Heather Madland, Huron Capital

Accelerating Growth Through Acquisition

By Heather Madland
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Heather Madland, Huron Capital

Developing a plan for meaningful growth can be a challenge many business owners face. With Gross Domestic Product growth currently at three percent, if you aren’t launching new products or services, adding new customers, or increasing sales to existing customers, the road to continued growth may not be clear. However, a careful and strategic purchase of a company – an acquisition – is one approach that could help you in meeting your company’s growth goals in less time with potentially less uncertainty than relying on only organic growth to get you there.

The advantages of acquisition

While acquisition may come at a significantly higher cost than certain organic growth initiatives like expanding your manufacturing facility or solidifying a new customer relationship, it’s potentially faster to execute. Of course, no substantial business move is without its risk, acquisitions included, but an effective acquisition strategy can be worth considering particularly for a small or middle market company looking to accelerate revenue and earnings. Advantages may include:

  • Access to new markets both regionally and globally
  • A new, built-in customer base
  • An established product line
  • A larger pool of talent
  • New technology and physical assets

Through acquisition, your company may be able to remain a step ahead in existing markets while plotting expansion into new cities, states, regions or even countries. An acquisition strategy has the potential to expand your geographic reach and may even help improve or expand market share.

Other advantages may include expanding your existing customer and/or product base, while potentially introducing new products or customers. Absorbing existing customer relationships of the acquired company may reduce costs in one area of the business while allowing you to re-allocate costs and resources to other things like technology and talent.

Increasing your pool of qualified and experienced employees can be invaluable. Resources earmarked for training could possibly be allocated elsewhere. Meanwhile, diversification of talent may improve the performance of your existing workforce by leveraging best practices across the combined employee base.

Increase your profit margins

Acquisition has the potential to increase revenue and earnings if the right strategies and tactics are implemented. However, the devil is in the details, and it’s important to make sure you have a solid execution and integration plan in place. Assuming that’s the case, there are a few key reasons why earnings might grow after an acquisition, including:

  • Overhead optimization
  • More efficient use of assets
  • Improved purchasing power and economies of scale

Sales, marketing and administration can be some of the largest expenses companies bear. By eliminating redundant operating and administrative functions, you may be able to accelerate margin improvement post acquisition. The challenge comes in identifying where redundancies exist while making sure to retain critical institutional knowledge and relationships.

Asset efficiency or asset turnover means generating more revenue per dollar of assets. Improvements come from consolidating manufacturing and distribution locations, leveraging better manufacturing practices of the target, or automating inventory and ordering systems. With greater asset efficiency, you may be able to free up more working capital to invest elsewhere in the business.

You may also benefit from improved purchasing power and economies of scale. Whether it’s in office supplies or industrial equipment, larger companies with more purchases often benefit from greater spending volumes which can lead to discounted or lower cost purchases from vendors.

Where does the capital come from?

Sources of capital to support an acquisition are plenty and varied, though each comes with a unique set of pluses and minuses. One of the most common and well-known sources of capital is bank debt, which many companies use as “standard practice.” It’s generally the cheapest form of capital, though requires regular interest and principal payments that will impact your cash flow. However, seller financing and third-party equity investment are both potential alternatives.

Seller financing is a good option for business owners who lack the cash to pay for an acquisition and who may not qualify for traditional bank debt. In these situations, the seller acts as a lender, with similar terms to a bank, though securing this type of financing is generally faster than through a bank. A business owner should be aware, however, that when sellers offer this option, they are usually looking for a buyer with experience in the industry, a well thought out acquisition strategy and a solid business plan.

An equity investor, such as a private equity firm, specializes in buying a company or share of a company with the intention of selling at a later time. While there are typically no required cash interest or principal payments associated with equity financing, depending on the arrangement and terms negotiated, an equity investor may end up with either a majority or minority ownership stake. However, there may be more to what equity partners can offer beyond just a check, including certain operational, strategic and financial resources to help your company grow. For example, an equity partner with other investments in a similar industry as yours may be able to help you expand existing customer relationships and/or introduce you to new ones. An equity firm may also be able to help you build a formal sales team and business development process, train new managers and find and execute the acquisition you are contemplating.

Overall, it may be possible to accelerate growth through acquisition; and a thoughtfully considered and carefully executed acquisition strategy certainly has its advantages. While the expense of doing an acquisition can be a factor, there are a variety of worthwhile capital options to help you get your deal done. Besides, if you can meet your financial goals in less time through acquisition than you otherwise would by pursuing an organic growth strategy only, it’s certainly worth assessing the feasibility of such a strategy for your own business.

Brendan McCahill

Four Ways Technology Can Ease The Burden Of New FSVP Compliance Regulations

By Brendan McCahill
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Brendan McCahill

What if it was possible for importers, or the customs broker that imports food into the U.S. on behalf of shippers, to stop salmonella-tainted food before it arrives in the hands of a consumer? While there are assorted systems in place to prevent contamination, often times, grocery stores and other businesses are unable to track the supply chain of foreign food importers, leaving customers blind to the origin of a product.

Descartes FSVP InfographicThe U.S. Food & Drug Administration (FDA) is working to address this issue with the Foreign Supplier Verification Program (FSVP). The new program makes importers responsible for better tracking hazards, identifying their suppliers and ensuring that their food is compliant with processes that meet the FDA’s standards for preventive controls and safety.

On the surface, this visibility seems like a great benefit to both consumers and businesses. But what will it mean for importers as they try and keep up with reporting requests and new regulations?

To prepare businesses for the continuing list of FSVP regulations that must be implemented by 2019, here are four ways in which technology will ease the burden and make the food industry’s supply chain even stronger.

1. Gain a holistic view of the supply chain

For navigating FSVP specifically, technology provides food importers with an efficient way to identify and better trace a supplier network, as well as and a quick and easy way to locate D&B D-U-N-S® Numbers*. For importer self-filers and customs brokers, similar solutions enable them to streamline techniques to transmit data to U.S. Customs & Border Protection (CBP) in the Automated Commercial Environment (ACE) as their goods move across borders, as well as to store details, such as D&B D-U-N-S Numbers, Harmonized System (HS) codes and more.

Ultimately, food importers and customs brokers that enlist the expertise of one technology provider can better prepare for FSVP compliance. While piecing together a technology solution using multiple logistics technology providers may work in the short term, a forward-looking, compliance-centric approach that aligns with future regulations must be adopted – one that gives a holistic view of the supply chain via one service provider.

2. Identify and better trace the supplier network

Supplier verification is an additional area of FSVP whereby suppliers must undergo periodic review and approval, and must be identified in order to perform an effective supplier hazard analysis and evaluation. Accurately identifying suppliers is a highly complex task due to intricate supply chains, compound food formulations and the number of SKUs in a product line. Plus, a supplier ecosystem evolves over time for many reasons, such as changing cost and consumer demand. Simply put, managing a complex supplier network can be a drain on resources and costly. Luckily, technology can help.

Logistics solutions that feature periodic updates that adapt to changing supply chains can help food importers better target suppliers to ensure regulations are followed. It can also help focus on suppliers with higher shipment volumes to optimize data management and prioritize compliance responsibilities.

In the event a food code is subject to FSVP, customs brokers are required to input the importers’ name, mailing address, email address and D-U-N-S Number. Because the FDA’s consumer protection function is dependent on the entry process, brokers are aware of the added scrutiny shipments subjected to FSVP-related information will be under, especially if any of the above information is noted as Unknown (UKN). Logistics technology can help automate this process and ease custom entries, booking, security filings and more.

3. Streamline techniques to transmit important data

Transmitting data to the CBP as goods move across borders can be challenging in its own right. Basic customs issues include import/entry process, tariff classification, valuation and duty assessment.

Innovative technology solutions can help businesses go beyond the bare minimum to improve the speed and accuracy of submitting entry and Partner Government Agency (PGA) data to CBP. Users can receive and react to responses and customs status messages by exception. Proactive alert functionality can notify users of actionable items including rejections, intensive exams, requests for electronic invoices, Temporary Importation Bonds (TIB) expiration notices and more. On-demand solutions also enable brokers and forwarders the ability to run complex international operations more efficiently.

4. Dedicate D&B D-U-N-S numbers for imported food product

The D&B D-U-N-S Number was selected by the FDA as the recording system to identify importers by a common reference system. The FSVP regulation indicates that a D-U-N-S Number must be provided by an importer for each line entry of food product imported into the U.S.

Today’s complex food industry means importers often work with an extensive ecosystem of subsidiaries, affiliates and Doing Business As (DBA) divisions. To comply with FSVP, technology can help quickly locate the D&B unique identifier for each member of the network, and streamline the complicated process of managing each line entry of food product offered for importation into the U.S.

A tech-driven pathway forward

There is no doubt that the new FSVP regulation is complex. U.S. food importers are now responsible for ensuring compliance in an effort to improve the safety of food entering the U.S. This will require food importers to fully understand the regulation on a practical level and react accordingly, using technology to its fullest.

Leading businesses should consider the FSVP regulation as an opportunity to look forward and prepare. With the right logistics technology and processes in place, organizations can improve their readiness to enable compliance, improve data management and execute a holistic regulatory strategy to meet the new stringent requirements.

* D&B D-U-N-S Numbers are proprietary to D&B, are licensed from D&B and are for internal use only. 
D-U-N-S is a registered trademark of D&B.

Christopher Sheeren

How To Recruit The Best Leaders

By Christopher Sheeren
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Christopher Sheeren

Unless they want to shut off the lights upon retirement, private business owners have to think about succession planning. Even more, if all key customer and vendor relationships reside with the owner, there isn’t much value to the business without him or her. Building a strong leadership team and implementing a succession plan are essential to a company’s continued success.

Baby Boomers will be transitioning out of the workplace in vast numbers over the next decade. This exodus, particularly involving those in leadership or ownership positions, will result in substantial transfers of wealth as businesses are shifted across generations or to new owners.
Valuing physical assets, such as equipment and facilities, is relatively simple, but the value of firms that provide services or intellectual assets to clients is harder to define. Their valuation is heavily dependent on their reputations, relationships and management teams. As a result, the long-term survival for many of those businesses is highly reliant on strategic succession planning to build bench strength and the future leadership team.

Begin with a plan

Companies and owners who strategically plan for succession help ensure an orderly transition of management with minimal uncertainty, decreased productivity, fewer employee morale issues, and limited impact on day-to-day business. That’s true especially in family-owned firms, where emotions and personal issues can impede efforts.

However, according to data from CNBC and the Financial Planning Association, 78 percent of small-business owners intend to fund their retirement by selling their company, yet less than 30 percent of companies have a written succession plan.

The lack of planning among larger organizations is even more pronounced. Less than 25 percent of private company boards have an official succession plan, according to the National Association of Corporate Directors.

Branding and clarifying the role

The transition to new leadership – and possibly ownership – doesn’t happen overnight. It may happen faster if the company is known as a great place to work and can provide a successful career path. Competitive compensation and benefits are important, but so is finding a good fit for the position and its responsibilities. Developing a clearly defined role (and the compensation package ranges) will help an owner focus his or her efforts on finding the right person.

Consider the following when defining the leadership role:

  • How many years of experience in a similar role does a candidate need?
  • What management style fits the culture?
  • What education, qualifications or knowledge of the industry must the candidate possess?
  • What communication skills does a candidate need? Does the role require negotiating, establishing direction, and instilling confidence from the board of directors, clients, staff and others?

Recruiting options

Besides strategically determining the need for succession planning or backfilling, it is important to develop a communications/recruiting strategy for the position. This includes determining where to look and establishing a budget for the effort.

Internally

Many companies either assume from the start that positions require new blood or that they should automatically promote from within. Growing staff internally by increasing levels of responsibility is important when grooming a trainee for the future. When companies immediately look to fill positions from the outside, it can be demoralizing to employees who wish to advance. Being overlooked can spur people to seek opportunities elsewhere, costing the company valuable employee experience. To be effective and efficient, fully vet internal candidates before searching outside, and make sure they understand what the position requires. It also helps to ask staff what they believe is needed as they may offer fresh insight.

Spreading the word internally also allows companies to mine employee networks. A 2016 Society of Human Resources Management (SHRM) survey indicated that referrals are the top source of new hires for 96 percent of companies with at least 10,000 employees and for 80 percent of firms with under 100 workers.

The do-it-yourself approach

Companies that do not do a lot of recruiting often try to handle the task of finding new leaders themselves. Job postings, LinkedIn, industry sources and other platforms can work, particularly if the recruiter or person heading the search has access to a pipeline of great contacts.
However, relying solely on job listings is usually a poor sourcing strategy. While there may be outstanding candidates scanning the listings at that point, the candidate pool will be limited to those currently looking for a position as opposed to the best possible options. A do-it-yourself talent search can be effective, however, filling a higher-level position often requires more than a single approach.

Outsourcing the recruitment effort

Engaging an executive search firm or professional recruiter opens up a hidden market of talent. Recruiters remain connected to ‘the trenches’ because their livelihoods depend on it. They have typically built up a network of contacts already performing similar roles and can tap into it and proactively target (or ‘head hunt’) the best possible candidates.

Turning to a professional search firm is not cheap. Typically, the cost is a percentage of the first year’s compensation (25 to33 percent is typical) or a flat finder’s fee. But, searching for talent that is critical to a company’s succession planning is not an area to skimp.

Other considerations

A best recruiting practice is to meet with someone at least three times, in three different settings (e.g. office, coffee, and dinner). Each meeting can take on a different tone to closely analyze the individual. Thought-provoking questions can help determine management aptitude, and the more social engagements can help in assessing the personality traits that comprise effective leadership and whether or not the person will fit in.

Give a candidate a thorough review in person, with a background check, and by checking references before making a final offer. Additionally, consider bringing a representative from a key partner, a trusted advisor, or an important client to the dinner meeting and ask their opinion of the candidate.

To ensure success, set aside an adequate transition and training period. Then, let everyone in key positions know about it. This demonstrates to employees that leadership wants to make the transition as smooth as possible.
Too many business leaders and owners fail to recognize the importance of succession planning and developing the best future leaders until the end of their careers.

While time-consuming, succession planning is truly planning for future success. Realistically, preserving an organization’s value for the future can be as challenging as building that value in the first place. Hiring professionals who work with companies on building leaders, transferring the equity of businesses in all industries, and valuation is a wise investment.

Accreditation

Why Accredited Services Increase Business Opportunities And Contribute To The Harmonization Of Regulations

By Natalia Larrimer, Jacqueline Southee, Ph.D.
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Accreditation

Accreditation is an internationally accepted independent oversight process for maintaining operational standards and ensuring confidence. It is accepted by many governments and private industries, including at various levels of the global food supply.

Recognized within the food industry and endorsed by the Global Food Safety Initiative (GFSI), the process of accredited certification has become essential for business.

In the United States, the Food and Drug Administration (FDA) Food Safety Modernization Act (FSMA), in its rule on accredited third-party certification, incorporates the accreditation process for oversight over third-party certification bodies certifying foreign food facilities manufacturing for import into the United States.

With accredited services increasingly becoming an integral part of business operations, many wonder how the processes of accreditation and certification work.

Accreditation is the process of ensuring that an organization has the necessary technical competence to perform a specific task, and has met and continues to meet a specific set of operational requirements. An accreditation body (AB) uses internationally established techniques and procedures to assess conformity assessment bodies (CABs) against recognized standards to ensure their impartiality, competence, and ability to produce consistently reliable, technically sound and impartial results.

Accreditation provides formal recognition that an organization is competent to carry out specific tasks, and provides an independent assessment of conformity assessment bodies (CABs)1 against recognized standards to ensure their impartiality and competence. Accreditation provides assurance to a CAB’s customers and industry that the CAB continuously operates according to internationally accepted criteria applicable to CAB’s scope of accreditation.

Although there is flexibility for an AB to design its accreditation process within the constraints of ISO/IEC 17011, Conformity assessment – General requirements for accreditation bodies accrediting conformity assessment bodies, the standard to which all internationally recognized ABs must conform, some aspects are mandatory.

As part of the application process, the applicant for accreditation submits information about the desired scope of accreditation and its documented quality management system. The AB conducts a document review to verify that the applicant has documented all management system requirements specified in the relevant criteria and any other applicable requirements. Additional requirements could include, for example, those mandated by a specific regulatory authority or industry. During the assessment, through witnessing of the CAB conducting a conformity assessment activity, interviews of personnel, and review of records and other objective evidence, the AB’s assessment team verifies the CAB’s technical competence and implementation of the quality management system.

The applicant is required to provide corrective action for all identified deficiencies. Only after all identified issues have been addressed can the accreditation decision process begin. To ensure that the accreditation decision is impartial, members of the assessment team do not take part in the decision. The designated decision maker, which may be a group or an individual, is responsible for reviewing the assessment team’s recommendation and ensuring that all accreditation requirements have been met by the applicant and are properly documented before granting accreditation.

A certificate and scope of accreditation are issued only after a favorable accreditation decision.

Once accredited, the CAB is regularly re-assessed to ensure continued conformance to the accreditation requirements, and to confirm that the required standard of operation is being maintained.

To ensure transparency, the AB is required to make publicly available information on the status and scope of accreditation for each accredited CAB. Any changes occurring after initial accreditation, such as suspension for all or part of the scope of accreditation, are published on the AB’s website.

It is important to note while ABs provide oversight over CABs, internationally recognized ABs are themselves subject to regular oversight from organizations orchestrating the harmonization and recognition of the accreditation process internationally.

The International Laboratory Accreditation Cooperation (ILAC) and the International Accreditation Forum (IAF) provide this international oversight. ABs that are signatories of the ILAC and/or IAF mutual recognition agreements (MLAs or MRAs) must conform with the requirements of ISO/IEC 17011 as applicable program-specific requirements, and are admitted to the agreements for a specific capability, for example, as an accreditor for testing labs or for management systems certification bodies. Technical competence of the AB and conformance to the requirements is verified through rigorous on site evaluation by other member of the IAF or ILAC community.

Without international oversight, there would be no evidence or confirmation that an AB operates in accordance with international requirements when providing oversight of accredited CABs. This oversight provides assurance that the AB understands the CAB’s process and can attest to the CAB’s competence.

The IAF, MLA and ILAC agreements are internationally recognized forms of approval; signatories have demonstrated their compliance with specified standards and requirements. Accreditation by a signatory of the ILAC MRA and/or IAF MLA provides assurance that decisions are based on reliable results, thus minimizing risk.

This is of particular importance in the constantly evolving global food-supply network. Many specifiers, such as regulatory authorities, have acknowledged the importance of credible accreditation programs.

A number of government agencies in the United States and around the world, including the U.S. Consumer Product Safety Commission (CPSC), U.S. Environmental Protection Agency (EPA) and the Canadian Food Inspection Agency (CFIA), have mandated accreditation by an internationally recognized accrediting body for their programs.

Accreditation within the MLA/MRA process helps regulators meet their legislative responsibilities by providing assurance that testing, inspection and evaluation results are issued by organizations whose technical competence and compliance with specified criteria has been verified by an independent third party. It provides assurance to stakeholders, such as the regulatory authorities, that the accredited CAB operates in accordance with recognized and accepted criteria.

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Status and Outlook of Food Labeling Proposals

By Brian Ronholm, Karen Ellis Carr
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When the National Bioengineered Food Disclosure Standard was signed into law in July 2016, it represented the culmination of an extended legislative and regulatory period of activity on food labeling issues in general. As the focus shifts toward the implementation of these labeling proposals – such as requirements for bioengineered food disclosure, calorie disclosure on menus, and updating the nutrition facts panel – the debate over food labeling issues will remain very active, and new labeling proposals are certain to arise, including ones directly impacting food safety.

Bioengineered Food Disclosure

The National Bioengineered Food Disclosure Standard was enacted into law to preempt a patchwork of differing and conflicting national, state and local requirements that were going into effect or being proposed at the time. The legislation, which acknowledges the proven safety of agricultural biotechnology products while simultaneously ensuring consumers have access to more information about the foods they purchase, was enacted with strong bipartisan support. Because this labeling mandate is based on a desire to enhance consumer information, and not address any safety concerns, Congress delegated responsibility for implementing the disclosure standard to the Agricultural Marketing Service (AMS) within the U.S. Department of Agriculture (USDA).

The disclosure standard, which will be developed by USDA through rulemaking, is intended to apply to a broad category of foods and provide several options for mandatory disclosure, including text on packaging, the use of a symbol, or an electronic or digital link. Additional flexibility will be provided for small food manufacturers and food in very small packages.

Under the law, certain foods are excluded from the disclosure requirement, including food served in restaurants or similar retail food establishments, or food produced by very small food manufacturers and any food that is derived from an animal solely because the animal consumed feed produced from a bioengineered substance. Food products that have meat, poultry or egg as their main ingredient would remain subject to labeling under other federal statutes. The legislation also would ensure that food products certified under the national organic program could display a “non-GMO” label or other similar claim in addition to the USDA organic seal.

Study on Potential Challenges

The law also required USDA to conduct a study to identify any technological or other barriers to disclosure and offer additional disclosure options if the Secretary of Agriculture determined that barriers existed. While the study, which was released in September 2017, did acknowledge some notable challenges, it concluded that most consumers seeking information on their food purchases would be able to access this information, given the proper education and tools.

Challenges identified by the study include: consumers not recognizing the on-package digital link or not associating it with food information; retailers’ unfamiliarity with digital links and inability to assist consumers; some consumer challenges in accessing the tools needed to scan a link; consumers struggling with mobile applications (apps), regardless of comfort level with technology; and broadband connectivity and connection speed.

Although researchers observed these key technological challenges that prevented nearly all participants in the study from obtaining the information through electronic or digital disclosure methods, the study asserted that the challenges could be overcome through appropriate implementation of the law.

Outlook

USDA Secretary Sonny Perdue has expressed his commitment to meeting the implementation deadline of July 29, 2018 for the National Bioengineered Food Disclosure Standard. This summer, the department collected feedback on thirty questions under consideration in connection with the rulemaking process, and released the accessibility study required under the law close to the deadline set by Congress. The fact that consumer groups filed suit to compel the study’s release shortly after the deadline passed serves as an early indicator that all aspects of USDA’s implementation of the law will remain under close scrutiny and, in all likelihood, be the subject of additional litigation.

There also has been some indication that the compliance date will coincide with another labeling requirement in the pipeline – the update to the Nutrition Facts Label.

Update to the Nutrition Facts Label

Original vs. New Format – Infographics to Help Understand the Changes

On May 27, 2016, the Food and Drug Administration (FDA) published the final rules updating the Nutrition Facts label for packaged foods to reflect new scientific information, including the link between diet and chronic diseases such as obesity and heart disease. In its announcement, the FDA indicated that the new label would make it easier for consumers to make better-informed food choices.

While the familiar look of the nutrition facts panel remains, FDA is proposing changes that would include an emphasis on Calories by increasing the font size and bolding it. The font size for serving size and servings per container also will be increased.

Other notable changes include requiring manufacturers to declare the actual amount of vitamin D, calcium, iron and potassium, in addition to the percent Daily Value, and to better explain in the footnote what percent Daily Value means. The rule also requires that the label include Added sugars in grams and as percent Daily Value in order to reflect recent scientific data showing that it is difficult to meet nutrient needs while staying within calorie limits if a person consumes more than 10 percent of total daily calories from added sugar.

The rule also requires updates to serving sizes on the nutrition facts label so that they are based on amounts of foods and beverages that people are actually consuming. For example, for packages that are between one and two servings, the rule requires that the calories and other nutrients be labeled as one serving because people typically consume it in one sitting.

Additional details of the update to the Nutrition Facts Label can be found on the FDA web site.

Outlook

On June 13, 2017, FDA announced that it would delay the compliance date for the final rules updating the Nutrition Facts Label, adding that the new date would be forthcoming. In a Federal Register notice on October 2, FDA announced the new compliance date of January 1, 2020.

Earlier in the year, a group of food industry trade associations and officials requested that FDA delay the compliance date for three years, asserting that it should be aligned with the compliance date for USDA’s Bioengineered Food Disclosure Standard. Industry groups had been arguing that aligning these dates would eliminate the need to change labels twice.

Because the Administration has hinted support for aligning the compliance dates for USDA disclosure and FDA labeling requirements, FDA could announce another delay as the January 2020 date approaches.

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Joy Dell'Aringa, bioMerieux

Proficiency Testing Considerations

By Joy Dell’Aringa
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Joy Dell'Aringa, bioMerieux

Proficiency testing has increased in food microbiology laboratories in response to various factors: ISO 17025 accreditation increases, regulatory focus, customer requirements, internal quality requirements and an increase in validation and verification activities. Here we will explore available resources, testing considerations, and response guidance for participating food microbiology laboratories.

What is Proficiency Testing?

Proficiency testing (PT) is widely used in the food testing industry as a way to verify that an individual laboratory is capable of performing a given method. There are several ISO 17043-accredited PT providers that issue unknown samples with various organisms and matrices throughout the year. Heather Jordan, director of LGC PT operations for the API Group in North America, says the increase in participating labs has led to additional insights on the value of PT programs. “We receive feedback from participants that they also find gaps in their methods and operations as a result of the PT. For example, a participating laboratory recently uncovered a reagent expiry system flaw that impacted results and implemented improvements. Another laboratory reported that they were experiencing challenges with a unique matrix type – and through the PT process identified the issue and validated the process adjustments made.” Participating laboratories report analytical results to the PT provider and evaluations are issued based on statistical success criteria. Additionally, performance is often reported to third party entities defined by the laboratory, such as ISO 17025 accreditation bodies and other certifying authorities.

Considerations When Designing a Proficiency Testing Plan

ISO 17025-accredited laboratories are required to have a written proficiency testing plan. Operations not bound by accreditation requirements are still encouraged to document their PT plan as a matter of best practice. When designing a PT plan, laboratories should consider the following:

  • Proficiency Provider(s)

    • Selecting a PT provider is the first step in designing a PT program. Providers may be evaluated based on available accreditation status, analytes and matrices, frequency, data deliverable, accreditation status and cost.
    • Common Microbiology PT providers include:
      • LGC / American Proficiency Institute (API)
      • AOAC
      • Various Regulatory Bodies
    • ISO 17043 is the international standard that proficiency providers are accredited to by various accrediting bodies. When evaluating a PT provider, you should ensure that they are accredited to this standard. A list of ISO 17043 accredited PT providers can be found here: https://portal.a2la.org/pt/PT_Summary1.pdf

  • Matrix & Analytes

    • Matrices selected should be representative of the matrices routinely tested by the microbiology laboratory. Common matrices available include: Dehydrated Mashed Potatoes, Non-Fat-Dry-Milk (NFDM), Powdered Cooked Beef (PCB) and Environmental. The laboratory should consider not only the category of matrix, but also constituency. For example, a dairy laboratory would likely select the NFDM matrix. However, a laboratory that analyzes primarily animal proteins may select the PCB, even if they do not analyze beef specifically.
    • PT providers offer several target analytes for laboratories to choose from. Laboratories should incorporate the appropriate PT’s into their PT plan that match the routine and/or critical analytical operation of the laboratory. Most PT providers will offer package combinations of various quantitative and qualitative tests that include key pathogens and indicator organisms of interest. Laboratories can also select to add on analytes that might be more specialized to their operation such as Campylobacter , STEC or Lactic Acid Bacteria.

  • Frequency:

    • Each PT provider offers scheduled PT rounds throughout the year. When creating the PT plan, the laboratory should consider how often they will participate. Factors to consider are often third party requirements, risk and cost. Often customers or third party certifying bodies will specify a minimum frequency of testing. In the absence of a predefined frequency, laboratories should weigh the risk of failure vs. cost and resources to determine the best frequency. For example, if a laboratory fails a PT- how long before the next PT round is received can be critical to the corrective action process. Many providers will offer off-schedule rounds to aid in troubleshooting and corrective action investigations. Quarterly and biannual frequency is quite common. Annual participation is often the minimum requirement, however many operations find that is not frequent enough to meet PT plan objectives and goals.

  • Rotational Models to Consider

    • Laboratories that conduct multiple methods for the same analyte and/or have several analysts will often incorporate a rotational model in the proficiency testing plan. PT events often have a limited amount of sample to process, which can also create a logistic challenge. A rotational plan is flexible and custom to each operation, but essentially ensures that each method and analyst is evaluated at least annually via PT programs. A rotational plan should also consider how to conduct PTs in order to capture routine operational conditions including staffing, capacity and workflow conditions of the laboratory.

My PT Samples Arrived! Now What?

Once the PT samples have arrived, having a predetermined plan will aide greatly in efficient and organized processing and analysis. Laboratories often designate an individual as a “PT Coordinator” that will schedule the testing event and notify pertinent administrative and lab personnel prior to the arrival of the samples. This helps to ensure all testing reagents and consumables are available and that the needed personnel are available on the days required. The PT Coordinator can organize any rotational aspects of the PT plan, report results, monitor deadlines, receive results and initiate the corrective action process if needed.

PT samples should be prepared according to PT provider instructions so that the laboratory has a working sample to test. This is a critical step and, if not done properly, can have a significant impact on the results. To ensure comparable results across participants the PT provider may include important details in the instructions such as what dilution level to consider the prepared sample, or what characteristics must be present to consider the sample a positive. The working sample should be treated the same as a ‘real world’ sample that would be received by the laboratory. Activities such as sample login, entry into a LIMS or SAP system and set up are important to follow as the laboratory would routinely.

Once the laboratory is in the sample preparation and analysis portion of the PT, it is important to avoid any method modifications unless the laboratory routinely performs a validated modification for a given method. Remember, the PT event is designed to verify the laboratories ability to perform a method, therefore, all factors of sample receipt, set up, analysis and reporting, should be incorporated into the PT process.

When the analysis is complete and results are available, the PT Coordinator can report them to the PT provider. Be mindful of making proper calculations, proper categorical results and appropriate confirmations. Report all results just as the laboratory typically reports them. For example, if the laboratory routinely reports Yeast & Mold as a combined count, or if Listeria is routinely confirmed to the species level, be sure to report it in the same manner for PTs. Records generated through the PT event should also follow the same recording and record keeping process in accordance with laboratory policies. To ensure that records are robust enough for potential troubleshooting, take great care in documenting any anomalies of the event.

Reporting and Response

In addition to reporting results externally to the PT provider, who may also report to other external organizations at the laboratories discretion, the laboratory may also have an internal reporting structure. Once the results are received from the PT provider indicating success or failure for each parameter, the laboratory may also share these results internally, especially if there are multiple laboratories within the network.

If an unsatisfactory result is reported, the laboratory should implement a pre-determined corrective action process. Often this will include several parties such as the lab manager, analysts, PT coordinator and a QA representative. Heather Jordan reminds us that an unsatisfactory result isn’t necessarily a failure for the laboratory. “We encourage laboratories to ask themselves the question ‘was this testing scenario relevant to my operation?’ If not, then they should document accordingly.” For example, a laboratory’s standard practice might be to fail a product on specification if an indicator organism count was too high (such as generic E. coli) and therefore they would not test the product further for a targeted pathogen. In this case, they should document how their laboratory would have handled a similar real life sample according to their procedures and store that documentation with their PT results. The laboratory may even proactively communicate this investigation to their accrediting body. The investigation of an unsatisfactory result should include a document and record review, interviews with participating parties, discussion with other network laboratories (if applicable), and communication with outside stakeholders such as accrediting bodies, the PT provider and the diagnostic company for the corresponding method (if applicable). Often the PT provider will provide educational commentary or guidance on a sample that can also be useful in a corrective action investigation. Many times laboratories will request troubleshooting samples from the same round as the unsatisfactory result – not necessarily to negate the original results – but to aide in the root case and corrective action process.

Melanie Neumann, Neumann Risk Services

Today’s Inspection and Audit Reality: The New Normal

By Melanie Neumann, JD, MS
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Melanie Neumann, Neumann Risk Services

Food industry inspection and audit protocols are evolving at a rapid pace, and rightly so. This is not surprising given today’s regulatory, audit and ever-changing risk landscapes, which are driving further complexity and expansion of requirements to ensure the industry is, “audit ready, all the time.”

This evolution of inspections and audits has been primarily triggered by newer regulations such as FSMA and private standards, such as GFSI and its certification programme owners (CPO’s, fka Scheme Owners) like SQF, BRC, FSSC 22000, IFS, etc. Heightened customer demand and consumer visibility into food safety incidents –many thanks to mainstream and social media– and the resulting increased demand for information has also fueled this evolution, compelling industry to focus on higher levels of transparency, both internally and throughout the supply chain.

The changes above are driving the food industry to face a new reality. One where the following questions continue to rise to the surface:

  • How have “yesterday’s” inspection and audit expectations changed from what companies are experiencing today?
  • Based on this evolution, how will “tomorrow’s” inspection and audit expectations change?
  • In short, what does the new reality or the “new normal” look like now for inspection and audit readiness?

We will take a look at what some of the first inspections are shaping up to look like under the Preventive Controls for Human Food (PCHF) Rule and the Foreign Supplier Verification Program (FSVP) Rule. Some common themes and some tips to successfully manage regulatory inspections as well as audit readiness tips are set forth below.

More Inspectors

Roll out the welcome mat because more inspectors are coming to the party. We are seeing an average of three to upwards of six regulatory inspectors performing the inspections under the PCHF rule. This may cause an initial shock wave but when you stop to consider the rationale it has a certain level of reasonableness to it. Industry has invested in its personnel for nearly two years in updated training to meet new FSMA regulations such as preventive controls qualified individual (PCQI) training, updated current GMP training and perhaps qualified auditor training, if applicable. It makes sense that FDA needs to make a similar investment in its people to ensure its inspectors are prepared to knowledgeably perform FSMA-related inspections.

FDA has implemented a robust training program for its inspectors. Regarding PCHF inspections for example, only inspectors who have successfully completed the PCQI training plus FDA’s internal training will lead other inspectors through the facility inspections as an in-field training exercise. So, the good news is at least one inspector is fully trained under FDA’s training program standards. This said, with more inspectors, there are more eyes, and with more eyes, more opportunities to see risk through different perspectives. It’s best to be on your game, with a tested playbook so you have confidence you are prepared when the team of inspectors arrive at your facility. Conduct a mock inspection against your policies, procedures and food safety plan that have been updated for the new PCHF and other applicable FSMA requirements. You will be thankful you did.

Digging Deeper

Into Records: FSMA and the seven rules that comprise it requires more controls, monitoring and verification activities by the food industry, thus naturally giving inspectors more records to access and review. Further, FDA received expanded records access authority upon the signing of FSMA. FSMA allows FDA to access records relating to articles of food for which there is a reasonable probability that the use of, or exposure to, the article of food will cause serious adverse health consequences or death to humans or animals. Before FSMA the standard FDA had to meet to access records was “credible evidence”; now its “reasonable probability”—a standard that is far lower and subjective—allowing access to more types of records than before. Another new addition is FDA now may access records beyond those relating to the specific suspect food if the agency reasonably believes that other food articles are likely to be affected in a similar manner.

Example: If you have a potential problem on production line 1, and you firmly believe the issue is contained to line 1, but that line is in even arguably close physical proximity to line 2, depending on the issue an inspector may invoke this new authority and ask for all records associated with line 2 in addition to line 1 for the same time period to be sure that the situation indeed did not spread or otherwise impact line 2. (e.g. confirm no risk for cross contamination or allergen cross-contact).

This should not mean it’s open season on all your records, but it certainly means more records are open to review and scrutiny, so having a robust record retention and management system becomes mission-critical. How sound is yours? Record-keeping and document management have long been important to GFSI / CPO’s. However, many food companies do not have a certification from one of these entities, which begs the question whether the scope of your third-party audit, or that of a supplier you are currently evaluating for approval, adequately evaluates this important area.

Into your Hazard Analysis: Inspectors are spending significant time reviewing the adequacy of the hazard analysis performed as part of the requirement of the food safety plan under the PCHF Rule and as part of the foreign supplier verification plan requirement under the FSVP rule. If facilities do not identify all the hazards of concern that require a preventive control associated with their facility and foods they produce, then the rest of the food safety plan falls apart. If you work with peanuts to produce peanut butter and identify Salmonella as a hazard requiring a preventive control but not aflatoxin or peanut allergen you have likely missed the mark.You may not have the appropriate preventive controls, monitoring, verification activities, validations and corrective actions identified in your hazard analysis and food safety plan to control for the most significant hazards your facility / the finished food is facing from a food safety risk perspective. (note the identification of hazards requiring preventive controls is highly dependent on the food, facility, processing methods of the manufacturer, upstream supplier and will vary if products are RTE or nRTE)

How are auditors tackling this issue? Many third-party audit firms have invested in providing PCQI training for its auditors so they are better prepared to evaluate the sufficiency or gaps in the hazard analysis. It is a good idea to ask your audit firm what updated skills and training have been given to its auditors to ensure you are getting the assistance you need.

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Roslyn Stone

The Changing Landscape of a Foodborne Illness Outbreak Response

By Roslyn Stone, MPH
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Roslyn Stone

Recent high-profile foodborne illness outbreaks appear to have an enduring impact for the entire industry – from when and how health departments respond to alleged illness to how a single tweet wreaks havoc. The bar for when a comprehensive response is required is lower and the extent and nature of the required response has changed.

Here’s what we’ve learned:

Health departments are receiving more complaints from consumers. Although much of this is believed to be related to the high-profile outbreaks, some are a result of health department websites making it easier to report illness. A few years ago, guest illness reporting required calling the health department during business hours, working your way through complex voicemail options until you reached a recorded line to leave a message about your illness. Today, most health departments in large cities and many in smaller counties, have simple on line reporting systems available 24/7. So when someone isn’t feeling well at midnight, and is sure it’s from the last thing they ate, they go online and report the illness.

Health departments are now more often following up on single reports of illness and reports of illness that are inconsistent with most foodborne illness incubation periods. This is creating a large burden for already short-staffed departments, but in response to what the public now expects. In the past, they might have replied to the ill guest and explained that they’d received no other reports, that most foodborne illness has a longer incubation period and refer the illness to personal physicians if a follow up is clinically appropriate. But today, we’re finding many health departments dispatching inspectors for even a single complaint that doesn’t appear consistent with incubation periods for that meal.

There’s increasing pressure on health departments to go public with illness events – even if the illness is no longer ongoing or creating a public health risk. The foodborne illness legal community has made it clear that they believe the public has the right to know about any and every foodborne illness. And some health departments are responding to that pressure – without their being an on-going public health risk; which would have been the trigger in the past.

Guest complaints about illness are occurring more frequently. Every single one of our clients is reporting an on-going uptick in guest reports of illness. We’re not clear if it’s that consumers are more aware of illness, more concerned or more likely to associate it with a restaurant or food service provider. But the entire industry is seeing an increase in guest reports of illness. And every guest assumes it was the last meal they ate.

How you handle any guest complaint about illness is even more critical than it was a few months ago. Here’s why: if you don’t’ respond to the guest quickly and listen with authentic empathy, that guest is far more likely than ever before to tweet about you, write a bad review, post on social media or contact the media. You need to act quickly and it doesn’t matter if it’s a weekend or holiday. Waiting until Monday morning is not an option.

Noro season is year-round now… it’s no longer the winter vomiting disease like it is called in some places. Noro virus outbreaks continued in California (and elsewhere) until after the school year ended. We need to be alert to Noro all of the time.

Fourth of July
Fourth of July was an unusually quiet day in the restaurant, quieter than anticipated (meaning more prep done than needed). The next day, two employees called out sick. A day later, two guests (small parties) called the restaurant reporting illness and later that day, two more larger parties emailed their reports of illness through the corporate website. It took another 24 hours to match these multiple illness reports through three different channels. It didn’t trigger a full-blown response and implementation of the noro sanitizing protocol.
THE FINAL TALLY: 40+ guests reporting sickness and nearly half of the staff.
THE LESSON: Coordination of reporting mechanisms so that you see a potential problem and respond at the earliest point when you can have the greatest impact in minimizing risk.

Employees continue to work sick. There are so many reasons that employees work sick and it has little or nothing to do with paid sick time. They work sick because they’re not very sick, they don’t understand that any gastrointestinal upset may be a sign of foodborne illness, they don’t want to disappoint their manager or they don’t want to let their team down. They’re working sick for altruistic reasons without understanding the potential ramifications. We have a long way to go in educating managers and employees about what “sick” looks like, what can happen from working sick and why we need to work together long term to change this set of behaviors.

Employee Exclusion Policies need to be revisited. Someone is shedding the Noro virus for twenty-four hours prior to become symptomatic and then at very high levels for three days after symptoms end. Sick employees need to be excluded for much longer than they currently are in most restaurants and food service establishments to control Noro outbreaks.

Employee Illness on Days Off are as critical to crisis prevention and response as illness on work days. You need to know if an employee was sick on a scheduled work day or on a day off. As we discussed previously, they were shedding the Noro virus before they got sick and for days after. Your illness response plan needs to include a very robust tool for employee illness reporting – one that is as easy to use seven days a week and raises an alert to management when there are two or more sick employees.

It’s time to redraft and recommunicate the definition of a potential crisis in your organization. In the past, we previously used the following definitions of what defined a potential crisis for a restaurant or foodservice group:

  • Two or more employee illness reports (for same time period and symptoms)
  • Two or more guest complaints (from different parties for same time period)
  • One confirmed employee illness (with a communicable disease)

Your new definition must be broader and reflect the lower trigger points for action. It may include one guest complaint from a large party, illness in a neighboring school, social media buzz about illness from your location and / or a health inspection in response to a guest complaint of alleged illness.

The takeaway: the lessons learned continue to evolve and new ones emerge with each new outbreak. Making sure we identify and share these lessons across the industry and your organization is critical for being prepared to first identify and then quickly respond to the next threat that comes your way.

Amy Kircher, DrPH

Food Defense Collaboration: The Whole is Better than the Sum of its Parts

By Amy Kircher, DrPH
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Amy Kircher, DrPH

It is 4 p.m. on this warm, fall Friday afternoon. You are wrapping up your work for the week and the dreaded “we’ve got a problem” call comes in. “Hey boss- we have confirmed foreign materials in the product. It’s a material we have never seen before and is not found in our plant. What do you want us to do?”

Nothing kills your weekend faster than this phone call. And frankly, you know this incident has a high likelihood of being intentional adulteration based on the information shared. What do you do? Who do you call? What does the regulation say?

With the increasing global threats and actual case history of intentional adulteration in our food system, no single organization – public or private – can tackle all the threats, vulnerabilities and incidents capable of causing devastating public health harm and economic loss from a food system disruption. There is little doubt that collaboration can – and has – mitigated consequences of intentional contamination. So how do we make an interagency and intra-agency, public and private collaboration in food defense a standard business practice?

I can almost hear what you are thinking, “We specialize in making food,” not in food defense. How do we even start making it a standard business practice? Collaboration! especially given the small margins within the food industry and limited funding at all levels of the government. The economic reality is that we must address the low probability versus high consequence ratio in the food defense area carefully and allocate restricted dollars responsibly. In the food and agriculture sector, this is complicated by a multitude of factors. Our food comes from a complex system of systems with challenges presented throughout global production and rapid, just-in-time transport. Today, our evening meal has likely traveled hundreds, if not thousands, of miles before it hits our lips. To efficiently and effectively protect our food, we must partner in a way that allows each collaborator to operate at the top of their skill set.

While traditional food safety events are readily handled by current infrastructure, preparing for and responding to an intentional contamination of our food will require expertise and experience from an interdisciplinary team. The industry knows how their business operates from procuring optimal ingredients for their recipe to the internal process controls operating in their facility. Professionals in the food industry know when something is not right. Our academic institutions are filled with subject matter experts on food science, public health, manufacturing and global trade. They spend careers becoming an expert within their discipline and collectively are a robust network ready to be tapped. Academic institutions also have training specifically designed for the food industry. Finally, our government collaborators are working hard to not only mitigate the risk of intentional adulteration but also create a consortium of trained experts to aid in the response to an intentional adulteration event.

So going back to that call you received at 4 p.m. on this warm, fall Friday afternoon, what would collaboration look like?

An employee with food defense training (designed in conjunction with a government regulatory agency) recognizes the food product on the final processing line has unidentified foreign material on it. He stops the line immediately and calls their supervisor who participated in a food defense workshop and exercise (provided by a university). The supervisor recognizes the foreign material has a high probability of being intentionally added to the food product and calls headquarters to recommend a facility shut down and immediate hold of all product based on their food defense plan (written with support of government and academic tools). The next call is to the regional FBI agent with whom an established relationship exists (meeting at a public-private-academic outreach event). The agent is informed that a possible intentional adulteration attack has occurred. The agent and the facility supervisor quickly determine they will include public health based on their training both received (criminal–epidemiological investigation workshop jointly developed by government and university). Within a matter of days, the facility has restarted full operations and the perpetrator was apprehended. No adulterated product reaches the marketplace.

Does the above sound like a dream collaboration for a really bad Friday? It is completely feasible and we have seen it in practice. Unfortunately, there are numerous examples in recent years of similar events using similar collaboration to address intentional adulteration events. Having all the collaborators from industry, government and academia function at the top of their skill set with open communication allows the collaboration to work. Before, during and after incidents, the following roles are essential for both preparedness and response:

  • Food producers provide expertise on making food and identifying anomalies during production
  • Investigators (criminal or public health) provide expertise in conducting investigations, stopping the exposure and finding the source of contamination
  • Regulators provide expertise in producing implementable guidance and tools
  • Academics provide expertise by serving as subject matter experts, developing and delivering training, and serving as consortium-building neutral third parties

We cannot ignore the food system as critical infrastructure. There are risks and vulnerabilities throughout the supply chain and production of our food that must be identified and addressed. A collaborative industry, government and academic collaborative approach has much to offer to prepare for, protect against and respond to intentional adulteration motivated by terrorism, sabotage or economic gain. This month, take a moment and identify the collaborators you need to help you defend our food supply.

Randy Fields, Repositrak

Five Latest Recall Technologies

By Randy Fields
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Randy Fields, Repositrak

Like most other sectors of technology, systems designed to make our food supply chain as safe as possible continue to advance rapidly. Government regulation certainly has played a role in innovation for the space, but economics and customer engagement really lead the way.

The area of recalls is specifically receiving attention from vendors, and both brands and retailers are demanding fast and accurate technologies to meet customer expectations and government requirements. While all trading partners understand major recalls are inevitable, the belief is that new technology will help reduce their severity.

We have lived through and learned from these situations, and are now working to ensure even more efficient recalls in the future. Here are five recall technology trends to watch during the next few years:

Cloud computing – On-premise computing still has a significant role to play in retail technology, especially with sensitive customer data, but retailers and their brand partners are moving elements of their systems to the cloud for added flexibility and collaboration, reduced cost, document control and easy disaster recovery. These last two prove extremely useful for the optimization of a recall, ensuring that the right information is shared with the right stakeholders about the right products in a timely fashion.

AI & Machine Learning – Retailers and brands are already gaining tremendous increases in accuracy in shopper data, as computers rapidly become better trained on how different profiles are best marketed to. Accurate shopper data allows retailers to understand exactly the type of shoppers who are engaging with its brand, and those insights allow for more tailored decisions on everything from assortment and store design to customer loyalty programs and, yes, product recalls. Artificial intelligence boosts this process by a factor of ten or more.

Smart Homes – While a growing percentage of household items can already connect to the internet and provide data, much of the smart home technology currently isn’t that smart. But it will be, as technology rapidly moves toward a point where it can use the data and connectivity to act on the user’s behalf. The advent of smart speakers like Amazon Echo is leading to alerts linked to orders that will tell shoppers when they’ve purchased something that has been recalled.

Blockchain – Blockchain is more typically discussed in financial services circles, but there are important business use cases in retail. At its basic elements, blockchain is about record keeping and that is critical to many parts of the retail operation. With benefits like reduced fraud and improved security, it will certainly enhance the recall process from start to finish.

Robots – This one is a bit further out, but the foundations for robot automation are being built now. This technology will impact the retailer and brand well before the consumer as factories, distribution centers and stores deploy systems that both stock and, critically for recalls, remove products from storage and display units.

There was a time when recalls were basically manual transactions in which a manufacturer or supplier called or faxed retailers with instructions on what products to remove from the shelf and how to get them back to be credited. Thankfully, those days are gone. A new era of technology is coming that will connect the producer to the consumer via the retailer in order to limit the need for recalls in the first place and quickly address them when required.