U.S. President Barack Obama has signed into law the Food Safety Modernization Act of 2010, the largest overhaul of U.S. food safety laws since the 1930’s. While the measure has gained widespread support among industry participants, certain emboldened House Republicans are threatening not to fund the regulatory enforcement measures related to this law. Supply Chain Matters finds this position to be unconscionable, and lacking any sense of good judgment, other than favoritism to certain political interests.

The new law as outlined would:

-Increase inspections of U.S. and foreign food facilities; the riskiest U.S. facilities would be inspected every three years.

-Allow the FDA to order the recall of tainted food. Previously, the agency could only negotiate with businesses for voluntary recalls.

-Impose new safety regulations on producers of the highest-risk fruits and vegetables.

-Require processors to prepare detailed food safety plans and inform the FDA what steps they are taking to keep their food safe at different stages of production. The government would use the information to trace recalled foods.

The law exempts meat, poultry and processed eggs, since they are regulated by the Agriculture Department. That alone was a major concession considering the 2010 major recall of salmonella infected egg, poultry and meat products that impacted so many.

Also exempt are some small businesses, which had complained that the new requirements could force some of them into bankruptcy.

Representative Jack Kingston, Republican of Georgia, favored to become the incoming chairmen of the agriculture appropriations sub-committee is quoted as indicating that he does not feel that the $1.4 billion price tag, spread over five years, to enforce this new law is necessary.  Mr. Kingston argues that although one in six Americans (which equates to in excess of 50 million people) are estimated to be sickened by tainted food every year, if the number is divided by the entire food supply chain, than 99.9% of food is safe.

Any reader scanning the numerous Supply Chain Matters commentaries related to food contamination that we have posted in the past twelve months would perhaps get a better sense of the true overall cost of this problem.

Let’s suppose that if one were to calculate just the physician and healthcare system costs related to over 50 million people potentially receiving treatment who were sickened by food contamination incidents in 2010, that alone should provide a strong argument that funding enforcement is a no-brainer decision.  Add in the additional costs of litigation and attorneys’ fees by alleged victims to sue consumer goods companies or other supply chain participants, and there is even more evidence of savings. Food related companies have also rightfully concluded that it makes good business sense to have a safer food supply chain because the alternative costs of a recall to the business, and to the brand, can be significant.  Consider that Peanut Corporation of America, which resided in Georgia, is no longer a viable business, or that Jack DeCoster’s national network of egg farms has gained the watchful eye of many consumers.

Representative Kingston, your logic is somewhat suspect.  Rather than arguing that Americans cannot afford the high costs of enforcement, the argument is really that Americans cannot afford to have their food delivery supply chains to be unsafe and without proper safeguards.  I should know, since I was one of those who was sickened by contaminated pistachios, and it will be a very long time before I consume any more.

Bob Ferrari

Supply and contract management technology provider Emptoris today announced that it has completed the acquisition of telecom expense management provider Rivermine Inc.. As with previous Emptoris acquisitions, financial details are sketchy, and we choose not to speculate on either the cost of revenue multiple involved.  Both companies have private ownership.  However, in the view of Supply Chain Matters, this acquisition appears on the surface to be a move that will benefit both Emptoris and its existing customers.

Fairfax Virginia based Rivermine provides technology that helps firms to gain visibility into, and control over, their telecommunications spending, including ordering, inventory, invoice processing and auditing.. The company claims coverage of over $6 billion in telecommunication spending and a healthy revenue growth rate. Rivermine has also had its share of previous acquisition activity, acquiring two separate companies a mere year ago, including MBG Expense Management.

Procurement teams, especially those residing in Fortune 1000 companies, view the control of telecommunications expense as one of their top challenges, with typical corporate-wide expenses in the millions of dollars.  This area, however, typically falls under the management umbrella of IT.  With the current explosion of mobile-based and other advanced communications, these same companies increasingly have difficulties in understanding the various components of spending and utilization over communications spending. Traditional ERP procurement software suites lack the deep functionality to manage this particular area. Rivermine provides its customers an on-demand software-as-a-service platform to manage and control this activity, and the savings can be substantial.

This acquisition fills another strategic hole for Emptoris in its ability to provide customers broader tactical management tools surrounding key services procurement. The acquisition also serves as further evidence that Emptoris primary investor, Marlin Equity Partners, continues to follow through on a growth strategy that includes bankrolling strategic acquisitions for the company.  In 2009, Emptoris acquired the labor services and contract management of Click Commerce which has since been rebranded as Emptoris Services Procurement.  The acquisition of Rivermine adds telecommunications spend analysis and capabilities to the services procurement support area.  Industry vertical penetration also appears to be complimentary with both companies targeting similar industry verticals. Emptoris management indicated an existing customer overlap of between 5-10 customers, which provides lots of opportunity for upselling.  Major system integration partnerships are also similar, featuring both IBM and Accenture, which provide certain telecom business process outsourcing and control services.

In our acquisition briefing, I was informed by Emptoris management that initially Rivermine will remain independent as a wholly-owned subsidiary, and will retain its existent management team. This is a smart move on the part of Emptoris management, since telecom expense management brings specific expertise, and as previously noted, may involve target audiences beyond procurement.

With this acquisition, Emptoris will now include over 300 installed based customers with 650 global based employees, and a significant profile in the best-of-breed procurement technology arena.  Emptoris customers should view this acquisition as a positive in that over time a broader suite of functionality addressing telecom management will be available for consideration.

Bob Ferrari