I’m penning this posting from Vancouver, a beautiful city on Canada’s west coast.  I’ve been participating in an APICS working sub-committee conference since Thursday.  I’ve had some technical difficulties in establishing a technical uplink to my blog ISP carrier, and hopefully we have resolved the issue.

Recent news coming from all global geographic areas indicate that our global economy is sinking.  My conversations with supply chain professionals here in Canada have reinforced that notion.  While some industries such as pharmaceutical and food products may either be stable or still growing, the majority of others are not.  In this particular region, there are many base materials supply chains such as minerals, ore, steel and metal products.  The consensus I heard was that cutbacks are occurring at significant rates.  Walking down to the harbor, my eye sensed far less shipping activity than when I visited two years ago.

 I was also very interested to hear the Canadian media reaction to the latest U.S. stimulus package that is working its way through Congress.  The current proposed amendments that state that the steel and infrastructure products that will make-up the spending could only be sourced in the U.S..  As you would expect, this spurned many negative reactions from Canada’s business community.  So much for North America free trade.

I’ll be commenting in future posts on the various supply chain implications of these various governmental responses to the sinking global economy.

Bob Ferrari

An article on CNNMoney.com validates what many auto industry participants already know, that supplier disruption is going to get worse before it gets better within the U.S. auto supply chain.  Some weeks ago, when national debate was raging about potential bailouts of any of the U.S. Big Three, I penned a post indicating my view that the biggest concern for this industry would be the cascading effects to the supply base, in addition to the failure of any one of the big three OEM’s.

Multiple failures among Tier 2 and Tier 3 automotive suppliers have to have broad impacts, not only to the U.S. OEM’s but Asia and European automakers as well.  The CNNMoney article points out that the primary problem of supplier failure lies in both a lack of bank credit, as well as depressed volumes.  I’ve read other articles, including one in the Wall Street Journal, that concerns are not only with the smaller suppliers, but certain Tier 1 suppliers as well.  Suppliers like Visteon and Delphi experienced some form of financial crisis before this latest severe downturn, and business is just getting worse.  Ford has already indicated that it cannot assist Visteon. GM and Chrysler are in similar situations.

The takeaway for automotive-related and all other supply chain professionals is to build better intelligence in your supply base, and expand assistance programs with key suppliers in any way you can. In today’s tough economic environment, supplier viability may rank higher than contract performance.  Monitor early-warning signs and be prepared to extend a helping-hand either operationally or financially.

An especially difficult challenge facing the U.S. automotive sector will be investing in innovation toward more fuel-efficient or alternative fuel vehicles.  An investment in time, effort, and resources among high quality and responsive suppliers will be key to insuring supply continuity and future innovation.

What about your industry?  Is your company monitoring the supply base for risk?

 Bob Ferrari

A recent announcement from the U.S. Food and Drug Administration (FDA) reinforced some comments made in this blog last August..  The FDA announced a two-year pilot program aimed at improving drug safety.  This program, which is termed Secure Supply Chain, seeks to voluntarily enlist 100 drugmakers that would help demonstrate the feasibility of guaranteeing the safety of foreign-produced drugs and active ingredients.  It would require participants to document and maintain strict control over the production of up to five of their drugs from overseas manufacturing points to entry into the U.S.  Drug makers who participate in this program must meet specific FDA-approved criteria, comply with Good Manufacturing Practices (GMP) and document that their products use a secure supply chain.

In a posting I penned in late August of 2008, I noted that the FDA and other regulatory bodies were ill-equipped to keep-up with the pace of current outsourcing within these supply chains, and risk mitigation must stem from internal and external controls.  As an example, 15 FDA inspectors in China could hardly keep track of all present export volumes.  Thus, you would think that I would be applauding this new program. Not really..

A lot has transpired in drug and food safety since August and I’m not totally convinced that a complete turn towards industry self-regulation is going to provide a secure supply chain.  Do not mis-perceive, it is a step in the right direction.  I tend to agree with an effort to determine the practicality of developing a secure supply chain. But, I would rather lean more toward higher regulation until the industry can prove it is ready and equipped for responsive self-regulation. That includes the ability to overcome some of today’s obvious challenges of oversight in many developing countries.  Five products over two years may be too long a time to prove practicality.

What’s your view?  Do you believe that either the drug or food industry is truly ready to assume self-control?  Share your thoughts in the comments section below this post.

Bob Ferrari

This blog, which averages over 5000 visits per month, has 2009 sponsorship slots still available.  Sponsorship of Supply Chain Matters can serve as an effective means to identify your company or organization as a sponsor of leading-edge thought leadership in global supply chain management, as well as leverage brand awareness, lead generation and viral marketing strategies. This is especially important in stretching limited marketing budgets for 2009. There are several flexible plans of gold, silver, bronze, or interim sponsorship, and the most premium gold sponsor slot is also currently still available. Gold and silver sponsorships include a services component where I periodically meet with product marketing or management teams to help reinforce marketing themes.  Gold and silver sponsor can also describe their products in our “About Our Sponsors” section.

Also, in an effort to assist in helping to overcome difficult challenges in 2009 budgets, I can also offer potential sponsors flexible and affordable month-to-month sponsorship plans, including promotion of upcoming conferences or events.

To facilitate the process you will note that on the top right hand side of this site, under the Pages column, there is a Sponsorship Request link.  Simply fill out the interest form with a bit of important contact information indicating your interest in potential sponsorship, and I will personally follow-up with you. You can also email your interest to supplychaininfo@theferrarigroup.com.

 Bob Ferrari

I first alerted Supply Chain Matters readers to a new outbreak of human infections involving salmonella in a posting on January 8^th.  At the time, federal investigators had not been able to determine the specific source of the infections and I urged risk management professionals and product managers to be very diligent to the ongoing CDC investigation.

In an update posting of January 15^th, I alerted to the fact that the U.S. CDC and FDA agencies  had begun to link the infection to peanut butter, specifically production originating from a specific Peanut Corporation of America (PCA) manufacturing plant in Blakely, Georgia.  We sounded the alert that since the contamination was suspected to have involved institutional and bulk-packaged peanut butter products, that the concern for potential contamination would echo through various food production supply chains and indirectly impact consumers and brands. I also applauded The Kellogg Company for being the first to take proactive action to place a precautionary hold on the sale of a variety of its peanut butter cracker products.

In this post, I observe that the implications of this contamination have indeed been working their way through food production supply chains.  As of this morning, over 125 products have had to be recalled, and my unofficial count would indicate that at least 27 brands, both public and private, have also been impacted.  The products that have been recalled include peanut butter, crackers, cookies, candy, fruit and vegetable, snack food, and other products.  It also now includes certain pet-food products.  If you would like to search the complete list of products, here is the link to the listing on the FDA website.  The latest CDC update also indicates that the count of infected persons is now 486 within 43 states.  This qualifies for the term of nationwide outbreak.  Infections may have contributed to six deaths, according to the CDC. 

While the frequency of illness may be waning, the implications of this incident will continue to impact each of the companies involved. Almost all national and local media outlets are reporting the story of contaminated peanut butter. Both the CDC and the FDA now urge manufacturers to inform consumers about whether their products contain peanut butter or peanut paste acquired from PCA.  These agencies also urge institutions, food service establishments, as well as retailers to not serve or sell specific recalled products.  While these same agencies continue to clarify that the contamination does not involve retail-based peanut butter, consumers who have been constantly hearing of unsafe products are sure to be very wary of consuming any form of peanut butter products. 

Similar to the last year’s salmonella incident involving tomatoes and peppers, the dollar-impact to brands and brand equity are yet to be quantified. For the time being, supply chain risk management teams involving any of these recalled products will need to move from reactive to proactive means to deal with this incident.  Visibility to inventory throughout the supply chain, as well as alternative sources of supply will prove invaluable. While Kellogg was proactive in its response, these other impacted manufacturers are most likely in react mode, attempting to not only insure recalled products are accounted for, but also mitigated for any long-term impact.

Yet another reminder that a supply chain risk event that may initially seem small in scope, can echo itself through many impacted supply chains.

 Bob Ferrari