Biggest change in over seventy years

The FSMA certainly is important: as the official Federal Food and Drug Administration (FDA) Web site itself summarizes, it is "the most sweeping reform of our food safety laws in more than 70 years". The Federal Food, Drug and Cosmetic Act (FFDCA) of 1938, under which we all came of professional age, focused on additives, classifications, and certification processes, in response to concerns and problems of the '30s. The FSMA, in much the same way, is a reaction to food scares of recent decades, including mad cow detection, poisoning by Salmonella and E. coli, and the growing importance of foodstuffs imported from countries whose regulations align poorly with those of the United States. Key themes of FSMA include "traceability" and "transparency", so that all segments of the supply chain can be properly accountable for their roles in the safety of the food consumers receive.

The FSMA expands the FDA's authority and discretion to recall food, inspect facilities more intensively, and require tracing. All observers agree that it will soon be standard in the industry to be able to retrieve records that tell, for instance, that a particular cellobag of carrots had originally been packed at a specific facility on a specific day. The FDA is in the process of issuing a constellation of compliance requirements, inspection schedules, and fees that will affect nearly every grocry operation.

Those requirements remain in the future, though. Scott Bolduc, Director of Supply Chain Strategy at SPS Commerce, emphasizes that GS1 is still drafting standards that the FDA will eventually enforce. Retailers can't comply with the FSMA at this point, because the requirements aren't yet in final form. GS1 is the international standardization not-for-profit with responsibility, among many other things, for the GS1-128 "field-to-fork" barcode the Produce Traceability Initiative (PTI) requires.

ASNs pay off now

Sometimes regulatory uncertainty or incompleteness of this sort is a reason to defer compliance projects. Bolduc, however, argues that it's time now for many grocers to start with the advance shipping notices (ASNs) that all observers expect the FDA to require eventually.

ASNs, often realized as EDI 856 documents, are electronic transmissions that notify distribution centers (DCs) or retailers the details of a shipment before its arrival. They have roughly the content of a bill of lading, but, by arriving in advance of delivery, they provide cost savings, improvements in accuracy, and other advantages over bills of lading. One common example: a retailer who knows in advance that an order was only partially filled can re-order immediately, without having to wait for a truck to arrive. Depending on delivery cycles, this might well save a week in re-stocking a particular item.

Compliance with the FSMA will ultimately require use of ASNs, at least for food, pharmaceuticals, and likely cosmetics. For Bolduc, though, the primary motivation behind ASNs now is simply that they save money: the literature claims receiving costs are reduced by as much as 40%, inventory accuracy is higher, and automation allows for more favorable financial terms. Among the 40% of wholesalers and large retailers Bolduc sees using ASNs, savings on labor and error-rate appear to average around $50 per ASN.

As with so many of the automation solutions ec-bp covers, ASNs also bring qualitative change that ultimately dominates cost savings. "Vendors have a different process for packing" ASN-based orders, in Bolduc's observation, and reduce error rates by what he estimates as 90%. Establishment of a channel for communicating ASNs encourages suppliers to provide other alerts. Automation also promotes the accuracy and reliability of vendor scorecards and development of pertinent key performance indicators (KPIs).

Reduction of supply-chain friction through ASNs pays off for suppliers and ultimately for consumers, of course. Quicker and more accurate buying cycles leads to fewer out-of-stock losses, and thus more and faster turnover of suppliers' production. Improvements in accuracy lead to fewer delays in and demands on retailers' accounts payable (AP) departments, where exception-handling too often dominates effort. More generally, everything that brings suppliers and retailers closer promotes strategic improvement in operations and branding. ASNs help make the connection from supplier to consumer more visible.

FSMA probably doesn't demand you institute ASNs today. Your bottom-line interests do, though, and experience with ASNs will only help when FSMA compliance rules do take effect.