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Chipotles' battle with multiple, food poisoning events has hurt the brand and caused millions of (normally) avid customers to go elsewhere. And yet, the company is making all the right moves by doing a top-down review of all steps in its supply chain. With the Barbacoa Burrito Bowl pictured above (my very favorite), I hope they survive!  Image Courtesy: recipeshub.com

Chipotles’ battle with multiple, food poisoning events has hurt the brand and caused millions of (normally) avid customers to go elsewhere. And yet, the company is making all the right moves by doing a top-down review of all steps in its supply chain. With the Barbacoa Burrito Bowl pictured above (my very favorite), I hope they survive! Image Courtesy: recipeshub.com

Chipotles’ battle with multiple, food poisoning events has hurt the brand and caused millions of (normally) avid customers to go elsewhere. And yet, the company is making all the right moves by doing a top-down review of all steps in its supply chain. With the Barbacoa Burrito Bowl pictured above (my very favorite), I hope they survive! Image Courtesy: recipeshub.com[/caption]

The old cliche, “a chain is only as strong as its weakest link,” is not only relevant but firmly accurate when it comes to just about any type of consumer facing product. Edible or otherwise, when there is a breakdown in quality or safety in a products’ supply chain, multiple parties suffer.

Aside from first-affected consumers (e.g. those who got sick eating at Chipotle), the consumer-facing brand gets hit next, hard and fast when a failure occurs. And why not? Consumer’s initially don’t care how or why things happened, many (or most) will simply take their shopping elsewhere. In this land of many different choices, if one product is perceived to be putting people in danger, then why chance it? Of course, some might say the food at Chipotle is worth the risk…and even I might have to agree (Barbacoa Burrito Bowl anyone?)…but the vast majority of a given brands’ customers will return only after they’ve worked hard, and very publicly, to remedy the problem. Some may never return at all.
 

It Isn’t About Internal Blame

The typical supply chain sees many touches before the end-product reaches consumer hands. Careful management and investment into quality, at every step, is the only smart course. Image Courtesy: alticoadvisors.com

The typical supply chain sees many touches before the end-product reaches consumer hands. Careful management and investment into quality, at every step, is the only smart course. Image Courtesy: alticoadvisors.com

Consumer’s care little about supply chain blame. Rather, they hold the end-brand responsible for the product it puts on the shelf or plate. They figure, “if company X sources its ingredients from seven different places to create my meal, well, they are responsible for ensuring quality in each of those separate buying decisions.” This makes sense as an internal, supply chain buying decision is viewed as an endorsement.

“If company X gets is nutmeg from farm B, the consumer is fair in assuming that company X is inspecting exactly what it is buying from farm B and is a champion of both farm B’s product and process. Why do consumers hold brands responsible like this? Because the consumer doesn’t have this purview. Rather, they rely on company X to protect them. Thus, ultimate failure at farm B is NOT perceived as an “out” for company X in the eyes of the consumer…but rather a failure in supply chain management.”

To be sure, this “supply chain vulnerability” exposes a real and major issue: any brand that blends together multiple elements from different sources up and down a supply chain had better have a firm hold on each product component, where they come from and exactly how they’re produced, packaged and delivered. Failure to manage this process is to invite a broken chain (and broken profits).
 

Proactivity is King

Accidents happen. Failures will and do occur. Whether from an accidental breakdown in the vendor supply chain, or from far more sinister product sabotage, the actions that the consumer-facing brand takes will, in most cases, determine if the company (or in the very least a product line) will survive. Take the infamous case of Tylenol cyanide poisoning in the early 1980’s, where seven people died after consuming cyanide-laden acetaminophen capsules. As both the police and the manufacturer of Tylenol products (Johnson and Johnson) were initially baffled by the deaths that were spread around the Chicago area, they suspected that product tampering had most likely occurred after the product had made it to store shelves. This was determined by the fact that the tainted capsules had come from different manufacturing facilities and were sold in different stores. Nevertheless, the public was in a panic.

A drugstore clerk removes Tylenol capsules from the shelves of a pharmacy Sept. 30, 1982, in New York City after reports of tampering. Seven people in the Chicago area were killed that year by Tylenol that had been poisoned with potassium cyanide. Image Courtesy: Yvonne Hemsey/Getty Images

A drugstore clerk removes Tylenol capsules from the shelves of a pharmacy Sept. 30, 1982, in New York City after reports of tampering. Seven people in the Chicago area were killed that year by Tylenol that had been poisoned with potassium cyanide. Image Courtesy: Yvonne Hemsey/Getty Images

In a smart, proactive move, Johnson and Johnson reacted swiftly by immediately recalling all Tylenol products from store shelves. This action eliminated the chance of further consumer exposure (and death) by the Tylenol line and kept consumers from having to make the choice to avoid the product on their own. By “grabbing the reins,” so to speak, Johnson and Johnson was demonstrating that it was putting consumers well ahead of profits. Tylenols’ later discovery of the likely culpable, criminal party, which had nothing to do with Tylenol’s internal supply chain, helped further propel the brand back into consumer confidence. Yet Tylenol didn’t stop there. Rather, they developed the first sealed safety cap that, once tampered with, became a clearly-noted instruction to consumers to return or throw away the product. Voila! Not only was consumer confidence restored in Tylenol, the brand had now become a leader in safety, forcing other competing brands to follow suit.

Indeed, a supply chain failure can spell doom or be an actual opportunity. Proactive and over-arching action on the part of the consumer-facing brand can actually be a boon, allowing for demonstrations of “taking responsibility” and “taking care of consumers first” to occur. This is not to say that a supply chain failure is something to be sought after or desired, rather, it is most definitely something to be avoided. However, if a breakdown does occur, how a company reacts will have firm footing in their future level of success.

Kraft Singles cheese slices faced an initial recall of 36,000 cases of product due to a choking hazard built into their packaging. This recall quickly expanded 10x as the issue grew in enormity. Image Courtesy: Robert Galbrait / Reuters

Kraft Singles cheese slices faced an initial recall of 36,000 cases of product due to a choking hazard built into their packaging. This recall quickly expanded 10x as the issue grew in enormity. Image Courtesy: Robert Galbrait / Reuters

The Case of the Choking Cheese

While brand and profit-impacting issues can and do occur up and down the supply chain, sometimes the problem is in-house. A good example of such an internal manufacturing issue can be seen with the Kraft Heinz Company as, after several complaints of choking by customers, it was determined that a small strip of film covering certain lots of its Kraft Singles cheese products was remaining adhered to the cheese intent for consumption. With the film not dissimilar (enough) in color from the cheese, some customers (mostly kids) were mistakingly swallowing the cheese and film together.

In a proactive move, Kraft Heinz quickly initiated a voluntary recall of 36,000 cases of 3 Lb. and 4 Lb. sizes of Kraft Singles American and White American pasteurized prepared cheese product with a “Best When Used By” date of 29 DEC 15 through 04 JAN 16, followed by the Manufacturing Code S54 or S55. This recall was put out in July of 2015.

After seven more choking complaints reached Kraft Heinz, in early September 2015 the company expanded its voluntary recall by 10x, affecting some 335,000 cases of product. The updated recall was broadened not only by date but also product type. Now, 1Lb. cases of the noted product were added to the list and the “Best When Used By” date was widened to 12 DEC of 2015 out to 2 MAR of 2016.

While not a brand killer for a powerhouse like Kraft (and they certainly did the right thing by the swift recall), such a breakdown in (this case) the manufacturing chain could easily put a smaller brand out of business. The lesson here is that not only should all items in a products’ supply chain undergo intense scrutiny, so should all internal manufacturing practices.
 

Investing in Safety and Quality

Many key lessons can be taken from this examination of the supply chain and how failures can spell high cost (or even doom) for a brand. It pays to invest in your supply chain…up and down the line…to ensure all parties are delivering safety-checked quality. Further, the speed in which you can and do react to failures (internal and external) is critical in not only staving off additional losses, but also restoring consumer confidence after the issue is addressed. Cutting corners here may invite expensive, potentially brand-ending costs and consumer perception issues.

Barriers against failure must be built in layers, with extra barriers covering the most probable failure points. A good example of this kind of “thorough quality and safety planning” can be seen with companies going through (and securing) SQF Level 3 certification, where every element of a given products’ supply chain must be inspected and insured for quality and a total lack of contamination. Of course, such prudence costs money and can, ultimately, affect pricing. Yet like most things, you get what you pay for. Trying to save on components or ingredients, up or down the supply chain (whether to increase margin or pass on a lower price to the end-consumer), may help profitability for a period…but if that savings comes from a product or process of lower quality and/or safety, well, at some point that shoe just might drop. If or when it does, those earlier profits will likely pale in comparison to the new, failure-based costs to the brand.

AUTHOR: Dan Meyers