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Security and good manufacturing practice - one and the same

The 2003 Ernst & Young Global Information Security Survey identifies legislative and regulatory compliance (48%) and reputation and trust (47%) as the most influential driving factors for information security spending.

South African food (including nutraceuticals) and animal feed manufacturers exporting to the European Union (EU) are currently faced with compliance of EU Food Law EC178/2002 which is due to come into partial effect in January 2005. Essentially, the law states that the manufacturers will have in place systems that facilitate full lot traceability for all food/feed products being used for consumption in the EU.

However, spending on systems to facilitate compliance with the EC178 directive should not be the sole driver for systems in the manufacturing industry.

Reputation and trust goes hand in hand with good manufacturing practice (GMP) and this should be considered when systems are put in place. Full lot traceability begins on receipt of raw materials and should continue until the manufactured product leaves the manufacturers premises. However, many small-to-medium South African manufacturers are adopting a wait and see attitude, relating to the implementation of GMP systems and are reluctant to carry the costs. This was confirmed at a recent meeting with representatives from EAN and the Consumer Goods Council. They commented that manufacturers (mainly in the small-to-medium arena), are prepared to run the risk of damage to both brand and reputation as well as suffer crippling recall costs if it means that they can put off expenditure on traceability compliance systems.

"For manufacturers today, innovation is the engine of growth. Paradoxically however, building or restructuring their operations to profitably bring new products and services to market is near the bottom of most manufacturers priorities." - Deloitte & Touche Mastering Innovation Study.

Deloitte & Touche released a fascinating article (Available on its website at www.deloitte.co.za) where the company goes into detail about how an integrated supply and manufacturing chain is integral to the development of profitability. The study continues by discussing that revenue growth in the manufacturing industry is likely to be driven by product innovation not by corporate activity such as mergers and acquisitions.

The 'innovation paradox' continues by looking at how many companies need the innovation to grow but are not prepared to invest in infrastructure to support the innovation.

Consumers today would be very surprised how the manufacturing process is sometimes handled in reality - recipes and lot numbers are stored on random Excel spreadsheets and pieces of paper, goods are labelled as an afterthought and not as part of production. Access to safety datasheets and manufacturing instructions is often limited and not available for the people down on the production floor

A closer relationship between retail and the manufacturers?

What will be interesting to watch will be whether or not retailers actively push GMP through their supply chain in an effort to protect their own reputations and brands. A prime example of a retailer influencing their supply chain is the Wal-Mart directive where 100 suppliers are being instructed to comply with regulations relating to RFID tracking of items.

Cost of recall

Recall of a product in any instance is a headache for a manufacturer and often leads to damage to a brand and the manufacturer's reputation. Being able to identify suspect lots and their destination will make the entire process much easier to manage and reduce commercial damage.

Are security and GMP related?

Good manufacturing practice begins with full lot traceability of raw materials including secure receiving and labelling. Secure custody transfer between warehouses, production floor and a secure distribution channel mean that the manufacturer can rest easy knowing:

* What raw material has been received.

* The raw materials have been correctly labelled.

* Secure custody transfer of raw materials and manufactured product from stores to line-side warehouses has been achieved.

* Secure proof of delivery out of the manufacturers warehouse.

* In the event of a recall, the manufacturer is able to identify specific lots that need to be recalled instead of an entire production order.

Closing note on implementation costs

Any system that is implemented is only as good as the people that use it and the systems in place that 'govern' its use. Both manufacturers and retailers must identify what their problems are - shrinkage, lot traceability, regulatory compliance, etc, and find the system that fits their operation. One of the key factors that comes out of a number of research reports into security systems is that most companies believe technology is where they should place their money and that will solve their problem. However, they do not look at the people that have to operate the system and their training and incentives.

Fitting a scalable solution with key people being trained to oversee specific tasks is likely to generate a far better return on investment than simply incurring massive technology costs.

Considering security and GMP when evaluating technology solutions may well provide a better return and afford manufacturers operational, regulatory, brand and reputation security.

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