July, 1999

From the Editor

Taking Responsibility

At a wedding in Singapore, the bride broke down in tears, as the wedding cake was declared contraband. It seems the cake was made in Singapore but used a mix that came from Malaysia, and the Malaysian mix was based on egg powder from Europe that, possibly, could have been made from eggs laid in Belgium.

The chickens that laid those eggs may have eaten chicken feed laced with dioxin, a carcinogen. So we live in a world in which the quality of chicken feed in Belgium can ruin a wedding in Singapore.

Historians of the future will marvel at modern day supermarkets as triumphs of civilization. As we are astounded by the ancient Egyptians and their ability to build the pyramids, historians will be astounded that we were able to harness the ingenuity and productivity of the whole world to bring the most delectable delicacies within easy reach of virtually everyone in the United States.

But this massive chain of procurement is a complex organism, and in many ways more fragile than simply buying what local vendors had to offer not so very long ago. Protecting the procurement chain is therefore very important and requires asking questions and hedging one’s bets.

To start with, in evaluating suppliers, it is prudent to know what contingency plans they have established to keep themselves well supplied with the raw materials they need. What happens if their own suppliers should experience difficulties – food safety, or a war, or financial collapse? Anything can disrupt a supply chain.

Of course, it is also good to steal a page from our associates in produce and be very hesitant to place all one’s eggs in one basket. Produce buyers have been reminded all too frequently that Mother Nature plays havoc with even the best laid plans and so are loathe to have just one supplier of any commodity.

Astute deli buyers also have learned to hedge their bets and make sure they have, at least, both primary and secondary suppliers for most major items.

This way if a disaster hits and a product is in short supply, a buyer has someone to turn to who won’t ask, “Where were you when I needed you?”

This is also a consideration in deciding how deeply a retailer wishes to commit to a single brand. If the public image of a store comes to revolve around an outside brand, the retailer becomes vulnerable to any event that could diminish the reputation or restrict the availability, of that particular brand.

Also important is to maintain relationships with importers. So much emphasis is placed on buying direct that it is easy to place oneself in a vulnerable position.

In Singapore, those with good relationships with importers have been able to quickly cover most of their needs with products from Australia, New Zealand and Canada.

Those who had “cut-out” the importer and were buying 100 percent direct from Belgium are scrambling. Of course, though food safety concerns are typically the catalyst for this kind of analysis of the supply chain – and though some of the evaluations of suppliers may seem intrusive – they really are just the beginning.

Too many retailers approach food safety as the manufacturer’s concern. Sure, those who prepare food in-store or at commissaries recognize that they have special responsibilities for food safety issues that arise in preparation. Retailers also recognize their responsibilities for food safety issues that arise through care and handling. But for product ordered from manufacturers, most retailers are hesitant to see any retail responsibility.

Yet, in the end, the responsibility has to be primarily in the hands of the retailer. Partly this is just because consumers trust their retailers to deliver safe product and will blame the retailer regardless of who technically is at fault.

More generally, though, the issue is simple: You get what you pay for. Retailers can give speeches about food safety all day long. Retailers can demand that manufacturers submit affidavits as to HACCP plans and get manufacturers to swear they meet the highest food safety standards.

But running a good plant costs money, and retailers who give speeches about food safety, yet switch suppliers based on price, send the message clearly: Retailers don’t really care about food safety; they really care about low prices.

Retailers simply must move to a verified supplier format in which manufacturers that want to become suppliers open themselves to inspections of plants, procedures and records. Then, even if someone else is a nickel cheaper, the retailer just has to say no dice until the manufacturer has been evaluated as a potential supplier.

For all the talk of partnerships and strategic alliances, in far too many places, the business partner is the one who pays the biggest up front fee, and the alliance is with the guy who is the cheapest on the block.

Is that any way to pick a supplier?

There was once an age where scarcity of product meant that the retailer who could secure supplies had an edge. Today, we live in a world of surplus, and so the edge becomes qualitative. Whose product is better and safer? How many retailers have the foggiest idea where their own operation stands?  DB