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Friday, 4 January 2013

Product Safety - The Myth of Standardized Third-Party Assessment Programs

The problem with myths: Some people strongly believe that zeus has real and amazing superpowers.

They say: “You will be left in the rain” if you do not buy the shield but what is offered is only a paper shield.

Customers want a common basis for assessing the product safety and quality management systems of their suppliers. This has led to the rage of “standardized” supplier assessment schemes as if they have some superpowers. The assessors often conclude that suppliers who conform to the so-called “level playing field standards" demonstrate due diligence. In the face of numerous reported cases of supplied product failures, one wonders if this is true. 

It should be common knowledge, if not experience, that the demonstration of due diligence is not likely to win a court case faced by a company if it sells a product that causes injury.

Failed Objectives of Standardized Supplier Assessment Programs

Although "uniform standards" and the use of outside auditing and regulatory agencies promise cost reduction, impartiality, elimination of self-regulation by suppliers, a “level playing field” and satisfied retailers, these objectives are only marginally realized. The industry generally accepts illusions of success along with the notion that uniform assessment standards automatically lead to strong product safety systems. 

The frequent incidences of product recalls that are affecting large "food safety certified" companies, even in advanced countries, point to an undeniable systemic failure in the global product supply chain. Some of the significant product recalls involve companies that have enlisted in the “level playing field” and external party assessment systems. This forces the admission that the external assessment processes do not offer any guarantees of product safety. So what do they offer?

Some may argue that these uniform assessment schemes help customers choose among possible suppliers or co-packers and nothing more. Where product safety and quality form the bases for the choice among suppliers or co-packers, this argument hardly justifies doing the same things, getting the same results (without product safety guarantees) and resting satisfied. 

Should the industry continue with this “level playing field” and “due diligence” game or should the focus be the actual protection and satisfaction of consumers? How comfortably should retailers rest with these “level playing field” and “due diligence” proposals or claims? Will consumers who are harmed by, or who are dissatisfied with, supplied products simply accept their fate and say the suppliers' certifications demonstrated sufficient “due diligence” under the circumstances?

Variables Posing Serious Challenges to the “Level Playing Field” Idea

The industry does not need cookie-cutter assessment standards. One only needs to travel to different establishments to realize that the notion of uniform standards for product safety assessment at the different establishments is a myth. Establishments are uniquely located and staffed. They have different setups and face different situations. Circumstances and incentives vary from one location to another as well as from day to day. Different jurisdictions also have different regulations with which establishments must comply. This has forced some assessment standard providers to develop different standards for different jurisdictions. These providers would argue that at least the same standards apply to all operators within the same jurisdiction. The irony is that the differentiation of standards from one jurisdiction to another is immediately counter-intuitive to the idea of a level playing field. Furthermore, the wrong criteria typically govern the establishment of the so called level playing field standards.

Even with the level playing field standards, the experienced and knowledgeable assessor must address the unique situations and variations that exist at every location. Thus the presumed “uniform assessment” standards are essentially applied and/or interpreted differently depending on the specific situations faced. The need for the assessor to have specialized knowledge and a keen capability to conduct risk assessment cannot be overemphasized.

The myth of uniform standards for product safety assessment also finds its expression in product safety consulting quackery. With little to no risk assessment skills, many people have branded themselves as “Product Safety Consultants” because they are able to read the generic "level playing field audit standards" and, by copying and pasting information, they are able to assemble generic product safety manuals for sale to various companies. The myth of "standardized" audit criteria makes this quackery possible. Some of these “consultants” actually believe they are doing great work because their clients eventually pass the particular audits of interest. Sometimes, it is a case of engineered focus: The clients simply want to pass the audits and that is the only focus. Meanwhile a thorough risk assessment pertaining to each client’s operation remains conspicuously absent. The "Drive-Thru" consulting services provided by quack consultants mimic the “Fast Food” idea and applies it to the development of product safety and quality management systems. Consequently, many companies now have the “Drive-Thru Fast Product Safety and Quality Management Systems” for managing their operations.

One commentator (Neil Linford) stated the need for good and continuing risk assessment in a post to the Food Quality Consultants group on LinkedIn. Mr. Neil Linford stated as follows: “So much these days is carried out by mantra rather than taking a common sense approach. I think this is behind the misconceptions list” The misconception list to which he referred is posted under "A Series of Unfortunate Misconceptions". Mr. Linford’s comments highlight at least two things that are worthy of attention: The need for proper risk assessment and the use of commonsense.

The Contradiction of Having Different “Uniform Standards”
In many respects, the proposal and reality of "uniform standards" present an intriguing contradiction. The following questions immediately come to mind: How many versions of "standards" have scheme owners or other unifying initiatives produced? Are the "standards" uniform? How many different auditing outfits are involved in the administration of these "standards"? Do they administer the "standards" in exactly the same fashion, with the same interpretations, results, conclusions, etc.? Anyone following the "standards" and their administration should already know the answers to these questions.
The creation of multiple "standards" by different scheme owners presents a contradiction of intent because the scheme owners derive the so-called uniform "standards" from the same knowledge pool with the "standards" simply packaged in different formats. Even the acceptance of different standards by the standards unification bodies is based on criteria that are drawn from the existing knowledge pool. Essentially, the scheme owners and standards unification bodies have created different "standards" from what has always been the true uniform standard and are selling a proliferation of "standards" to the industry as “uniform standards”.

Many users of these different “uniform standards” appear to draw a fallacious conclusion that they constitute the foundations upon which to build successful product safety and quality management systems. In reality, the true foundations are science and real-life experiences by the industry and consumers. Incidentally these true foundations form the basis for any product safety and consumer protection confidence. Where proposed "standards" do not correctly and completely reflect these true foundations, they simply serve as decoys and any operation relying on them is badly mistaken.

Needless Fear

Mr. Linford expressed what clearly represents an illusory concern of many industry participants today. Mr. Linford stated as follows: "If there is a move away from third party audits then you will move away from uniform standards into individual customer and supplier standards as before, this can work but when things go wrong for whatever reason it is more difficult to demonstrate due diligence in the absence of compliance to a recognized standard."

This concern may have some merit but there is no difference between the proliferation of "uniform standards" and the existence of individual customer and supplier standards. One must also keep in mind that even with the so-called uniform standards, customers have not stopped to independently assess suppliers prior to contracts and on a continuing basis. Thus, the proposed "uniform standards" are not completely respected and fully relied upon by customers. Sadly, the need to develop strong systems for customized assessments of the unique situations and circumstances of the different operations is downplayed due to the contradictions of “uniform standards”.

While incongruities can be identified in the current attempts to standardize supplier assessment, this does not automatically mean that external party audits are useless. Rather, it necessitates a better utilization of external parties under more effective arrangements with a proper focus on consumer protection. Suggesting that customers must have a standardized basis for assessing their suppliers is reasonable. However, annual external party assessments mandated by customers and based on a proliferation of “uniform standards” are not inevitable. While third party audits may be useful in some respects, they play a lesser role in ensuring (guaranteeing) the consistent safety of products. Third party audits are good for initial supplier search, trade negotiation and contract ratification. Beyond that, they contribute minimally (if at all) to consistent marketplace product safety. They can even be disruptive or distracting in some instances.

The focus of some suppliers can be distracted from relevant internal issues as they become preoccupied with passing the generic third party audits that may or may not be exactly suited to their unique situations.
Third party audits must be used along with a host of other means of assessing supplier reliability. These include an ongoing assessment of received products and supplier performance tracking. A prudent customer would place more emphasis on these than on any annual third party audit reports. Third party audit providers may fear losing out with the suggestion that third party audits play a lesser role in the actual realization of product safety. The greater fear is this: If things continue exactly the way they have always been in spite of observable failures, the industry will continue to experience sporadic but catastrophic failures as it has always experienced.

Failures will continue irrespective of how the same old things are packaged and re-packaged. All claims about any successes with the current arrangements need to be seriously re-examined.

In a separate conversation, Mr. Linford said what must be said to jolt the kind of right thinking that is very much needed today. He said: “. . . the key point for me is that there has to be a framework which is recognised in law (such as an industry standard) , I don't believe any of the current standards are perfect and all need to be used as a framework rather than a rigid set of rules i.e. using basic common sense. I am interested in food safety and risk assessment and am currently working independently so have cast off my corporate shackles and can say it as I see it. Many of the Tech Managers in the UK would have issues in expressing their views in case they did not chime well with their customer base, by the same token standard developers are also bound by what is commercially acceptable rather than taking a purist approach there is much up for discussion from your innocent questions. My answer to the single question audit was similar to yours, ‘ what measures have you in place to assure the safety of your consumers? ' and clearly the answer to this is not ‘we passed an audit’ "

 The Need for Customized and Strong Internal Assessment Programs

A paradigm shift is clearly needed. One area of such shift is in the strengthening and utilization of internal audits as part of the controls for ensuring product safety. Let me stress that the idea of “internal audit” does not preclude the contracting of qualified external providers of audit services to conduct such audits. This can be done in the same way that employees are hired under contract to perform different roles. This shift of focus to internal audits is not altogether a novel idea. Customers have and will always rely on the suppliers’ consistency in maintaining good control of all aspects of their operation. Strong internal audit systems ensure the completeness, consistency, regularity and effectiveness of internal control measures with or without external audits. External or third party audits may verify that these controls are in place. However, consumer safety and satisfaction with products from suppliers depend more on the day-to-day internal controls (including the internal audits) that are maintained by the suppliers’ personnel or contracted external parties. Many providers of external (third party) audit services also recognize the need for internal controls via internal audits.

Even the “uniform standards” (the supposedly good ones) used for external assessments also require internal audits to be conducted. This fact alone strongly supports the need for internal audits to be ranked above external audits. Practical realities clearly show in every instance that auditing arrangements through second or third parties cannot ensure immediate and sufficient control over an operator’s system to the same degree that such controls can be internally enforced. The providers of third party audit services also openly acknowledge this fact. They often provide disclaimers stating that their audits are snapshots and do not guarantee the consistent compliance of the audited parties.

The term “internal” does not mean “for internal eyes only”. In an environment of complete transparency, customers may scrutinize the results of internal audits in the same way that they may scrutinize the records of all other internal control measures: production monitoring, quality control, risk assessment, implemented HACCP programs, corrective actions, environmental control (temperature, humidity, ventilation, air quality, etc.), sanitation, employee training, customer communications, et cetera. Customers may demand better internal audit performance where necessary in exactly the same way as they would for external party audits.

Enforced Integrity

If the anticipated problem with internal audits is the lack of integrity shown by the audited parties, third party audits do not solve this problem. Rather, the problem actually worsens in some instances. A good portion of the resources that could be applied to strengthening the internal control programs are inevitably expended in maintaining needless external corroborations. The premise of distrust that drives the presumed need for external audits in order to gain customer trust is counter-productive. If suppliers cannot be trusted to run internal audits with adequate knowledge and integrity, how can they be trusted to run their operations with adequate knowledge and integrity after the external auditors have left the scene? The battle is already lost if suppliers cannot be trusted. On the other hand, if suppliers can be trusted to run their operations with integrity in the absence of external auditors, they will run their internal audits with integrity. Trustworthy operators can be counted upon to demonstrate good ethical and moral judgments. They are also socially responsible and do not need to be subjected to external scrutiny except where this is a redundant corroboration. All well informed and wise operators do not need outside parties (third party auditors or regulatory inspectors) to force them into operating with integrity. They almost naturally act with integrity because they understand that business survival is most assured where honesty and integrity are maintained. The outcome is that customers or brand owners can have confidence and consumers are well protected.

The entire supply chain relies on the internal controls (including the effective internal audits) within the individual parties in the chain. This does not negate any influence that a customer can have on suppliers. On the contrary, by virtue of customer/supplier contract arrangements, cross-influence inevitably occurs between the contracted parties with or without third party scrutiny. In fact, the same GCSE-Food & Health Protection SSQA model that drives the suggestion for strengthened internal audits also drives the collaboration of all parties in the supply chain:

The Need to Protect Brand Reputation

Customers’ concerns about damage to brand reputation cannot be alleviated through snapshot third party audits. As soon as the third party auditor leaves the scene, the facility that lacks integrity and control will relapse into practices that are engendered by such lack of integrity and lack of control. In the absence of supplier integrity and good internal controls (including good internal audits), there will always be this concern about possible damage to brand reputation. If, on the other hand, a supplier shows integrity and control, the customer can rest assured with the supplier’s effective internal audit program. The brand is protected in the process.

This discussion calls for companies to seriously re-examine current arrangements along with all of the erroneous pre-suppositions. Reactions to this blog post are anticipated. Please feel free to provide your thoughts. It will certainly be beneficial to have input from more people with an open-minded approach. There must be such open mindedness, clarity of thought, shared knowledge, properly harnessed pool of expertise and frequent reality checks in order for the industry to successfully deal with the product safety challenges that it faces.
Felix Amiri is currently the chair of GCSE-Food & HealthProtection. He is also the Director of Technical Services at Amiri Food Industry Support Services (AFISS) and the Canada/U.S representative for the World Food Safety Organisation.


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