Speed is crucial when tainted food products are recalled. A new study co-authored by Dr Benn Lawson of Cambridge Judge Business School looks at the effect of geography and industry clusters on the responsiveness of food producers to recalls originating in their supply chains.
Contaminated food products can pose
particular threats to consumer health and well-being, as well as impose
significant financial and reputation costs on firms.
Such recalls often involve a
tainted ingredient – peanuts, eggs or beef, for example – which can then spread
quickly through complex food supply chains, infecting many other fresh, frozen
or prepared food products. So speed in spreading the word and getting contaminated
food products out of distribution and off supermarket shelves is critical.
A study co-authored by Benn Lawson,
University Senior Lecturer in Operations Management at Cambridge Judge Business
School, looks at firm response time in such food-product recalls. Based on US
Food and Drug Administration (FDA) data from 2004 to 2013, the study looks at agri-food
recalls involving 407 pairs of suppliers and affected downstream manufacturing
The conclusion: firm response time
is lengthened by geographic distance between the supplier and manufacturer, but
shortened when the supplier and affected company operate in related, rather
than diverse, industry sectors. The research finds further that response time
deteriorates as more firms in a given industry are affected by a recall, perhaps
due to competitive pressures.
The findings pose important
implications for suppliers, manufacturers and regulators in seeking to minimise
the fallout from future food recalls. The study recommends that supply chain
resilience be strengthened through better tracking and traceability systems,
and more extensive quality audits.
Co-author Benn Lawson of Cambridge Judge Business
School comments on some of the key findings and implications of the study:
The study is based on what we call “time to
recall”. That’s the downstream
supplier’s public reaction time – measured in the number of days it takes a food
manufacturer to issue its own recall following the first opportunity at which
it could learn about the problem, which is the supplier’s recall announcement.
We then looked deeper at the effect of geography and industry on a firm’s
The damage caused by food recalls is hardly peanuts. In fact, one of the most high-profile cases involved
Georgia-based peanut processor Peanut Corporation of America (PCA) and
Salmonella contamination in 2009: it was the largest agri-food recall in US
history, linked with nine deaths and $1 billion in losses. Geography clearly
played a role in the slowness of affected downstream firms to act: a company in
Washington State more than 2,000 miles away was a customer of PCA, but it took
more than a month to clear all affected peanuts from its processing lines and
issue a recall. That company subsequently moved back to a local supplier in
Washington State to keep a closer watch on everything.
Distance boosts pipeline inventory, slowing response
time. When suppliers and manufacturers
are far apart, firms tend to hold larger stores of inventory as insurance
against transport delays. This makes it more difficult to identify tainted
goods because there is simply more product to inspect, and because the affected
goods are more widely dispersed among transport networks and storage points.
We expected that a geographic cluster of affected
firms would reduce recall times, but there was no effect. The assumption was that a number of affected firms
located in the same metropolitan area would increase information flow and
improve recall times, but that didn’t occur. That might be due to competition
among the affected firms for limited local resources to enable the recall, such
as storage and transport capacity, or a reluctance to disclose firm-specific
information to investors due to concern about the share price. We conclude that
government penalties and inducement to share information may be required.
Prior experience with recalls improves subsequent
recall response time. This poses an obvious
problem: how can firms gain such “recall management expertise”
without actually going through a costly and damaging recall? Simulation models
and pilot tests of a firm’s internal processes may be a good way to prepare for
future disruption, and thus quicken response times in the event of a recall –
because while unpredictable in terms of timing, product recalls are an expected
form of operational disruption.