FMCG Supply Chain complexity

FCMG companies face many challenges; however, one of the key obstacles for the global FMCG companies currently is end-to-end data visibility. Studies conducted by Boston Consulting Group (BCG) and Grocery Manufacturing Association (GMA), showed that for 78% CPG companies participating in the survey, end-to-end data visibility—from point-of-sale data to GPS tracking data on shipments—is a priority.

Another related study demonstrates that the leaders in digital supply chain management are enjoying increases in product availability of up to 10 %, more than 25% faster response times to changes in market demand, and 30% better realization of working-capital reductions, on average, than the laggards (Gstettner, Roesgen, Ganeriwalla, Kotlik, & Walter, 2016).

Food Fraud – A Global Concern

The costs related to food fraud for the global food industry have been estimated at around EUR 30 billion every year, threatening the proper functioning of the internal market. Faced with this phenomenon, control authorities are losing credibility, companies are losing money and consumers are losing trust in food. Fraudulent practices in the food sector may lead to public health risks. EU policies make an important contribution in pursuit of this responsibility in order to identify and prevent food fraud. (European Comission, n.d.). Here are some numbers, which highlight the scale of a counterfeiting problem in FMCG sector.

  • More than €100 million worth of potentially dangerous food and drinks was seized in the latest Operation OPSON, coordinated by Europol’s Intellectual Property Crime Coordinated Coalition and INTERPOL (EUROPOL, 2019).
  • In April 2017, a joint Interpol-Europol operation (Opson VI) seized counterfeit food and drink worth an estimated 230mn€ (EUROPOL, 2017).
  • The joint Europol-Interpol Operation Opson V ran over the course of four months (November 2015-February 2016) across 57 countries. It resulted in the total seizure of 11 131.18 tonnes, 1 449 056.40 litres and 5 549 328 units of either counterfeit or substandard food and beverages, as a result of checks carried out at shops, markets, airports, seaports and industrial estates across the globe (EUROPOL, 2016).
  • A study conducted by AC Nielsen which estimates that 30% of FMCG business is lost to fake products, and 80% of the consumers who purchased these products believed that they had bought originals (FICCI CASCADE, 2015).
Food Fraud – A Global Concern

The costs related to food fraud for the global food industry have been estimated at around EUR 30 billion every year, threatening the proper functioning of the internal market. Faced with this phenomenon, control authorities are losing credibility, companies are losing money and consumers are losing trust in food. Fraudulent practices in the food sector may lead to public health risks. EU policies make an important contribution in pursuit of this responsibility in order to identify and prevent food fraud. (European Comission, n.d.). Here are some numbers, which highlight the scale of a counterfeiting problem in FMCG sector.

  • More than €100 million worth of potentially dangerous food and drinks was seized in the latest Operation OPSON, coordinated by Europol’s Intellectual Property Crime Coordinated Coalition and INTERPOL (EUROPOL, 2019).
  • In April 2017, a joint Interpol-Europol operation (Opson VI) seized counterfeit food and drink worth an estimated 230mn€ (EUROPOL, 2017).
  • The joint Europol-Interpol Operation Opson V ran over the course of four months (November 2015-February 2016) across 57 countries. It resulted in the total seizure of 11 131.18 tonnes, 1 449 056.40 litres and 5 549 328 units of either counterfeit or substandard food and beverages, as a result of checks carried out at shops, markets, airports, seaports and industrial estates across the globe (EUROPOL, 2016).
  • A study conducted by AC Nielsen which estimates that 30% of FMCG business is lost to fake products, and 80% of the consumers who purchased these products believed that they had bought originals (FICCI CASCADE, 2015).
Regulatory Environment

Food counterfeit is considered a serious threat to consumer health by the regulators across the globe, who are working on tightening up their Food Safety Governance. The current focus is on modernization of governance with the help of digital technology (like Blockchain, Serialization Coding, etc.) Serialization technology, which is already well-established in the pharmaceutical industry to combat counterfeits, is gaining lot of attention in FMCG sector these days. Nevertheless, at this moment there is no law in force in any country that mandates serialization of food products.

However, some EU importers demand trading partners to apply traceability systems beyond the legal requirements. ISO 22005:2007 established the principles and requirements for the design and implementation of a feed and food traceability system.

Food Traceability Regulatory Environment

China: The revised Food Safety Law was passed by the Chinese Executive Committee on the 24th April 2015 and came into force on the 1st October 2015. The Food Safety Law introduced more stringent regulatory controls over domestic production and increased oversight over the entire supply chain, effectively improving safety measures for food production and traceability.

USA: The FDA Food Safety Modernization Act (FSMA) is transforming the nation’s food safety system by shifting the focus from responding to foodborne illness to preventing it. FDA recognizes that ensuring the safety of food supply is a shared responsibility among many different points in the global supply chain for both human and animal food. Although a fully-fledged Food Traceability system is not in place, FSMA highlights the importance of establishing a system to track and trace both domestic and imported foods.

EU: The EU faces challenges in the fight against food fraud and the way forward. In 2017, the EU Parliament and EU Council agreed upon new rules to tighten up Food Traceability to combat food fraud. There are ongoing efforts to update existing food laws to increase transparency and food safety.

Canada: The Safe Food for Canadians Regulations (SFCR) came into force on January 15, 2019. Some requirements had to be met immediately, however other requirements are being phased in over a period of 12-30 months based on food commodity, type of activity and business size.

New Zealand: New Zealand is working on a new Food Safety Reform Bill. It is expected to enable new regulations for the tracing of food products and ingredients. Furthermore, New Zealand plans to bring changes to the food recall system. (https://www.mpi.govt.nz/law-and-policy/legal-overviews/food-safety/)

Serialization & FMCG

What is driving serialization in FMCG sector?

There are 3 major aspects that drive serialization in FMCG sector.

Counterfeiting

Increasing instances of counterfeiting are damaging brand reputation. With the advent of the Internet and complex global supply chain, food fraud has become a huge issue.  Serialization is a tested and proven mechanism to fight fraud.

Compliance

Regulations such as FSMA (in USA), SFCR (Canada), Chinese regulations for Infant Formula, etc.  are driving companies to adopt serialization. Industry experts believe that “Healthcare-like” serialization programs in FMCG is not too far. Large Retailers might take matter into their own hands to prevent fake food from entering their supply chain to avoid litigation. This could mean that Serialization and Track &Trace could become mandatory to do business with them.

Technological advancements

Serialization technology perfected in Pharma is now ripe for FMCG. Alliances are being formed to perfect pre-serialization of packaging materials for FMCG (e.g., Amcor and Kezzler). Blockchain and Cloud based authenticity are the new buzzwords in Food Business

Serialization data, when analyzed and interpreted using advanced analytical tools can help the companies to achieve greater levels of supply chain optimization, gain invaluable insights into consumer shopping behavior and enhance customer service.