FSMA 204: How food companies are going beyond compliance to create greater organizational change

Using the FDA food traceability rule as an opportunity for transformation

Coauthored by Michael Shackelford and Sarah Dalton

FSMA 204: How food companies are going beyond compliance to create greater organizational change

Using the FDA food traceability rule as an opportunity for transformation

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How many times have you received an email or seen a notice at your local grocer about a recalled food? Already in 2024, the FDA’s website shows nearly 75 recalled food and beverage products. What if companies could not only better manage and comply with these incidents, but also transform the business?

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To enhance traceability and recordkeeping for faster identification and removal of contaminated food from the supply chain, the FDA introduced Section 204 of the Food Safety and Modernization Act (FSMA 204). Simply put, FSMA 204 requires companies to establish traceability recordkeeping processes, beyond what is currently in existing regulations, for specific high-risk foods on the Food Traceability List (FTL) that have a high potential for contamination and a history of foodborne outbreaks and illnesses. Companies who manufacture, process, pack or hold any of these foods are required to maintain specific records and be able to provide this data within 24 hours to the FDA.

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Straightforward as it may seem, compliance becomes increasingly complex when you consider all the various players in the supply chain who must share data, and there is no proscribed standard data structure nor definitions of the batch or lot size to be recalled. With an implementation deadline of January 20, 2026, changes to processes, technology systems and ways of working must be considered and prioritized as companies, large and small, will need every bit of the next year and a half to make these changes.

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The not-so hidden benefits

?While the road to compliance may not be simple, the good news is this requirement may, at the same time, open the door for unexpected benefits.

• Address overdue updates to supply chain processes, systems upgrades and change management. A deep dive into every procedural detail in the supply chain may offer a unique vantage point for enhancing and improving processes and data collection, providing consistent, comparable data points and creating standardization across the enterprise. It may also provide for cost savings through greater precision in recall processes, rather than being forced to segregate large product quantities until the data analysis is completed.
• Gain greater insights on consumption reporting. With better knowledge of direct material consumption, companies can more accurately estimate product input costs and true manufacturing time as well as gain visibility to accurate, real-time inventory levels and waste and manufacturing losses. Evaluating the ingredients and materials utilized at steps in individual lines can help measure scrap more accurately and provide detailed variance information – aiding in better product costing and root cause analyses. Improved traceability may also facilitate continuous improvement activities and help companies be more proactive by leveraging real-time process data. Better, more accurate data can then be leveraged to improve product design and strategic decision-making and promote systematic new product development.?
• Advance sustainability goals. By promoting transparency, mitigating risk and increasing consumer confidence in the food chain, companies finding it hard to obtain internal funding to implement a traceability program could tie FSMA 204 compliance to the broader environmental, social and governance (ESG) vision and garner additional support and resources.

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How to reap the rewards

?Impacted companies are each approaching compliance with FSMA 204 differently. Some are implementing traceability plans and technology changes one facility at a time and only for products with ingredients on the FTL list. Others are wrapping compliance efforts with broader program objectives — such as existing enterprise resource planning, product lifecycle management and ESG upgrades and enhancements — to make wholesale process, technology and resource changes across their entire North America product portfolio. Upstream companies are also receiving directives from their customers — for example, some retailers, focused on driving standardization and ease of implementation in their own companies, are notifying their manufacturers and suppliers that all products, high-risk or not, will need to be compliant with FSMA 204 by 2026 or risk de-shelving. There is no “one-size-fits-all” approach, but whatever decision a company makes, it will need to take into consideration all its stakeholders and other enterprise priorities.

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Compliance with new regulatory requirements is rarely an exciting adventure, but there may be a silver lining with FSMA 204. The move to a more transparent supply chain could provide greater benefits to companies beyond just avoiding the ire of the FDA. But to understand how you can best benefit from this, you must first work to understand how this rule affects your organization, what changes are needed to fill in any potential gaps and how best to apply these changes for the greatest rewards. To do so:

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1. Bring representatives from all the impacted areas of the organization to the table, including supply chain, food quality and safety, operations, finance, and corporate leadership, to workshop potential challenges, solutions and funding needed to implement changes.
2. Understand which products, plants and lines will be affected, as well as the data transfer expectations upstream and downstream of your operations.
3. Conduct a current state or fit-gap assessment to understand what existing technologies, processes and resources can be leveraged to comply with FSMA 204 and what will need to be changed or enhanced.
4. Design the traceability program, including developing traceability plans, policies and standard operating procedures, as well as the implementation roadmap for acquiring or adapting technology systems and deploying a change management strategy that resonates with employees.

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Regardless of how companies decide to ultimately implement these changes, the most successful companies will not only take into consideration all impacted stakeholders but also the added benefits that can be achieved through this exercise. Ultimately, traceability is here to stay and now is the time to act.

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The views reflected in this article are the views of the author(s) and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.

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