Most supply chains cannot deliver against brand promise
Sep 18 2008
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AMR Research fielded a quantitative study of 251 US food and beverage companies in May 2008, with the goal of understanding the current state of the food supply chain and what actions companies can take today to improve performance. 

63% of respondents have increased their brand claims of health and safety and product performance over the past five years. These includes “organic,” “hormone free,” “free range,” “allergen free,” “good for the environment,” open code dating, and country of origin labelling. Over 75% feel confident in the ability of their supply chains to deliver on these claims.

However, for most companies the ability to deliver products against their brand promises safely and reliably is an issue. Reasons given are:

• Brand complexity is increasing exponentially-For consumer products (CP) companies, the product portfolio has become more complex, with over 500 active products (exclusive of brand extensions) and 10% of lines launched each year.
• Leaders feel good about recall capabilities—Companies feel good about brand safety. 78% have completed simulated recalls and feel confident about their capabilities, according to our survey. The majority of companies (88%) are satisfied with the results from their simulated recalls.
• Supply chains have become more complex—39% of food products are manufactured by third-party companies and 30% of distribution is handled by a third-party provider, according to our study. In addition, many contract manufacturers source ingredients directly (46%). This level of supply chain complexity didn’t exist 10 years ago.

Although most companies believe they can overcome supply chain deficiencies through a recall. AMR believes they are wrong, as:

• Recalls are expensive—In 2007, 67% of companies with more than $5B in revenue had write-offs related to recalls that exceeded $20M.
• The recall number is high—The average company had 178 recalls: 38 for product performance, 36 for allergen-free compliance, 31 for potential contamination, 30 for health and safety, 29 for marketing label issues, and 14 for products that don’t perform well when aged. This level of recall activity causes consumer confusion.
• Recalls are not effective—On average, it takes 14 days to sense the need for a recall and 20 days to act on it, according to our data (see Figure 2). For companies in our study, this resulted in less than 40% of the product actually being recalled, which means 60% is sold and consumed within this time period.

Three actions to take now:

• Track by unit, with a focus on tracking through transformation processes
• Focus on tracking across the links in your supply chain
• Improve the frequency of quality data collection and analysis.  

Adapted from Source: AMR Research, 13 September 2008