Addressing the Challenges of the Food Allergen Labeling and Consumer Protection Act (FALCPA) W H I T E P A P E R Summary To ensure compliance with the Food Allergen Labeling Consumer Protection Act (FALCPA), food processors should consider an automated approach to traceability and attribute management that is both cost-effective and a good fit for their current business operations. In addition to addressing traceability requirements, operational systems of record deployed by progressive food companies are also used to streamline schedules, reduce operating costs, and improve customer service. Rather than piling on overhead costs, these solutions are leveraged to improve bottom-line profits.
Introduction According to the Food & Drug Administration, an estimated 2 percent of adults and 5 percent of infants and young children in the United States suffer from food allergies. Approximately 30,000 consumers require emergency room treatment, and 150 Americans die each year from allergic reactions to food. 1 To better protect these individuals the Food and Drug Administration enacted the Food Allergen Labeling and Consumer Protection Act of 2004 (FALCPA) (Public Law 108-282) to addresses, among other issues, the labeling of foods that contain certain food allergens. According to the FDA s Center for Food Safety and Applied Nutrition (CFSAN), this labeling law will be especially helpful to children who must learn to recognize the presence of substances they must avoid. For example, if a product contains the milk-derived protein, casein, the product s label will have to use the term milk in addition to the term casein so that consumers with milk allergies can clearly understand the presence of an allergen they need to avoid. 2 FALCPA, which went into effect January 1st of 2006, requires food manufacturers to identify, in plain, common language, the presence of any of the 8 major food allergens (Milk, Egg, Peanut, Tree Nut, Fish, Shellfish, Wheat, and Soy). The legislation also requires food labels to indicate the presence of major food allergens used in flavorings, spices, additives, and colorings. According to the FDA, the law applies to all packaged foods sold in the U.S. that are regulated under the Food, Drug & Cosmetic Act (FD&C), including both domestic and imported foods. Raw agricultural commodities such as fresh fruits and vegetables are not affected by the mandate. IMPACT AND CHALLENGES The Enactment of FALCPA has elicited a wide range of opinions ranging from the broader powers of regulatory agencies to the increasing business risks faced by food processors. The impact for food processors can be significant: In addition to the scrutiny of regulatory agencies, the expectations and demands of the supply chain, ranging from immediate customers to final consumers, present many new challenges for food processors. To minimize these risks, food processors must be able to produce detailed and accurate records that identify the disposition of products and their potential exposure to Food Allergens. Food Processors are required to label ingredients in foods by their common or usual name or foods that contain by-products or elements of the eight major food allergens. Unless the common name of a food product identifies the major food allergen, e.g. Dry Roasted Peanuts, manufacturers must identify the presence of a major food allergen in one of two ways 3, see example below: One of the biggest potential challenges with FALCPA is the lack of guidance for allergen thresholds as this effects food products that do not have an allergen in their recipe, but are produced in a facility that makes other food products with a known allergen. For example, in addition to the added burdens of cleaning equipment between batches and scheduling allergen-containing production after allergenfree batches, the processor must print advisory statements such as manufactured on equipment that also processes wheat on the labels. Ice cream processors for instance, in addition to flagging any wheat component, also must flag the soybean oil-based release agent for their baked bit inclusions because the amount of soybean oil used does not warrant reporting on the nutritional label. 4 In the end, many food processors will be faced with two scenarios: a. Take a blanket approach and limit the selection of products for allergic individuals, who now must avoid a greater number of foods under this approach b. Re-engineer products and manufacturing processes to insure that exposure to food allergens have been completely eliminated. This approach can be costly and the investment doesn t always guarantee increased sales of a certain food product. Addressing the Challenges of the Food Allergen Labeling and Consumer Protection Act (FALCPA)
COMPLIANCE AND INSPECTION Like all regulatory measures, non-compliance can prove costly. A company and its management may be subject to civil sanctions, criminal penalties, or both under the Federal Food, Drug, and Cosmetic Act if one of its packaged food products does not comply with the FALCPA labeling requirements. FDA may also request seizure of food products where the label of the product does not conform to FALCPA's requirements. In addition, FDA is likely to request that a food product containing an undeclared allergen be recalled by the manufacturer or distributor. The following represents the criteria for recommending legal action to the Center for Food Safety and Applied Nutrition:. 2. 3. 4. 5. The food contains an undeclared allergenic ingredient that is a derivative of one of the eight food allergens. (Milk, Egg, Peanut, Tree Nut, Fish, Shellfish, Wheat, and Soy) The food contains an undeclared allergenic ingredient that was used as a processing aid in the manufacture of the product. The food contains an undeclared allergenic ingredient, but the ingredient is not one of the eight allergens listed in this guide. The food is not labeled as containing an allergen, but inspection of the firm shows that it was manufactured under conditions whereby the food may have become contaminated with an allergen. The inspection of the firm was conducted consistent with the Guide to Inspections of Firms Producing Food Products Susceptible to Contamination with Allergenic Ingredients. Penalties for non-compliance range from $1,000 to $10,000 fines and up to 3 years in prison for any person who knowingly violates any provisions of the Food, Drug, and Cosmetic Act. While the penalties for non-compliance can be great, the costs associated with lawsuits and negative public perception can prove even greater. Settling food related illness or wrongful death lawsuits can cost Food Processors over a million dollars in settlement and legal fees. At the time of this writing, McDonald s Corporation is embroiled in a public relations nightmare brought about by inconsistencies over the allergen content of its French fries; several lawsuits have been filed to date and McDonald s is certain to incur substantial legal fees battling the claim and the ensuing damages if they lose any of the lawsuits. While these dollar amounts are far from insignificant, they pale in comparison to the dollar amounts associated with a tarnished brand image and a food processor s reputation. ATTRIBUTE MANAGEMENT AND FOOD INGREDIENT TRACEABILITY IS THE KEY With the enactment of FALCPA and other recent regulatory measures, such as the Bio Terrorism Act, food ingredient traceability has become an important part of doing business for Food Processors today. Many food products contain ingredients produced in other plants by other food processors. Therefore, determining potential exposures to food allergens one step back in the supply chain, and being able to carry forward that data along with the final production data, is critical to accurately labeling the presence of food allergens or the potential exposure to food allergens that may have been introduced during production. For many food processors, their current challenge in choosing a traceability solution is to identify an automated approach that is both cost-effective and a good fit for their current business operations. Without the necessary speed and accuracy, food processors cannot gain the confidence of their customers, auditors or regulatory inspectors. This confidence is necessary to maintain prices, competitive advantages, and the strength of their brand. The most widely used systems for traceability in the food industry are essentially manual, relying on paper records and spreadsheets. These systems are also largely based on financial data such as purchase receipts for raw materials and invoices from suppliers. While this approach may initially cost less than automated systems, the direct and indirect costs will be higher for all parties involved, as they are also high in risk, affording the least amount of protection. Many processors rely on their process line control (PLC) systems and manufacturing execution systems (MES) to support detailed traceability requirements. These systems generally provide a wealth of detailed operational data for the manufacturing process occurring in a specific plant, but they can not account for the production processes of ingredients that may have been produced in other plants by other processors. These systems do not take into account critical information like purchasing and receiving, inventory management, transportation and customer records all of which are essential for one-up/one-back traceability. The inherent risk is obvious: records provided during a regulatory audit must be complete. Any gaps not filled by detailed records in the one-up/one-back chain, will result in exposure to risk for both the processor and their customers. Addressing the Challenges of the Food Allergen Labeling and Consumer Protection Act (FALCPA) 2
THE OPERATIONAL SYSTEM OF RECORD A new concept is becoming popular with food processors of all sizes and at all positions in the food chain. Much like they already use their accounting systems as their financial system of record, industry-leading food processors are utilizing enterprise resource planning (ERP) systems as their operational system of record. Serving as an operational system of record, incoming materials, manufacturing operations, inventory management and customer shipments are all linked in a manner similar to that of financial systems. An operational system of record provides end-to-end traceability for every action that can impact food, starting with the orders placed with suppliers and ending with receipt of finished goods by customers. At any point in the supply chain, a food processor is able to trace back to the source of all ingredients and trace forward to the disposition of all finished products. With an operational system of record, the advantages over other approaches can be significant: Attribute Management Any ingredient, intermediate, and finished product can have related standard (i.e. target) product specification attributes associated with it, i.e., physical attributes such as package type and size and label, as well as specific quality properties. These might include target product properties and composition, such as protein content, PH, brix (sugar concentration), etc. Specific protein food allergens (i.e. peanuts, soy, dairy, etc.) can also be associated directly with each product. These attributes are available for use in nutritional labeling applications. Additionally, managing product attributes can give manufacturers the ability to produce more customized products that meet unique customer specifications. This can result in creating new products and new categories that meet unique requirements of global markets and contribute to an increase in overall market share. While this may be a benefit to manufactures of any size, it can be a key differentiator for smaller manufacturers that compete with larger players in the industry. Lot Traceability Any ingredient, intermediate, and finished product should have the ability to be associated with lot-specific attributes. These lot attributes reflect the actual test results for a unique inventory lot, based on utilizing Quality Management testing processes, as well as from Laboratory Information Management Systems (LIMS). While the properties which are associated with an inventory lot may be similar to the product specification attributes, what makes them different is the properties associated with an inventory lot reflect the actual test results for just one lot. When Food Processors have the potential for variability in an inventory lot s quality (i.e. whether a production batch contains a onetime allergen, due to ingredient substitution, etc.), the individual inventory lot can have its unique quality test results associated with it. This lot-specific information is also available for export to nutritional labeling applications, when the product label has the potential to be different over time, based on processing and ingredient variability. Food Processors are also able to quickly contain the scope of a potential recall by determining the disposition of any raw ingredient throughout production and the distribution of all finished products. Additionally, Lot Controls help Food Processors improve customer satisfaction by ensuring that they are delivering products that meet the quality expectations of each customer. Addressing the Challenges of the Food Allergen Labeling and Consumer Protection Act (FALCPA) 3
Product Specifications Product specifications (i.e. formulas) specifically identify all inputs and output ingredients, intermediates, primary products, by-products, and waste materials. This includes tightly managed definitions about allowable (i.e. approved) substitute material. When coupled with automated data collection of real time Work In Process information (i.e. mobile computing of user-entered activity reporting and shop floor integration of system-generated transaction activity), food processors are insured that only approved/ allowable ingredient substitutions in formulas will be allowed. Process Specifications Process specifications allow companies to specify the individual process steps within each recipe. This includes recycled material which is being fed into the same or another production process. Full lot track and trace genealogy around each recycled material (i.e. broken cookies being ground up and fed back into a new batch of cookie dough), provides both controlled input and lot history visibility of these allowable, add-in by-products Automatic Data Collection By addressing raw material receiving, finished goods production reporting (manufacturing), inventory control, and finished goods shipping, Automatic Data Collection ensures full backward and forward traceability. Additionally, Automatic Data Collection provides immediate validation to ensure compliance with quality procedures and highly accurate accountability by eliminating errors resulting from manual entry. Finite Scheduling Finite scheduling based on both customer/forecast demand attributes, as well as product supply attributes, where restrictions and conditional terms of sequential and parallel sequencing on the same production line, as well as across multiple production lines in close physical proximity, help honor business rules about the use of equipment capacity. A system designed for food processors should support scheduling based on dedicated processing lines for allergen-containing products, or side-by-side machines which can each run many products, while adjusting the schedules to avoid cross-contamination. IMPROVED BOTTOM-LINE PERFORMANCE Many processors view automated traceability and attribute management solutions in the same way they view insurance policies -- as nothing more than overhead on the business. However, for forward-thinking companies, traceability is treated not as a side-line requirement, but rather, as an integral part of their end-to-end operation, from suppliers to customers. Their traceability solutions are used not only to track product, but also to streamline schedules, reduce operating costs, and improve customer service. Rather than piling on more overhead costs, these solutions are leveraged to increase profits. With an integrated operational system of record, food processors have the ability to improve financial performance. Detailed visibility into product-line costs and profitability, manufacturing efficiency, inventory spoilage and many other operational metrics can expose hidden opportunities for improvement. Additionally, improvements in forecasting, scheduling and order fulfillment can have a positive impact on customer service. The same operational system of record that addresses the requirement of traceability can also be used to improve bottom-line profitability and competitiveness. With integrated systems for forecasting, scheduling, inventory control, and order management, Food Processors are able to reduce the overall cost of operations and at the same time, improve customer service levels. Detailed costing capabilities establish efficiency goals and closely monitor and adjust operations to ensure the goals are met. Specific operational improvements documented by food processors of all sizes include: Reductions in finished goods inventory Reductions in excess safety stock Improvement in order fill rates On-time delivery of customer orders Reductions in scrap and waste Reductions in labor costs tied to inventory management Improvements in production throughput Addressing the Challenges of the Food Allergen Labeling and Consumer Protection Act (FALCPA) 4
SUMMARY To ensure compliance with the Food Allergen Labeling Consumer Protection Act (FALCPA), food processors should consider an automated approach to traceability and attribute management that is both cost-effective and a good fit for their current business operations. In addition to addressing traceability requirements, operational systems of record deployed by progressive food companies are also used to streamline schedules, reduce operating costs, and improve customer service. Rather than piling on overhead costs, these solutions are leveraged to improve bottom-line profits. For more information on the Food Allergens Labeling Consumer Protection Act, please visit our Food Allergens Resource Center at www.rossinc.com/foodallergen For more information on the use of an operational system of record, please visit FocusedOnFoods.com. About Ross Enterprise for Food Processors Ross Enterprise is CDC Software s comprehensive suite of applications for food and beverage manufacturers. The suite of applications includes enterprise resource management (ERP), supply chain management (SCM), warehouse management, customer relationship management, real time performance management and business analytics. Together, these systems address the unique challenges in food and beverage including the need for detailed product costing and profitability analysis, management of pricing and promotions, optimized forecasting and scheduling, improved order fulfillment and customer service, inventory optimization with minimal spoilage, and compliance with food safety regulations and mock recalls. Ross Enterprise is used worldwide by over 1,200 companies including Boar's Head, Kerry Ingredients, Cheesecake Factory, Pez Candies, Nellson Nutraceuticals, Hilmar Cheese, Michael Angelo s and Litehouse Foods. For more information, visit www.rossinc.com. References: 1. Linda Bren - FDA Consumer magazine -March-April 2006 2. Allergens: A Potential Kiss of Death - Food Quality Magazine May 06 3. FDA Consumer magazine - March-April 2006 4. Ingredients Forensics Food Processing Magazine 1/2006 Addressing the Challenges of the Food Allergen Labeling and Consumer Protection Act (FALCPA) 5
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