Food Safety is Good for Business

For food safety professionals, the first order of the job is to think about the safety and quality of the product. But, said US Foods Senior Vice President of Food Safety and Quality Jorge Hernandez, “Food safety, and the systems that provide for an infrastructure of safe food products, is often seen more as a cost of doing business rather than a source of positive impact to the business.”

It was for this reason that US Foods decided to research the potential positives that a food safety certification process would provide to a company. “We wanted to prove our long-held belief that food safety can have a positive impact on business, an impact that goes beyond food safety,” Hernandez said. “If we could debunk the myth that food safety certification is a burdensome cost, we could focus on implementing safe programs that solve real problems,” he said, adding, “There are very few studies that focus on this.”
 

The Business Impact Study.

Eight years ago, US Foods (then U.S. Foodservice) began requiring that all of its private label products be grown, processed, or manufactured at facilities with food safety and quality systems certified against a GFSI-recognized standard. Three years ago, US Foods extended the requirement to its distribution centers and pledged to standardize all of its centers by the end of 2014, which it has completed. The food distributor chose to be certified to the IFS scheme because it was developed for distribution and logistics, the key elements of US Foods’ operations; it focuses on the adequacy of overall food safety systems; and it has a customer focus that aligns well with US Foods’ principles, Hernandez said.

For the certification, each distribution center was certified separately after a series of three audits. There is an initial “practice audit” for which the purpose is to familiarize everyone with the standards and expectations of the process. That is followed by an internal audit, and then ultimately by a formal certification audit. Only after the distribution center has passed the third and final audit can it be said to be certified.

As the company systematically brought its centers online, it realized that a good point to study the before and after effects of certification would be when it had a number of centers certified and a number not yet certified.

“We saw that certification improved performance, but the challenge was in how to measure those improvements,” said Director of Distribution, Food Safety and Quality Assurance Frank Ferko.

So US Foods contracted with faculty members at the University of Michigan’s Ross School of Business to get an objective, external perspective through a study involving US Foods data analysis and business performance impact evaluation.

The analysis examined monthly performance at each of the company’s distribution center from January 2011 through June 2014. It controlled for total sales at each division, improvements over time in sales and customer satisfaction, and predictable seasonal changes in performance. Benefits were computed by comparing the performance of certified distribution centers before and after certification, while controlling for these factors.
 

The results?

“The results of the study showed a strong correlation of certification and performance,” Ferko said. Certification to the IFS standard appears to have been a strong business success for US Foods. Three quantifiable business benefits of certification stand out:

1. Certification improves quality of service as measured by a reduction in complaints from customers by 23% on average.
2. Because responding to complaints consumes roughly 1.53% of employee time, the reduction in complaints due to certification also reduces company labor costs significantly. Hypothetically, for a company with 25,000 employees who work 2,000 hours/year at $20/hour, the labor cost savings due to certification’s reduction in complaints would come to roughly $3.5 million/year.
3. Certification is estimated to increase sales revenue by approximately 2.0%, presumably because it increases consumer confidence in the safety and quality of the food they purchase.
    

Other potential unrealized benefits include improvement in the reduction of food safety incidents and complaints, as well as better tracking, documentation, and assessment of issues that did surface.

“This research contains very compelling statistics for not only US Foods’ divisions, but for any food company,” said Denver Division President David Patterson. “And we think time will show that there are even more unrealized business benefits to certification. In Denver, for example, we saw the reduction in complaints, but we also saw an increase in productivity.”

Additionally, Ferko said, “the results of the study led to a series of improvements in management commitment to food safety from the ‘before’ to the ‘after’ of the process.”

“We have seen similar improvements in the retailers, processors, and growers who are certified to a GFSI standard,” Hernandez said. “We are hoping that these results incite and inspire others across the food industry to pursue the same concept; to conduct their own studies measuring the results of food safety programs.”

US Foods intends to continue its own studies, exploring other aspect of business impacts of food safety programs. “We want to continue proving that food safety is a win-win,” Ferko said.

“It’s difficult to find anyone who says food safety is not important, but people don’t always realize that when you do good for food safety, you do good for the business,” Hernandez said.

“Food safety certification definitely impacts the business positively,” he said. “A strong food safety program and discipline provide benefits that go well beyond food safety.”

The author is Editor of QA magazine. She can be reached at llupo@gie.net.