Readers may have noted the numerous posts I have penned that follow the ongoing developments related to the tainted milk scandal unfolding in China, as well as the all too numerous recall incidents of late.  I focus on these specific incidents because they provide key learning for supply chain management professionals relative to supply chain risk management. Beyond the moral issues, rage and consciousness reflected in the latest China milk scandal of managing a supply chain that operates with a culture of back-door business dealing or bribery, there are consistent patterns of what can be expected in the discovery, assessment and mitigation phases for many of these incidents.

The latest development in the China tainted milk scandal reflects that both the scandal and the scope of the recall continues to widen.  In China, the number of tested batches finding contaminated milk has risen to a least 100, and includes dozens of brands involving China’s biggest producers.  As in other incidents of this type, the tracing of exposure across multiple supply chains has now begun to impact numerous countries, including the U.S. The Journal article points to the fact that the consumer protection commissioner for the state of Connecticut initiated tests that have now found melamine in White Rabbit Creamery Candy, which was imported from China, and the U.S. FDA has reiterated its warning to consumers to not eat this brand of candy.  Officials in Indonesia, Hong Kong, Japan and Thailand continue their efforts in testing of other products with potential China milk powder content, and no doubt, the food companies potentially impacted are scurrying to react or resolve concerns. So as the third week of this latest crisis starts to wind down calendar-wise, the scope of potential impact to consumers, brands, and corporate reputations remains very uncertain.

Past incidents have involved the contaminated heparin drug that originated in China,   the suspected salmonella outbreak in tomatoes in the U.S. that was later found to be peppers coming from Mexico, and tainted pet food in the U.S. traced to gluten originating in China.  Each of these specific incidents point to the fact that supply chains may not be necessarily within product specification, and it takes precious time to trace the entire supply chain for both root causes and true extent of the problem.  In the incident of the life-saving drug heparin, from the time of public acknowledgement in mid-February, it took the U.S. FDA nearly three months to complete its investigations before it could officially declare U.S. supplies safe.  Human lives were lost and hundreds of others were affected.  The tainted tomatoes incident first became public in mid April and ran through the end of July before positive identification could be made to peppers originating from certain farms in Mexico.  Damage to tomato growers in the U.S. was needless to say quite detrimental in terms of dollars as well as brand reputation. Keep in mind these incidents involve regulated supply chains with mandated inspection controls and reporting requirements.  Think of how these incidents would unfold in unregulated environments where critical information is harder to gather or uncover.

The key takeaway is that supply chain risk management is something no company can afford to ignore.  The global expansion of supply chains involving all sorts of products and multiple business cultures has no doubt added to this risk.  Even if your products are sound, safe, and appealing to consumers, the risk of other competitors not doing so can cause backlash.  More importantly in my view, is that all of these incidents point to an ongoing need for enhanced supply chain-wide visibility, supplier control, and active risk management mitigation.

Let’s hear your comments, agree or disagree?

Bob Ferrari