Author: Rajesh
Case Study Overview
| Client | Industry | Solution |
|---|---|---|
| Fast-food Supplier | Foods and Beverages, Food Processing, Equipment Manufacturing, and Packaging | Identified Risks and Mitigation Factors/Strategies |
Key Takeaways
- The fast-food industry faces inherent risks, such as changing consumer preferences, health trends, and regulatory requirements. To ensure sustainable growth, companies must invest in risk evaluation and assessment strategies
- The fast-food industry also faces issues like certification and licensing, contamination, supplier problems, transportation and storage challenges, and equipment failure. Addressing these is crucial for maintaining operational efficiency and consumer trust
- Conducting risk assessment involves identifying, quantifying, evaluating, implementing precautions, and regularly reviewing risks. This helps food product manufacturers prioritize and address challenges effectively, ensuring smooth supply chain operations
- Implementing strong risk management strategies based on thorough assessments can enhance supply chain efficiency, reduce losses, and improve customer satisfaction
About the Client
A growing fast-food chain
Client Requirement
Identification of challenges, potential risks, and ideal risk management strategies for ensuring continuity in operations and its supply chain. The fast-food industry client was suffering from frequent delays, equipment failure, and loss due to the sudden upsurge of issues within its supply chain.
What is risk assessment in food industry?
Risk assessment for hazard identification in the food industry involves systematic evaluation of potential hazards and classification of their levels according to domestic and international regulations. These assessments comply with HACCP practices and analyze risks to human health from harmful bacteria and food ingredients, chemical contaminants, physical contaminants, and other potentially harmful substances.
The rising importance of risk assessment in food industry
In recent years, growing economies, changing consumer preferences, and increasing health awareness have heightened the need for risk assessment in the food and beverage industry.
Risk assessment helps fast-food suppliers identify, evaluate, and prepare for potential risks by analyzing historical data and predicting impacts on distribution systems, supply chains, and compliance. This involves examining risk factors related to ingredients, handling, processing, distribution, and inspections. Thorough risk analysis allows food manufacturing companies to develop effective risk control measures, ensure compliance, and minimize risks to product quality and safety.
What are the biggest risks/challenges fast-food industry players face?
-
1
Certification and Licensing
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2
Contamination and Spoilage
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3
Supplier Issues
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4
Transportation and Storage
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5
Equipment Failure
Point 1: Certification and Licensing:
Rising competition and costs, and evolving demands have created challenges for the food industry such as complicating compliance with regulatory requirements. Stringent food safety regulations, like the Safe Food for Canadians Act, particularly burden smaller chains. Maintaining necessary permits, such as food handling and liquor licenses, requires extensive knowledge of safety standards and effective risk management. Non-compliance can lead to high costs, fines, and potential business loss, with repeated issues risking closure.
Point 2: Contamination and Spoilage:
The food industry must consistently meet safety and quality standards. Spoiled or contaminated food due to mishandling during sourcing, storage, and distribution can lead to significant losses. In the fast-food sector, bulk purchasing makes contamination or hygiene lapses especially damaging. Additionally, failing to meet health and safety standards can result in hefty fines and substantial losses.
Point 3: Supplier Issues:
Challenges in raw material supply and bulk stock acquisition can lead to significant losses for retailers due to storage limitations. Also, supplier issues may arise from contract disputes, natural disasters, price negotiations, or material shortages. To mitigate these risks, companies should maintain standby suppliers.
Point 4: Transportation and Storage:
Transporting and storing food, particularly meat, vegetables, and baked goods, is challenging, prompting many fast-food chains to use frozen products to reduce spoilage. This requires significant investment in temperature-controlled storage and transportation. However, equipment failures can lead to substantial food waste and financial losses. Additionally, transportation issues like customs delays and contamination during transit can result in fines and further wastage.
Point 5: Equipment Failure:
The fast-food industry relies on equipment for production, packaging, transportation, storage, preparation, and services. Equipment failures and maintenance issues can disrupt supply chains and hinder consumer demand. Also, procuring and managing equipment requires significant time, financial, and labor investments. Companies must identify potential weaknesses and be prepared to maintain production during maintenance or repairs.
What are the Five Critical Steps in Food Industry Risk Assessment?
Identification of Risks:
The first step is to evaluate the supply chain, processes, and external factors to identify potential risks. This includes reviewing historical data, recognizing patterns with modern algorithms, and preparing teams for recurring issues.
Quantification of Risks:
Once risks are identified, they should be quantified in monetary value, time, labor, or other metrics. Supply chain managers must prioritize these risks, ensuring all departments understand their significance.
Evaluation and Determination of Precautionary Measures:
The third stage involves evaluating prioritized risks and their impact on the supply chain. External and internal factors affecting production, logistics, and services must be analyzed.
Implementation of Improved Practices:
Implementing precautions requires strategizing, planning, investment, and execution. Effective practices include locating standby suppliers, developing bypass procedures, and staying updated on laws and regulations.
Frequent Reviews and Updates:
Risk assessment and management must be an ongoing process. Precautionary practices should be regularly reviewed, new risks evaluated, and successful mitigations acknowledged.
Success Story – SpendEdge Advantage
Solution Offered:
SpendEdge offered risk assessment solutions that could help fulfil the client’s requirements.
The fast-food industry client was suffering from frequent delays, equipment failure, and loss due to the sudden upsurge of issues within its supply chain. SpendEdge experts identified the lack of proper risk identification and mitigation factors/strategies. They evaluated various internal and external economic, political, environmental, logistical factors to identify the core issues that were cause of the disruptions in the client’s operations. For instance, they suggested plans for overhauling and upgrading equipment wherever necessary. Then, they helped the company establish a data-driven and well-equipped risk management department which could help it better plan for current and future uncertainties.
Outcome:
This enabled the client to improve its supply chain efficiency, restore functioning for various problem points, mitigate future losses, and improve customer satisfaction significantly, leading to faster expansion and significant growth for the company.
