RFID and Food SafetyDan Fitzgibbons

Principal at Deloitte Consutling LLP

T he road to re gulatory compliance and brand assurance

Consumer Business

In this interview, Dan

Fitzgibbons, Principal at

Deloitte Consutling LLP,

describes why bar code and

genetic tagging technology

can not only help food

and beverage manufacturers, wholesalers and

retailers comply with evolving government

regulations regarding food safety but also

create a unique opportunity to enhance and

assure brand value and expand consumer

loyalty.

What is RFID technology and why has it become a hot topic in food safety?

Radio Frequency Identification (RFID) involves a reusable tag, containing a tiny microchip and an antenna. It can be attached to a single item, bulk shipments or containers of items and carries detailed identification and descriptive information about that item (with the added ability to collect the data via imbedded sensors). It is designed to be

read automatically at a distance by a safe, low-power radio signal. RFID readers can scan multiple tags rapidly and simultaneously, leading to significant handling efficiencies, greater visibility of inventory and asset information, better stock rotation and improved on-shelf availability for retail customers.

RFID has been linked to food safety for two primary reasons. First, while the security of our food supply has always been a critical issue for manufacturers and retailers, it has emerged as “Severe” i.e., DHS (code red) topic. Why? It's due to the terrorist attacks of 9-11, the mad cow and hoof-and-mouth disease crisis in the UK, the avian (chicken) flu pandemic in Southeast Asia and the future threat of other unforeseen incidents. Food companies and their consumers have heightened concern about the risk of illness from a contamination incident, whether by accidental tainting of a product during its processing, shipment and storage, or as the result of deliberate tampering or bioterrorism. Furthermore, customers are demanding assurance that the brands they purchase are supplied by companies with enlightened (i.e., green) and consumer sensitive policies and practices that assure a responsible approach to food safety. Additionally, there is heightened consumer awareness about food quality, including ingredients and their nutritional content, e.g., organic vs. processed foods. This former niche trend has now matured and virtually all consumers are eating healthier foods. They want to be assured of the integrity of the products they are buying, including a justification for paying a premium price for them.

Health and Human Services Secretary Tommy Thompson said in a speech 12/3/04 announcing his coming departure from the Bush cabinet that “he worried every single night about a possible terrorist attack on the food supply.” Despite dramatic increases in inspections of food imports, only “a very minute amount” of food is tested at ports and airports, Thompson said.

“For the life of me, I cannot understand why the terrorists have not attacked our food supply, because it is so easy to do,” Thompson said. “We are importing a lot of food from the Middle East, and it would be easy to tamper with that.”

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RFID & Food Safety

These two issues — the threat of bioterrorism and other forms of contamination and consumer concern about the integrity of the food they eat — have increased Industry concerns about the ability to prevent a food safety incident, and when an incident occurs the ability to quickly and thoroughly contain its impact and prevent its recurrence.

How can the Food Industry use barcodes and RFID to address these concerns?

Bar codes and RFID can provide visibility to the entire food value chain via inherent 'track and trace' capabilities. For example, a retail cut of beef can be traced back to the processor and ranch where the cow was raised. This includes information regarding all of its movements and acquired product attributes as it goes through the value chain, including each processor, wholesaler, distributor and retailer. RFID tags can become the unique identifier for successive steps in the product transformation up to and including point of purchase, if desired and justified.

It's important to note that RFID is in its infancy and the technology itself has both engineering and cultural challenges to overcome. For example, it can be difficult to accurately read all of the RFID tags on all items, e.g. frozen and other high moisture content items. Privacy issues are also prevalent as consumer advocacy groups express concerns about the private information that can be captured by regulators and retailers regarding the processing or purchase of RFID-tagged products.

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There is growing evidence, however, that Consumer food safety concerns will lead to RFID as a solution component as the technology matures and appropriate privacy safeguards are assured (see diagram below). RFID therefore remains in an incubator stage, with many companies experimenting on how best to apply this technology to their value chains before production-ready systems become more prevalent in the next 3-5 years.

What are the long-term benefits of RFID in food safety applications?

On one hand, retailers, manufacturers, wholesalers, and suppliers will achieve greater levels of safety by complying with the new regulatory environment that will be set up to address food security. For example, the USDA has proposed legislation that companies must be able to identify specific components of a food safety crisis within 48 hours of an event. If tainted material is found in the food value chain, all companies must be able to accurately and quickly locate, quarantine, recall and destroy all affected materials. Large-scale product recalls can be devastating financially, including long lasting financial impacts. Properly conceived food safety solutions provide Industry benefits that make good marketing, financial and overall business sense. RFID and related information technology can result in a recall that is more surgical, more precise and therefore much less costly. The damage to brand identity, consumer confidence and product allegiance can be minimized.

Thus RFID as it relates to food safety is not just an issue of compliance and product recall. More importantly it represents an opportunity to assure and enhance brand value by recording evidence of how, when and under what conditions the food item was processed and transformed. If a manufacturer can ‘certify’ to a consumer that its product is superior, e.g. where/how it was farmed or raised, it can anticipate greater market share and consumer loyalty. For example, following the recent mad cow scare in the US, Whole Foods markets immediately saw a 100% increase in consumer purchases of its beef products based on the marketplace belief in Whole Foods as a trusted retailer. Ultimately it depends on whether the consumer can be given evidence and assured that the food product, including its ingredients, were cultivated or raised and processed under conditions that have created both a safe and/or enriched product. Food processors who provide this assurance can instill confidence and faith in their brands with the consuming public and premium products e.g. ones with added nutritional content, etc. can warrant premium pricing. (see diagram below)

RFID & Food Safety

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What should these Food & Beverage companies do now?

There continues to be resistance to adopt technology in the short term given pending government regulations, evolving technical standards, and likely significant cost of implementing RFID. The cost consideration is certainly an issue at the item or SKU level (think individual cow, carcass or retail package of meat). As a result, only selected instances of live, production systems utilizing RFID for food safety exist currently with none currently providing 'field-to-fork' (i.e. end-to-end) supply chain traceability. Further, technology alone, be it RFID or related supply chain systems, will not in and of itself provide the solution. Revised food safety policies and procedures need to be created among trading partners (including clear definitions of shared roles and responsibilities) to establish the operating environment in which the 'solution' is mutually conceived and operated.

Food suppliers and retailers need to first establish their own Food Safety Agenda, inclusive of results of a Food Safety Maturity audit. A common-sense Food Safety agenda can be established by pursuing the following steps:

• Understand how to utilize process, product attribute, and ownership information to drive food safety compliance and brand value in your marketplace;

• Join Industry and Trade groups to keep abreast of marketplace and regulatory initiatives;

• Work with key trading partners early in the process to identify mutual risks/opportunities;

• Conduct an end-to-end Food Safety Maturity Audit (see below) and develop an associated Business Continuity and Risk Management Plan;

• Document a business case and its impact on Shareholder Value, i.e. create Food Safety Shareholder Value Map;

• Build solutions incrementally - start with small, focused in-house pilot projects; and then expand initial solution from one or more segments and address food transformation across the entire food chain

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The food audit mentioned above (and outlined in diagram below) is a means to evaluate the sensitivity and exposure to food safety issues across the entire value chain. The audit will logically go beyond a manufacturer's four walls, extending to suppliers and customers. By understanding the value chain and where the weakest links reside, each firm can target participants that do not have the necessary product information or appropriate internal controls to assure overall food safety. Trading partners can begin to understand where the real risks lie even as they attend to their own internal food safety issues.

Food Safety Maturity Framework

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RFID & Food Safety