Food Safety Magazine

Signature Series | November 4, 2013

Is Your ERP System Ready for the New FSMA Requirements for the Seafood Industry?

By Ian Dyslin

Is Your ERP System Ready for the New FSMA Requirements for the Seafood Industry?

The Food Safety Modernization Act (FSMA) shifts the focus in the food supply to preventing contamination rather than simply responding to it after the fact. By the very nature of its business, seafood companies operate a very complex supply chain that includes managing suppliers from all over the world and tracking hundreds of seafood species, as many as 300 or more,[1] in a variety of different weights and sizes, with each having their specific handling, process and packaging requirements. Seafood companies now faced with FSMA mandates will have some hurdles to overcome in complying with the new intensified record-keeping and reporting requirements. This is due to several factors including reliance on old databases, archaic spreadsheets, and homegrown systems.

By and large, legacy systems tend to be inefficient and prone to errors because of their inability to quickly find and produce the required data for audits, their limited ability to secure data and the lack of standardization capabilities that facilitate integration with other systems. So, let’s specifically take a look at some of the FSMA criteria which will stretch the capabilities of legacy systems and many enterprise resource planning (ERP) systems as the U.S. Food and Drug Administration (FDA) gains greater access to virtually all of a seafood company’s records.

Supplier Verification, Compliance and Registration with FDA Information
Clearly, the FSMA makes it more challenging to maintain food safety standards by requiring importers to verify that their foreign suppliers are in compliance. ERP systems will need to produce records populated with thorough supplier and facility data, as well as process data. Specifically, seafood companies will need to provide information related to supplier verification, compliance and registration with FDA. The Foreign Supplier Verification Program requires seafood importers to conduct risk-based verification activities to ensure the product was produced in compliance with FDA standards. By maintaining data on a supplier’s registration status, importers can avoid importing goods from suppliers that are out of compliance.

All food facilities, both domestic and foreign, must also submit registrations to FDA.[2] Non-compliance, especially by the foreign facility, can be costly. If a facility fails to register, food planned for import into the U.S. from that facility can be refused by FDA. Compliance reporting also will require information, such as the last FDA inspection date for a facility and next inspection date, as well as a data retention policy supporting two years of hazard analysis and risk-based preventative controls.

Delivery of Reports and Alerts
With all the potential risks in food safety that seafood companies are faced with on a daily basis, a non-compliant supplier can have a negative impact on the company’s entire supply chain. To minimize this risk, a system must be able to deliver timely reports and automatic alerts that proactively warn suppliers of their compliance obligations and the corrective actions they need to takein order to remain compliant.Consequently, if a particular supplier fails an inspection, and does not take corrective action to remain in compliance, the seafood company must be prepared to take quick and decisive action and disallow imports from that supplier. To further streamline the process, once the compliance verification event is set, the software shouldautomatically send notifications to internalcompliance officers to initiate tasks related to certificationrenewal and adherence to regulations.

Proactively managing suppliers that may be out of compliance or updating them with what they need to do to remain compliant can minimize significantly the risk and costs of delayed or rejected shipments, expensive fines, spoiled food, and even the potential loss of customers.

Cost and Predictive Analysis
Complyingwith the new FSMA regulations may mean additional costs for producers, suppliers and importers. To minimize the negative impact on a company’s margins, an ERP system must correctly analyze, predict and react to the price and cost implications of non-compliance issues. For example, a FDA’s product refusal as a result of a supplier’s non-compliancecanincreasecosts associated with possible spoilage, premium freight costs, and customer dissatisfaction. Then also consider the extra costs of re-inspection where fees can range from $221 to $289 an hour.[3] An ERP system must provide the analysis needed to manage these non-compliance costs and take action such as automatically applying fees to a supplier’s purchase order, either passing them on to the vendor or directing them to an account meant to accrue the liability associated with these types of fees.

Store and Render Certification and HACCP Documentation
The ability for an ERP system to store and render certification and hazard analysis documentation for FDA inspections will eliminate the common practice of usingmultiple systems, manual paper based solutions, and spreadsheets that are prone to inaccuracies. Under FSMA, companies are not only required to have a Hazard Analysis and Critical Control Points (HACCP) plan, but they also have to demonstrate how HACCP is implemented within their operations and show analysis of its effectiveness and proof of corrective actions if there are problems.

An ERP system should have the capabilities to enable seafood companies to manage all of the Critical Control points in their supply chain. This includes facilitating food safety recall plans, providing trace/recall information within 24 hours from and FDA request, and managing raw material intermediates and finished product traceability through automated and electronic processes. For instance, another automated process from an ERP system which further facilitates food safety compliance is the ability to manage the definition of each worker’s authority level and training requirements on the plant floor. For example, an ERP alert or trigger can automatically alert a manager that a workeris not up-to-date on all the training requirements such as food safety, allowing for proactive compliance management.

Create Transaction-Specific Holds for Product
In the new FSMA era, seafood companiesmust be able to isolate quality issues quickly to avoid painful audits and costly recalls and one way to achieve this is the ability to create transaction-specific holds for a particular product based on locations, reason to believe and definable attributes and/or batches. Transaction-specific holds are utilized in the trace/recall process once a trace/recall report has identified a suspect lot/batch, supplier or piece of equipment, for example. With an ERP system, this process and the corresponding report typically takes no more than 10 minutes and automatically places all results on “hold.” However, many companies find this process very time consuming, which can take hours or even days to perform, since they rely on a mixture of paper-based solutions and spreadsheets for tracking coupled with third-party quality systems or external databases for reporting.

At a minimum, an ERP system should have the following lot trace capabilities: lot traces by date/time ranges; trace results that can be saved for further investigation; lot traces both forward and backward with advanced and variable filter capabilities; and the ability to exclude transactions or times from a trace.

Sea-to-Fork Traceability
Even though FSMA is focused on preventing rather than responding, detailed recall information is still critical to the success of overall compliance and minimizing the risk of damage to a company’s brand and bottom line in the event of a recall. New regulations will require seafood companies to track and trace all products to the original point of origin compared to what is currently the norm of only tracking products at convenient points in the supply chain.Companies will have totrack and manage detailed information on every product such as country of origin, receiving port, shipping vessel, shipping container, arrival date, expiration date, manufactured date, lot number, and detailed information related to the form and species of the imported product.

To facilitate other traceability compliance requirements, a company’s ERP system also will need to populate data regarding critical tracking events, core business processes and key data elements that range from product receipt, ingredients, processing, packaging, storage, transfer and shipping.

Prepare Now for FSMA
Seafood companies need to be aware of their current systems abilities to handle the new FSMA regulations. Homegrown systems are usually designed to meet specific business requirements and struggle to keep up with growing businesses and changing regulatory requirements. Older ERP systems often lack the functionality required to meet new complianceregulations without costly modifications.

Software vendors are just now releasing FSMA-related software functionality. So, seafood companies need to consider adding this enhanced functionality to their existing ERP or replace their legacy systems with an ERP system with built-in FSMA capabilities. Obviously, there could be a significant investment when implementing any ERP system. However, a company needs to weigh carefully the potential costs of non-compliance which can result in expensive fines, increased operational costs, loss of throughput and, even worse, loss of customers.

Ian Dyslin is the director of consulting, food & beverage, for Junction Solutions.

References
1. National Oceanic and Atmospheric Administration. Ensuring global competitiveness of the U.S. seafood industry. National Sea Grant Program.
2. www.fda.gov/Food/GuidanceRegulation/FSMA/ucm247548.htm#SEC301.
3. www.fda.gov/Food/GuidanceRegulation/FSMA/ucm257982.htm.