Preventing Food Recalls: Whole Foods Inc Shares What It Learned the Hard Way

Recalls of any kind are time-consuming, brand equity destroying and just plain expensive. They are also dangerous in terms of the reputational meaning they convey about quality and leadership. And the sad fact is, they can be prevented. Doug Newman reports in Business Week on what premium food retailer Whole Foods learned about all of this:

"As children around the world bedded down eager for long-awaited presents and feasts last Christmas, executives at Whole Foods Market (WFMI) likely had visions of tainted gingerbread houses dancing in their heads.

During Yuletide season 2010, Whole Foods—known for its commitment to high-quality product—was pulling gingerbread houses from its shelves in 22 states due to a recall of baked goods from Lincolnwood (Ill.) supplier Rolf's Patisserie. The treats were flagged as one of several items possibly contaminated by Staphylococcus aureus, a bacterium that can cause food poisoning. Despite several degrees of separation, some of the packaging carried the Whole Foods label. Fortunately, the only consequence was a matter of having to give some refunds.

Risks always lurk in the supply chain, especially in an environment as global and complex as the food industry. The farther the chain stretches, the greater the likelihood that a problem or disruption will arise. How food sellers prepare for potential problems and mitigate the fallout once they happen can spell the difference between continued brand loyalty and a shuttered business.

The internal moves necessary to ensure food safety or react to a recall demand a fine understanding of a sometimes overwhelming global machine. Companies must focus on preventative measures in order to set the stage for a quick, effective mobilization. Food sellers can safeguard against recalls and react appropriately with concrete policies in place. Take the following precautions.

1. Remember, the best offense is a good defense. The food industry goes to all lengths to monitor its operations, but as the saying goes, a chain is only as strong as its weakest link. Food sellers should have strong supplier quality management systems in place that spell out required product specifications, expectations about delivery procedure and schedules, and the tracking measures that ensure auditability from one end of the chain to the other.

For example, packages in the food industry are clearly labeled with batch and lot numbers, which are recorded on an automated shipping notice and entered in the Warehouse Management System (WMS). This practice allows companies to track product locations and trace shipments. Greater precision is coming down the road, though, in the form of RFID (radio-frequency identification) tags. While the tags have so far proven cost-prohibitive in the food industry at large, adoption will eventually mean that tracking can be carried deeper—down to a single package's location and storage requirements.

Guidelines come from a combination of existing protocols and specific company mandates. There are myriad systems to adhere to: Wal-Mart (WMT) relies on its Safe Quality Food 2000 guidelines, Kroger and Safeway devised specific regulations, and the U.S. government has its own perspective. The USDA provides inspectors and sets quality standards for many food processors, including those of meat and dairy, while the FDA provides the good management practices (GMP) guidelines and governs food labeling requirements.

Putting the right technology in place to follow the chain and metrics that help paint the ongoing picture helps keep everyone on track. Within each testing component resides a set of "leading indicators"—red flags that will immediately spotlight a problem and help prevent a full-blown recall. Suppliers may, for example, be required to test product quality by the shipment or by the week, depending on the risk profile of the item. A deviation from the testing schedule or an unexpected quality-control result would be leading indicators that should trigger a correction, thereby stopping a recall before it starts

2. Account for accountability. Just as eliminating confusion around guidelines goes a long way toward creating a more reliable supply chain, so does clear communication about roles and responsibilities. Whether handling suppliers or the internal organization, delivering a clear understanding of accountability ensures that each participant takes ownership of specific activities.

Organizations should develop tools that lay out who is responsible for what, where, and when. A common approach is employing a RACI chart—responsibility, accountability, consulted, and informed. RACI spells out in clear terms who on each shift is responsible for performing an action, who is held accountable for the process as a whole, who should be consulted before making a decision, and who must be informed after a decision or action is made. RACIs can be simple tools, but they are extremely effective in providing a quick, clear view of the situation.

With this environment in place, a hiccup such as a missed quality test should send up an immediate red flag and enable the chief executive to follow the path easily to the cause—down to the individual tester, if necessary. When the pain point is identified, the organization should hold the responsible employee accountable in a manner that improves future work, tightens the process, and further secures the company's trust in its system.

3. Mobilize for the moment. Should a situation necessitate a recall, the processes and culture will prove more crucial than ever. Food sellers need to respond immediately, but they also need to make certain they are reacting to the right situation—context and the extent of the risk at hand will dictate much of the response. For example, a preemptive recall of potentially tainted gingerbread requires a different response from a situation that involves reported deaths associated with unknown ingredients in a product. The former is a matter of shipment stoppages and customer communication, the latter a potentially devastating situation that calls for a comprehensive investigation into each ingredient and widescale corporate involvement.

Every recall could turn into a mission-critical event and needs to be addressed with the same vigor as any major, company-altering program. Most important, a general response plan should be laid out ahead of time, prioritizing communication that will get product out of the supply chain as soon as possible. When a recall hits, time is of the essence; executives, the company as a whole, and suppliers should already be aware of first steps and ready to execute them immediately.

The plan will capture several elements: communications strategy, which will vary depending on size of a company, its supply chain, and its merchandise; reliable systems and metrics that help track and explain the problem and the solution; and once again, roles and responsibilities. Accountability is the all-important equalizer—regardless of an employee's role in the process, owning it and adhering to the stated guidelines means he or she can help minimize damage to customer health, company brand, and the bottom line.

Fortunately for all concerned, there were no reported sicknesses from the gingerbread houses sold at Whole Foods this past Christmas season. Whole Foods handled the situation in a timely and aggressive manner by issuing a public response within 24 hours of the FDA's announcement about Rolf's recall. The grocer provided contact information for concerned customers through its website and the media and posted signage in stores explaining the problem. Whole Foods guarded its reputation, and no lawsuits or health claims were filed in relation to the recall. And after recalling all desserts made from Nov. 1 to Dec. 24, 2010, and cooperating with the Illinois Department of Public Health, Rolf's Patisserie is still open for business. As for the experience gained through the process, that's icing on the cake