foodborne pathogens. Being familiar with the preventative measures, and taking steps to implement them prevents catastrophes.

Engage with Suppliers about Their Efforts to Kill or Reduce Foodborne Pathogens

Foodborne pathogens can enter a production plant on items like fresh produce received from farm suppliers. Agricultural professionals commonly use chlorine to decontaminate goods before shipping them. However, researchers used a chlorine solution on spinach leaves to assess its effectiveness in killing common types of bacteria. The team discovered that, even after chlorine exposure, some bacteria remained viable but undetectable by industrial methods.

Foodborne pathogens can originate at farms for other reasons, too. Failing to take the proper precautions during animal slaughter can introduce contaminants into meats that end up in food production facilities. Water impurities can also pose dangers.

All production plants should regularly communicate with suppliers about the actions they take against foodborne pathogens. Food safety is a collective effort. Practicing it means following all current guidance, plus updating methods if new research justifies doing so. If suppliers resist doing what’s in their power to stop foodborne pathogens, they must realize they’re at risk for severing profitable relationships with production plants that need raw goods.

Consider Using Sensors to Maintain Safe Conditions

The Internet of Things (IoT) encompasses a massive assortment of connected products that benefit industries and consumers alike. One practical solution to enhance food safety in a production plant involves installing smart sensors that detect characteristics that humans may miss.

For example, the USDA published a temperature safety chart that explains what to do with food after a power outage. Most items that people typically keep in refrigerators become dangerous to eat if kept above 40^o F for more than two hours.

Food production plants typically have resources like backup power to assist if outages occur. But, imagine a cooler that appears to work as expected but has an internal malfunction that keeps the contents at incorrect temperatures. IoT sensors can help production plant staff members become immediately aware of such issues. Without that kind of information, they risk sending spoiled food into the marketplace and getting people sick.

Researchers also developed a sensor-equipped device that detects the effectiveness of hand washing efforts. In a pilot program involving 20 locations, contamination rates decreased by 60% over a month. Most restrooms at food preparation facilities remind people to wash their hands before returning to work. What if a person takes that action, but not thoroughly enough? Specialty sensors could reduce that chance.

Install Germicidal Ultraviolet Lights

With much of the world on lockdown due to the COVID-19 pandemic, many people want to know if germicidal ultraviolet lights could kill the novel coronavirus. Researchers lack enough information to answer that question definitively. They do know, however, that germicidal ultraviolet lights kill up to 99.99% of bacteria and pathogens.

Plus, these lights are particularly useful in food production because they get the job done without harsh chemicals that could make products unsafe. Ultraviolet lights can damage the skin and eyes, so you must only run them when there are no humans in the room. However, it’s immediately safe to enter the environment after switching the lights off.

These specialized light sources do not eliminate the need for other food safety measures. Think about implementing them as another safeguard against adverse consequences.

Teach Workers about Safe Practices

Food contamination risks exist at numerous points along the supply chain. Mishandling is a major culprit that could make several parties partially responsible for a foodborne pathogen problem. For example, if a person does not wear the proper gear when handling food or stores items intended for raw consumption in places where meat juices touch them, either of those things and many others could cause issues with foodborne pathogens.

As you inform employees about which procedures to take to manage the risks, emphasize that everyone has an essential role to play in keeping products free from contaminants. If workers make ready-to-eat foods, such as packaged sandwiches, ensure they understand how to avoid the cross-contamination that happens when reusing cutting boards or utensils without washing them first.

The FDA requires domestic and foreign food facilities to analyze and mitigate risks. Employee training is not the sole aspect of staying in compliance, but it’s a major component. If a person makes a mistake due to improper or nonexistent training, that blunder could have significant financial ramifications for a food production facility.

Widely cited statistics indicate that food recall costs average more than $10 million, which is a staggering figure in itself. It doesn’t include litigation costs incurred when affected individuals and their loved ones sue companies, or the expenses associated with efforts to rejuvenate a brand and restore consumer confidence after people decide to take their business elsewhere.

Ensuring that workers receive the necessary training may be especially tricky if a human resources professional hires a large batch of temporary employees to assist with rising seasonal demands. If a higher-up tells them that time is of the essence and the new workers must be ready to assume their roles on the factory floor as soon as possible, training may get overlooked. When that happens, the outcomes could be devastating. Efficiency should never get prioritized over safety.

Stay Abreast of Emerging Risks

Besides doing your part to curb well-known threats that could introduce foodborne pathogens, spend time learning about new problems that you may not have dealt with before.

For example, scientists have not confirmed the origin of COVID-19. However, since early evidence suggested live animal sales and consumption may have played key roles, Chinese officials cracked down on the wildlife trade and imposed new restrictions on what was largely an unregulated sector cloaked in secrecy.

Much remains unknown about COVID-19, and it’s but one virus for food producers to stay aware of and track as developments occur. The ongoing pandemic is a sobering reminder not to blame specific groups or ethnicities, and to avoid jumping to hasty conclusions. It’s good practice to dedicate yourself to learning about any production risks that could introduce foodborne pathogens. Read reputable sources, and don’t make unfounded assumptions.

A Collective and Constant Effort

There is no single way to combat all sources of foodborne pathogens. Instead, anyone involved in food production or supply must work diligently together and know that their obligation to prevent issues never ceases.

April 20, 2020

Some Very Fishy Fish

By Susanne Kuehne

Tuna, food fraud — Find records of fraud such as those discussed in this column and more in the Food Fraud Database.
Image credit: Susanne Kuehne.

The coronavirus lockdown has halted fishing operations in most Indian harbors, and now stale fish and shellfish is finding its way to the consumer. In India, 50 tons of stale and spoiled tuna fish and prawns, no longer fit for human consumption, have been seized and destroyed after inspections by the Food Safety Department. These violations can carry fines and jail sentences.

Resource

The New Indian Express. (April 11, 2020). “Stale tuna fish, prawns flood markets”.

April 17, 2020

Coronavirus and Food Security

By Carla Zarazir

The novel coronavirus (COVID-19) has been quickly spreading across the globe, which triggered most affected countries to officially declare a state of public health emergency. The World Health Organization (WHO) has labeled this rather fast outbreak as pandemic. Food companies were urged to apply proper hygiene practices such as regular handwashing and surface cleaning to keep the risk of contagion at its lowest level.¹ At the moment, there are many ongoing clinical trials evaluating potential treatments for COVID-19 but no specific vaccine or medicine have been publicly made available, as of this writing.

COVID-19 belongs to a family of viruses that cause respiratory issues and can be passed on directly through contact with an infected person’s body fluids (i.e, cough or sneeze discharge) and indirectly, through contact with contaminated surfaces.² But can the virus be transmitted through edible goods?

Coronavirus Transmission through Food
According to the CDC, there is no current indication to support the transmission of COVID-19 through food since, in general, it needs a living host on which to grow. However, sharing food and beverages, especially in public places, is discouraged. Moreover, good food safety practices are highly recommended, including refrigerating, keeping raw and cooked goods separated and heating food at suitable temperature (around 75 ̊ C).³

If the consumed food is hypothetically contaminated with the virus, the stomach acid (due to its acidic nature) will immediately inactivate it. In addition, COVID-19 cannot affect the body internally via the intestines. One rare exception to the previous statement occurs when the virus gets in contact with a specific type of respiratory cells.

According to food safety experts, foodborne illnesses are generally caused by bacterial cells that have the ability to grow in food and multiply rapidly within a short amount of time. On the other hand, viruses are dormant particles floating around living cells; only when they successfully breaks into the aforementioned cells, the multiplication process can take place.1,3

General Food Safety Advice for Food Businesses

Food manufacturers must follow good hygiene and safety practices to help ensure the consistent quality and safety of their products:^4,5,6

Purchase raw material from reputable sources
Cook food thoroughly and maintain safe holding temperatures
Clean and sanitize surfaces (such as cooking boards, refrigerators handles, etc.) and equipment
Properly train staff in taking extreme hygiene measures
Employees showing signs of infectious illness must not attend work
Implement appropriate risk management strategies (e.g,. encourage social distancing and endorse online meetings when applicable)
Number of staff in a kitchen or food preparation area should be kept to a bare minimum
Space out workstations and food preparation areas, when possible

References

World Health Organization. (2020). Coronavirus disease: advice for the public.
Food Standards Australia & New Zealand. (2020). Novel Coronavirus and Food Safety.
CDC. 2020. Food Safety and Coronavirus Disease 2019 (COVID-19).
Harvard Health Publishing, Harvard Medical School. (2020). Coronavirus Resource Center.
European Food Safety Authority (EFSA). 2020. Coronavirus: no evidence that food is a source or transmission route.
USDA.(2020). Coronavirus Disease (COVID-19).

April 16, 2020

Creating a Disruption Database in Response to COVID-19

By Are Traasdahl

The spread and impact of the COVID-19 pandemic has been fast and furious across the globe.¹ The toll on human life and the economy is being felt by everyone, everywhere. Closures of schools and restaurants, restrictions on social gatherings, the shift to working from home, and other social distancing practices have created sudden, unusually high demand spikes across a number of categories, particularly related to food.

COVID-19 in the Food Industry: Mitigating and Preparing for Supply Chain Disruptions | Attend this complimentary webinar on-demandRepercussions from these dramatic demand surges are being felt across entire supply chains. Growers, producers, processors, manufacturers, wholesalers, and retailers of all sizes are scrambling to fill immediate shortages.^2,3 At the same time, foodservice operators are reassessing their needs in response to government mandated take-out/delivery-only service. Schools are consolidating preparation and pick-up points for breakfast and lunch programs, while on-campus foodservice venues have closed at colleges and universities. Food companies are scrambling to redeploy and redirect existing inventories, as well as forecast short and mid-term demand and production requirements in the face of an unprecedented situation.

In the first several days of disruption, the immediate response is all-hands-on-deck damage control. Rightfully so. But in the flurry of activity, it is critical that those responsible for demand forecasting document the disruption as it is happening. Why? Because sales history is the foundational input of sales forecasting algorithms. Outlier events, such as COVID-19, natural disasters, extreme weather, short-term international trade restrictions, etc., have the potential to distort demand trends if they aren’t recognized and weighted appropriately in forward-looking projections. Formally documenting extraordinary events allows organizations to:

Explain unusual variances to history and/or forecast
Create evergreen institutional knowledge (vs. relying on individuals, scattered notes, and memory)
Build a “disruption database” that can be used to make fact-based overrides to algorithm-generated statistical forecasts when a similar disruption is predicted or occurs in the future.

These “disruption databases” could ultimately serve as the foundation for even more sophisticated disruption forecasting models. As machine learning and artificial intelligence continue to evolve, these models could potentially be customized based on the type of event. Importantly, this annotation of events needs to occur within your forecasting platform so that it is permanent and visible to inform insights for all forecast users.

So, what information should you capture?

Timing of the event
- This includes specific days or weeks as well as information across the event lifecycle, including pre, during, and post event completion.
Geography impacted
- The scale of the event should also be noted. Some events are market-specific (i.e., the 2020 Nashville tornado), while others are state or region-specific (i.e. California wildfires, Hurricane Katrina) or result in national or global level impacts (COVID-19).
- The ship-to locations of your customers relative to the disruption will influence the demand impact of the event.
Customer gains & losses
- During shortages, changes to current customer strategies should also be accounted for, such as potential volume reallocations. This could mean realignment of current customer distribution centers, temporarily not shipping to or losing specific customers, and/or even securing new customers based on your ability to supply when competitors cannot.
- Customers may also shut down temporarily and/or delay previously scheduled new store openings. They may also reduce their hours of service and/or increase frequency of deliveries.⁴
Channel shifts
- The use of different channels in response to the event should also be captured. For example, in response to COVID-19, grocery retailers are seeing a significant increase in home delivery and click-and-collect orders.
- Collaborate with your customers to quantify this shift. It may explain your volume trends (if your products are or aren’t typically purchased online) and/or suggest alternative product forms, packaging, etc. to meet both immediate needs and longer-term demand.
Products impacted
- This includes both items with demand spikes as well as those realizing unexpected demand declines. Shifts may also occur between product forms. For example, some consumer concern about bulk produce has been expressed with COVID-19 since the produce is manually stocked and shopped.⁵ While efforts are underway to dispel this misconception, it has impacted short-term demand for both the bulk items and their pre-packed counterparts.^6,7
- Adjacent, complementary and/or substitutable items should also be considered.8 Focusing short-term production on core varieties, cuts, forms, etc. vs. a complete assortment may allow a faster return to category (if not item-specific) in-stock levels.
Ordered vs. filled quantities
- Typically, sales reporting systems only capture what was shipped/invoiced, not what was ordered. Capturing and comparing both enables quantification of the demand “opportunity loss,” which could be factored into future “event” forecast models.
Consumer sentiment and behavioral shifts
- Specific to COVID-19, Nielsen IRI and Crisp DemandWatch have identified “phases” of consumer behavior and anticipated category purchase impacts. Noting when these phases occur in your forecasting system can provide insight into performance analysis and inform future projections. These consumer patterns may also have application to other extreme events, such as natural disasters.^9,10
- In the face of significant disruptions, look for, leverage, and annotate relevant consumer insights to inform the forecast. Link the annotation to a central archive of relevant research and data to expand access and understanding across your organization.
Raw material, ingredient, packaging, labor or other sourcing issues
- Note any shortages that impacted your ability to meet demand. Your ability to satisfy demand may be impacted by your own suppliers’ ability to get you the necessary inputs and/or your ability to staff production runs.
Distribution & logistics issues
- Access to truck, rail, and/or air transportation of products may also be disrupted by the event. Note any logistics constraints to delivering finished goods to customers.
Competitor activity/disruptions
- New product launches, delivery systems, ownership, facility fires, labor shortages or disputes, weather patterns, and more that impact your competitors can also influence demand for your products, both in the short and long term.

In the heat of the crisis, this level of documentation may sound burdensome. Even if you start with notes on a scratch pad, email chains, and a collection of industry newsletters, set aside one morning or afternoon a week to annotate within your forecasting platform the factors that impacted demand that week. Continue to post notations in the week each specific disruption-driving factor begins and each week thereafter until its impact has dissipated. Keeping up with annotations as you go along will keep things fresher in your mind and can help inform immediate and near-term plans.

Disruption Database — Disruption databases can serve as the foundation for more sophisticated disruption forecasting models. As machine learning and artificial intelligence continue to evolve, these models can be customized based on the type of event. (Figure courtesy of Crisp).

Don’t forget that pantry loading shelf-stable items early in a disruption may significantly impact post-disruption sales, as consumers work through inventory they have at home. Track this as well. Best-in-class forecasting platforms, such as the example shown in Figure 1, can effectively leverage advanced computing power and analytics to help visualize the impact of COVID-19 on supply and follow-on effects predicted to be felt in your markets. The disruption information you track can be gathered, organized, and analyzed along with trillions of data points from disparate sources to generate high-quality statistical demand forecasts and actionable insights with speed and precision.

When the dust settles on this current event, take the time to document other historical disruptions. Working in reverse chronological order, gather as much date-specific archived data and tribal knowledge as you can, and add it to the annotations in your forecasting platform. The next time a disruption occurs (and it will!), you will be equipped to draw on this “database of disruptions” to proactively predict and respond to future impacts on demand.

References

Coronavirus Disease 2019 (COVID-19). (2020. Centers for Disease Control and Prevention.
Fares, M, Baertlein, L. (2020). Factories shift operations in scramble to restock supermarket shelves. Yahoo! finance.
Redman, R. (2020). Coronavirus: How leading grocery chains are responding to keep customers safe and shelves stocked. Supermarket News.
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April 15, 2020

A New Way to Spot a Fake

By Susanne Kuehne