Tag Archives: liability

Food Safety Vs. Blockchain: Who Wins?

By Maria Fontanazza
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The jury is still out on how (and if) blockchain can contribute to a safer food supply. Whether or not there is a clear understanding of the technology, and its potential and pitfalls, is up for debate as well. “What is blockchain? This is the number one question that people have,” said Darin Detwiler, director, regulatory affairs of food and food industry at Northeastern University, who led a panel of experts as they deliberated over this hot topic during the 2018 Food Safety Consortium.

“Blockchain levels the playing field where we can connect people, resources and organizations in ways we’ve never done before to harness new ways of extracting value,” said Nigel Gopie, global marketing leader, IBM Food Trust at IBM.

What Is Blockchain?

Gopie provided an introductory definition of blockchain: Simply put, it is a series of blocks of information attached together. Each block is a box of information that stores data elements, and this data could be almost anything. Each block has a digital fingerprint associated with it; this fingerprint allows you to know that the block is unique and can attach to other blocks. When new blocks come into the chain, each block has a new fingerprint—one that is unique to that block and of the block before it. This allows the connection to happen, and enables visibility into the origin of each block.

Blockchain enables one book of business and provides three important benefits, said Gopie:

  1. Digital transactions
  2. Distributed ledger with one version of truth throughout the network
  3. Data is immutable
Blockchain, IBM, Food Safety Consortium
IBM’s Nigel Gopie breaks down the basic meaning of blockchain for attendees at the 2018 Food Safety Consortium.

Although blockchain can help to start the process of solving food issues surrounding safety, freshness, reduced waste and sustainability, the technology is only the foundation. A series of other components are important as well, said Gopie, and the following are some insights that the expert panel shared during their discussion.

2018 Food Safety Supply Chain Conference, Blockchain
Is the Food Industry Ready for Blockchain? Check out a dynamic panel about the technology from the 2018 Food Safety Supply Chain Conference.

Can Blockchain Actually Impact Food Safety?

Jorge Hernandez, chief food safety officer at Wholesome International: “To me, it’s a fantastic new technology that would allow the food industry to do a much better job of finding, from seed to fork, all of the processes and things that happen to that product. And in the future, [it] allows us to identify problems first and solve [them]. My problem is it being sold to companies…and not able to deliver on the promise… It bothers me that we are looking at a future that may or may not be there.”

Angela Fernandez, vice president, retail grocery & foodservice at GS1 US: “We’ve been working on traceability and transparency for over a decade—you have to be capturing the data needed, [and] we’re still working on getting it right. We’re just not there yet. I think it’s a great place for us to strive to go towards, but we’re still early in the stages of accepting it as a community.”

David Howard, vice president of corporate strategy at Pavocoin: “Blockchain itself is simply a technology. We’re all here because we’re just trying figure out what application we can use in business. Blockchain is a technology that can help all of you improve operational efficiencies for your bottom line.”

Is Blockchain a Barrier or a Fast Lane to Heightened Liability Concerns?

Shawn Stevens, food industry lawyer and founder of Food Industry Counsel, LLC: “I think the starting point is to ask ourselves what makes food unsafe. It’s a lack of transparency…What blockchain can do is illuminate entire segments of the industry…From a reactive standpoint, blockchain can help us identify a problem [and] solve it. From a preventive standpoint, if I have access to all this information regarding attributes and quality of supplier, I can make better decisions that protect my company.”

“We want to know more and be better informed. Once you know more, you better react and do something. If you’re getting this line of sight and you don’t react to it, that’s what exposes you to liability.”

Darin Detwiler, director, regulatory affairs of food and food industry at Northeastern University: “We need to look at the balance between the reactive use of blockchain and the proactive use.”

2018 Food Safety Consortium on Blockchain. (left to right) David Howard, Pavocoin; Jorge Hernandez, Wholesome International; Nigel Gopie, IBM; Angela Fernandez GS1 US; and Shawn Stevens, Food Industry Counsel, LLC. Not pictured: Darin Detwiler, Northeastern University.

What Barriers Does Industry Need to Anticipate?

Fernandez: “The barrier of the standards and interoperability piece—that’s a big question our community is asking us. Scalability… standards are vital…I think that opens up a different discussion when talking about private versus public blockchain.”

Hernandez: “What is my ROI? The issue I have with blockchain is not only the investment in my organization, but I have to bring my entire supply chain with me if I want to get any benefit. There’s a good value proposition, but it requires you to get everyone on board. When you’re a large organization, it’s probably not that hard to do. But a small organization like mine where my suppliers are an Amish community that sells us cheese, that’s a huge mountain to climb. They don’t have the background [or] the technology, and even if they wanted to do it, it’s a big change for them. You’re asking me to make a change in my relationship with my suppliers.”

“Take a look at it from the business continuity [perspective]. What are the changes you’re going to have to make? And that changes that have to be made by everyone who works with you? We should not stay static. We should continue to look for things. If this is the technology that is going to move us forward, let’s start getting prepared.”

Randy Fields, Repositrak
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Insurance and Food Safety: A Primer for the C-Suite

By Randy Fields
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Randy Fields, Repositrak

Food safety risk is now a greater concern for retailers and manufacturers than ever before due to the combination of FSMA and increased consumer concerns. Supply chains are more complex, product recalls and foodborne illness outbreaks occur more frequently, and the new normal is prevention rather than inspection. Wrap that all up with advanced technology and the 24-hour news cycle, and consumers are acutely becoming aware of food safety issues as soon as they occur.

What this means for all of the participants in the global food supply chain is that you should review your insurance policies and look for gaps in coverage where you may be exposed. While no two recalls are the same, and foodborne illness outbreaks impact affected companies in different ways, certain trends have emerged to help better understand the claim friction points that frustrate companies after a food safety event.

Two of the most important tools to mitigate food safety risk are contaminated product insurance (CPI) and product recall insurance (PRI). Inventory, cost of refunds and recall expenses are three of the largest recall loss items suffered by companies. Combined, they are the largest percentage of loss (nearly 50%) and represent a substantial portion of uncovered loss for any insured under CPI/PRI. The sole basis for this frustrating friction point is simple—lack of traceability.

CPI/PRI only covers losses that result directly from a covered insured event. If a company is unable to support its claim that costs are directly related to the event and the resulting recall or outbreak, it will not be reimbursed under a CPI/PRI policy. And, as such, loss amounts are generally not covered under general liability and property policies either, so a significant portion of a company’s loss remains uncovered.

Here’s a recent claim example to illustrate the impact on a company that lacked the capability to properly trace its products. An insured purchased a CPI policy with a $2 million Accidental Contamination limit. An event occurred involving a contaminated food product, which triggered that coverage. During the review, the insured provided spreadsheets supporting nearly $1.1 million in customer credits for product shipped and either returned by the customer for disposal or destroyed by the customer. Unfortunately, based on a review of the information provided in support of the spreadsheets, the accountants found that the insured was unable to properly trace and support its claim that the returned or destroyed product was affected by the insured event recall. Under these circumstances, the accountants were only able to confirm $187,000 in losses. The result: The company was unable to recover nearly $1 million in potentially covered losses because it lacked traceability. These outcomes are not uncommon.

The insurance industry understands food safety risks and the need to evolve products to meet the needs of food industry clients. Companies can’t totally mitigate all food safety issues, but understanding the risks is the best way for a business to protect itself. Insurance industry leaders are working in partnership with their food sector clients to ensure that risks are better understood and that the client has appropriate systems in place to help mitigate them.

Insurance companies are tailoring their products to ensure that policies are developed to address the recall risks caused by regulatory changes and help companies ensure compliance as well as an understanding of the regulatory requirements. However, food companies may increasingly find coverage and limits adjusted lower for government recalls in high-risk environments. Insurers are also a key player in the promotion of food safety standards, and some offer favorable rates to food industry clients who are graded top tier for safety.

Some insurers go a step further, allowing clients to allocate a portion of their premium for pre-incident risk-analysis and crisis-response services. Top insurers provide clients access to a network of crisis management specialists as part of their food safety coverage. They should offer risk management guidance in areas such as food safety risk, regulatory compliance, supply chain management and product security.

One of the most critical risk mitigation tactics is developing long-term relationships with trusted, but verified, suppliers, distributors and other key partners. It is also important for companies to undertake regular site visits to their manufacturers or suppliers, and commission third-party audits to maintain reliability and transparency.

Not if, but when a product recall occurs, a company faces a myriad of risks. As with food safety, preventive planning can pay off significantly. By proactively working with insurers, trading partners and technology vendors you can reduce if not eliminate the negative impact of the event.

DOJ Launches Criminal Investigation into Dole

By Food Safety Tech Staff
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Learn innovative ways to mitigate the threat of Listeria at the Listeria Detection & Control Workshop | May 31–June 1, 2016 | St. Paul, MN | LEARN MOREOn Friday the news broke that the U.S. Department of Justice (DOJ) was investigating Dole Food Co. over the Listeria outbreak involving packaged salad. The deadly outbreak was linked to salad produced at Dole’s Springfield, Ohio facility. Although the DOJ has not yet commented on the criminal investigation, The Wall Street Journal reports that Dole reported positive Listeria samples at its facility as early as July 2014.

In January 2016, Dole voluntarily recalled all salad mixes produced at the Springfield plant, by which point 33 people in the United States and Canada had fallen ill with Listeria and four had died. The CDC reported on March 31 that the outbreak appeared to be over and Dole restarted production at the Springfield facility in April.

In a press release on the company’s website, Dole stated that the issues FDA reported at its Springfield facility have been corrected. “We have been working in collaboration with the FDA and other authorities to implement ongoing improved testing, sanitation and procedure enhancements, which have resulted in the recent reopening of our Springfield salad plant.” It also acknowledged that it had been contacted by the DOJ related to an investigation and will be cooperating with the department.

Fontanazza and Fields

Food Companies: Know Your Suppliers

By Food Safety Tech Staff
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Fontanazza and Fields

Read the Q&A with Randy Fields, “Senior Execs in for a Rude Awakening Regarding Supply Chain Compliance”Both accountability and liability will play a role in how food companies work with their suppliers moving forward. “The global food supply chain has really been based on trust for the last 70 years,” said Randy Fields, chairman and CEO of Park City Group and Repositrak. In a video interview with Food Safety Tech at the 2015 Food Safety Consortium, Fields explains how companies must go beyond simply “trusting” their suppliers to having a keen awareness of their suppliers’ activities from a compliance perspective.