The Real Cost of Food Supplier Management

"A man who dares to waste one hour of time has not discovered the value of life." - Charles Darwin

Many food manufacturers and importers use documents, PDFs and spreadsheets to approve their suppliers. This is a thankless, time consuming, back and forth, frustrating process, especially when it is all done by email and phone. Does anyone use still the fax for this?

At Primority, we know how long it takes to process a supplier and a material approval. On a daily basis we try to make this process more efficient. A key objective in this activity is ensuring that the user experience of the supplier is a good one to encourage responsiveness.

The truth is that some suppliers are more proactive than others and respond more quickly, but others can take months to get the information you require. It can be a major headache, but the alternative is an expensive on site, third party audit so there is often no alternative but to use a Supplier Approval Questionnaire (SAQ) and a Material Approval Questionnaire. These are used to comply with global food safety standards like BRC, SQF, IFS and FSSC 22000. They are also required for legal compliance for food importers, for example, the US Foreign Supplier Verification Program (FSVP).

We believe that there are significant savings and efficiencies to be gained by many food or food import business in this area.

To illustrate this point, I will use the following conservative information for an example medium sized food business. You can scale up or down according to your situation:

Example Medium Sized Food Business:

• Number of Suppliers: 25, with 10 documents per supplier (e.g. certification, food safety policy, audit reports, etc.) = 250 documents.
• Number of Raw Materials: 40, with 10 documents per material (e.g. certificate of analysis, raw material specification, HACCP plan, etc.) = 400 documents.
• Number of Finished Products: 20, with 25 documents per finished product (e.g. finished product specification, certificate of analysis, traceability records, production records, HACCP plan, etc.) = 500 documents.
• Number of Employees in Technical / QA: 3 with an average salary for technical / QA: ￡30,000 / $45,000
• Number of Internal ‘SOP’ Documents: 50
• Number of Approvals: Supplier: 25, Materials: 40
• Total Supplier documents to be reviewed: 250 + 400 = 650

Our example of a food company with 20 suppliers and 40 raw materials means that 650 documents that must be reviewed every year or so. If this task is being carried out manually by email, where an excel spreadsheet, word document or PDF is sent to the supplier for completion, then it may take weeks of back and forth to get a single approval.

Multiply the time taken for 20 suppliers and 40 food materials and we have a never-ending bureaucratic, paper based nightmare on our hands. An electronic system will not reduce the amount of information required. It simply organises the process, resulting in better information. Furthermore, the speed of supplier response is often down to the contact at the supplier having the time and information to be able to respond, so an electronic system will do little to speed this up either.

".. a food company with 20 suppliers and 40 raw materials means that 650 documents that must be reviewed. This all takes time."

What is the Cost? The back and forth via email and chasing together with the collation, organisation, management, update and storage of the 650 supporting documents can be captured more easily in a central electronic system that both parties can access. However, reviewing the questionnaires and their supporting documents can easily be a full-time job.

For example, if one is person working on approvals then they can easily spend up to 60% of their time to get all the approvals completed using a manual approach to the job. This means that supplier and material approvals could easily be costing our example business ￡18,000 or $27,000 per year.

"Supplier and material approvals could easily be costing the business ￡18,000 or $27,000 per year."

Eliminating 'Dead Time': A significant amount of the time spent will be spent chasing and following up with suppliers to get the approval started, completed and progressed. It will also be spent asking for, responding to, and reviewing feedback and clarification on the information submitted by the supplier. Our customers tell us that these tasks can easily account for up to 30% non productive 'dead time'. This 'dead time' requires many emails to be written, phone calls to be made and documentation and records to be updated. This is an activity that can be improved upon.

Let's be honest; Is writing hundreds of emails and doing dozens of phone calls really productive? By using a good electronic system to automate the chasing, feedback and response process we can, for example, remove the need to write an email each time. Furthermore, all responses and feedback can automatically be stored against the supplier approval record audit trail making it easier to find in future. Eliminating this 30% 'dead time' by leveraging automation means that supplier and material approvals may yield savings of up to ￡6000 or $9000 per year in our example.

"Eliminating this 30% 'dead time' by leveraging automation means that supplier and material approvals may yield savings of up to ￡6000 or $9000 per year..."

The Value of Easy to Find Information: Following approval, it is important to be able to quickly find information about the supplier and the materials they provide. Having the supporting documentation available and accessible in a central, easy to search location is key. Customers regularly demand this information and this task is much easier and faster using a centralised electronic system. This saves significant time and money. Whilst each food company will have differing demands from customers and regulators, this an area where accessibility will save significant amounts of time, and therefore cost.

Reporting Tools: Finally, separate documents and spreadsheets do nothing to allow easy reporting across all suppliers. For example, customers may require a list of all suppliers that have a risk of allergen cross contamination / contact for a particular allergen. Reporting activity like this can take a long time to compile if the information is trapped in individual spreadsheets and documents, or is hidden in emails or complex hierarchical folders on a file server.

Although difficult to quantify, having a database with good reporting tools can help generate key customer reports in seconds rather than a mini project that lasts days or even longer. Efficient reporting tools and accurate, up to date information can also help drive continuous improvement programs and demonstrate the effectiveness of your overall food safety and quality management system. Over the course of a year, we estimate a further ￡4,000 or $6,000 is possible in many cases, even for small and medium sized businesses like the one in our example.

"...having a database and adequate reporting tools can help generate key customer reports in seconds rather than a mini project that lasts days."

Another key point is the potential cost of not having a good supplier and material approval system in place. Manual systems, by their very nature, are prone to errors and omissions and simply may not be executed. The potential cost of a problem related to an expired approval can be fatal to a food business.

In addition, a manual approval system cannot 'stop' a buyer sourcing from an unapproved source. The horsemeat scandal of 2013 is the best known example of how such manual based systems can cause devastation to an entire industry. This easily could have been prevented by the quality and / or technical department having full and final say of which suppliers should be approved for purchases based on their verified food safety and quality credentials.

In conclusion, automating supplier and material approval processes can yield significant overall savings, reduce risks and enhance service levels to customers when they request information. When you add everything up for our example food company, savings of up to ￡10,000 or $15,000 are possible by implementing an effective, electronic supplier and material approval system. Service levels on customer information requests would also be significantly improved and information to help drive continuous improvement would be much more accessible by the wider team. The value of these elements is hard to quantify but is clearly is a very positive factor.

"When you add everything up, savings of up to ￡10,000 or $15,000 are possible by implementing an effective, electronic supplier and material approval system."

At Primority, our 3iVerify solution is an integrated food safety and quality management system. It can be applied to all of the above scenario and it provides an affordable, effective way to realise maximum efficiencies in food safety and quality processes.

"Our  3iVerify solution provides an affordable way to realise maximum efficiencies in food safety and quality processes."

Contact us to discuss how we can help you take an integrated approach to food safety.