The U.S. Food and Drug Administration (FDA) and the California Department of Public Health (CDPH) are investigating Salmonella contamination in pistachio products sold by Setton Pistachio Inc. of Terra Bella, California, and it is likely that this recall will impact many other food-related supply chains.  Similar to what we observed in the recent recall incident of peanut butter and paste,  in which salmonella contamination was traced to a Peanut Corporation of America (PCA) plant in Georgia, pistachios are also ingredients for other food products.  As the PCA incident unfolded, hundreds of products involving multiples of supply chains were impacted by this disruption. But this particular case seems to potentially involve both consumer direct as well as other food-related distribution.

According to the latest FDA advisory, the contamination may involve multiple strains of Salmonella, and it is not yet known whether these strains are linked to any specific outbreaks of salmonella sickness.  The FDA has warned all consumers to avoid eating pistachio products and to hold on to those products for potential testing.  The FDA first learned of the problem on March 24 when it was informed by Kraft Foods that its Back to Nature Trail Mix was found to be contaminated with salmonella, and the source was suspected to be pistachios from supplier Setton. Both Kraft and the Georgia Nut Company have taken proactive measures to recall their Back to Nature and Nantucket Blend trail mix products.

According to an AP news report, as well as reporting on cable news station MSNBC, the recalled pistachios represent a small fraction of the 60 million pounds that the Setton plant can produce each year.  Setton shipped 2000 pound bags of these nuts to 36 wholesalers, and it could take weeks to figure out how much within these shipments could be impacted.  “The firm is already turning around trucks in transit to bring those back to the facility,” stated an FDA official.

While the food industry continues to call for major joint government and industry initiatives in food safety, this latest incident is yet another reinforcement that a quality standard among food production facilities has deteriorated to unacceptable levels.

Similar to the advice I shared during the peanut butter contamination incident in early January, crisis what-if, and business continuity planning continue to be important tenets of an effective supply chain risk management plan.  Other consumer product companies utilizing pistachio products should focus upstream and act proactively.  Consumers and customers should be the first priority.

Supply Chain Matters will continue to monitor this latest major incident of product contamination involving food-related supply chains.

 Bob Ferrari

The need to foster cleaner emissions among U.S. ports and coastlines is gathering momentum, but certain lessons lie in the reactions of major participants.

The head of the U.S. Environmental Protection Agency (EPA), under pressure by a federal court order to issue regulations to reduce emissions from oceangoing ships, today indicated that the United States and Canada have applied to the International Maritime Organization to create a 230 mile emissions control area around much of their respective nation’s ports. This move paves the way for new emission standards for large commercial ships entering these ports.

The proposal calls for ships entering the proposed controlled maritime zones to face stricter limits on the sulfur content of their fuel beginning in 2015, and new ships would be required to incorporate advanced emission-control technologies beginning in 2016. In a gesture of joint co-operation, the president of the World Shipping Council, a Washington DC based trade organization representing international container ship operators, indicated that operators have participated in discussions regarding these proposed emission standards, and are not opposed to tighter standards.

In a somewhat related initiative concerning air quality of major ports, The Long Beach Board of Harbor Commissioners, in its Clean Trucks Program launched in October 2008, has been attempting to provide incentives to port truckers to quickly acquire cleaner running rigs that can operate within the ports of Long Beach and Los Angeles. On February 18, 2009, the port initiated certain fees per ocean container, namely $35 for a twenty-foot container, and $70 for larger containers, to help private truck owners with the financial assistance to secure cleaner rigs. However, importers and exporters who select truckers who have already acquired cleaner emissions vehicles are not required to pay this new fee.

This Clean Trucks program was recently handed a legal setback by an injunction ruling by the U.S. Court of Appeals for the Ninth Circuit. The challenge came from the Intermodal Motor Carriers Conference, an affiliate of the American Trucking Association (ASA), based on an argument that the program would extensively alter economic regulation and result in irreparable harm to the motor carrier industry.  It seems that truckers, in their legal actions, are more interested in competitive harm and impacts to competition, if cleaner rigs are favored over older rigs that tend to pollute more.

It is interesting to note that the ocean container carriers, who operate across many world ports, and who are also feeling the severe economic impacts of dramatic declines in shipping, are willing to accept the need for greener ships.  They should be given our applause. In contrast, the ATA argues that the economics of declined volumes are no time to implement incentives for cleaner trucks. Seems to me that the ATA should look to the future, since pollution standards and low-sulfur diesel fuel are already the realities for future commerce.  The argument that $35, or even $70 more per container is cost prohibitive holds small creditability, given the history of last summer when fuel surcharges surpassed these levels.

Green is the new reality, and the more we have joint government and industry cooperation toward reasonable progress, the better off we all will be as citizens of the globe.  Let’s embrace initiatives that can work for all involved.

 What’s your view?

 Bob Ferrari

It seems like Wall Street financial institutions are not the only firms with a history of crisis and need for assistance from the U.S. government. Enter stage right, the U.S. Postal Service.  An article in the New York Times reports that postmaster general John E. Potter has indicated that the agency will run out of money this year unless it gets help.  “We are facing losses of historic proportion“, states Mr. Potter, “Our situation is critical“. 

This situation comes as no surprise.  The Postal Service has been a budgetary “train wreck” for many years, relying on continual rate increases to compensate for many structural problems.  Now, the agency is seeking permission to cut delivery schedules to five days from the current six.  Mr. Potter also indicates that even if the agency manages to implement planned cuts of $5.9 billion this year, which include early retirement of workers and the closing of six district offices, there still could be a another $6 billion deficit in 2010.

To solve the financial crisis on Wall Street, we look to  the Treasury Secretary and the Chairmen of the Federal Reserve to come up with oversight plans.  To solve the problem of the U.S. automobile industry, a presidential auto task force has been formed to evaluate the situation and make recommendations, some structural in nature.

Time is long overdue for a task force to address the U.S. Postal Service.  In my opinion, it needs to be populated with seasoned, experienced transportation and logistics experts, as well as lean-sigma and productivity experts from the private sector.  This task force should have the autonomy to transcend the usual Congressional special interests and political maneuvering and drive new thinking for this agency. I hasten to add that the agenda may not necessarily be privatization, since that model has proven to be not so stellar from past administrations. Rather, the objective should be how to bring the postal service to world-class standards of efficiency and delivery, similar to a FedEx, UPS, or any major 4PL logistics provider

The U.S. needs a vibrant, effective and efficient postal service, and the present course is unsustainable. Rather than waiting for this financial wreck to crash, let’s take more proactive actions.

What’s your view?  Should the U.S. Postal Service be awarded additional subsidies without a comprehensive re-organization plan predicated on world-class standards?  Share your views in the Comments section for this posting.

 Bob Ferrari

This week I had the opportunity to view the webcast Best Practices in Risk Management which was hosted by Purchasing magazine and sponsored by Spend Management technology provider Zycus.  I really enjoyed the format of the event and wanted to share a few of my observations as an audience member, since I believe it can be an important feedback for technology marketing professionals who sponsor these types of events.

Marketing professionals sometimes confuse the purpose of webcasts, particularly in this new era of Web 2.0 marketing.  It seems that the singular goal is to gather prospective leads and push content vs. a broader perspective of engaging in a series of educational forums or events that help prospects understand the various aspects of a business challenge and how best practices supported by technology can provide meaningful business benefit.  Many supply chain related webcasts that I’ve viewed of late tend to be too one-dimensional, pushing large amounts of information without context. They leave little room for audience interaction or two-way dialogue, which for me defeats the purpose of the event. When I conduct or sponsor a webcast, I want to insure that there are some forms of interaction that can provide learning for all participants.

The Purchasing webcast featured two senior procurement executives as panelists, and Paul Teague, Purchasing Chief Editor served as the moderator.  While there was important content related to challenges and best practices in supplier-related risk management, the content served more as discussion points among the panelists.  Mr. Teaque also inserted a number of live audience polling questions, which provided two-way feedback for the entire audience.  There were frequent breaks where live questions were responded to by the panelists, and the panelists did not necessarily have the same perspectives, which is fine. 

I for one vote for more interactive webcasts where audience members can have their questions answered and where all can share in knowledge.  It provides a far better outcome.

What’s your view- do you prefer a more interactive format in webcasts?

 Bob Ferrari

Jessie Scanlon penned a rather interesting article in BusinessWeek last week (What Can Tata’s Nano Teach Detroit?) which many supply chain professionals associated with the Detroit Big Three automakers should read.  Beyond the notions of the introduction of the Nano in India, there is the challenge of what can Detroit learn from the Tata Nano?

As the author points out: ” Tata didn’t set the price of the Nano by calculating the cost of production and then adding to margin.  Rather it set $2500 as the price that it thought customers could pay and then worked back, with the help of partners willing to take on a challenge, to build a $2500 car that would reward all involved with a small profit“.  The article further makes a case that the Big Three management are disconnected from the needs of consumers, as well as means for “rethinking the supply chain’.

I tend to agree.  Because of its low price point, the Nano ships as a kit to a local facility, where it is assembled, avoiding the need for building and operating large final assembly operations This distribution model is very similar to how foreign manufacturers have introduced their new models to the Chinese market, by shipping kits to their foreign subsidiaries. The article rightfully points out that if the Big Three wants to expand its market to emerging markets such as India and China, as well as protecting the U.S. domestic market, there are implications for rethinking the supply chain and final distribution model.

Some specific challenges come to my mind:

Why is it that the Chevrolet Volt, GM’s planned extended range electric vehicle targeted to retail close to $40,000?  Is this about targeting what the consumer wants to pay, and what the supply chain can deliver? 

Why is that Ford cannot come up with a more affordable, fuel efficient and green alternative to its workhorse Crown Victoria? Every major U.S. city has fleets of Crown Vic taxis and police vehicles, yet the market lacks affordable alternatives in fuel efficiency.

Why is it that so many Tier One suppliers are at risk of financial collapse?  Is this a failure in supplier collaboration or rethinking the supply chain?

It continues to amaze me that auto dealerships throughout the U.S. continue to be inventory stocking points for finished models. Have any other viable distribution alternatives been explored and piloted for smarter inventory management?

Perhaps we do have a management problem.  Perhaps the Big Three is too invested in past thinking about consumer needs, sales, distribution and supply chain structure.

You are welcomed to share your views in the Comments associated with this posting.

 Bob Ferrari