(UPDATED COVERAGE Nov. 2) As the industry waits for tardy Food and Drug Administration guidance on traceability, questions abound about the initiative’s cost effects on the industry.

Retailer questions scanning costs of PTI

“I think everybody will agree that we want food safety and the ability to trace and I think the challenge is how efficiently can it be done and how inexpensively can it be done, ” said Dan Sutton, director of produce procurement at Albertsons LLC, Boise, Idaho.

While President Barack Obama’s Food Safety Working Group promised FDA guidance on traceability by Oct. 7, Gary Fleming, vice president of industry technology and standards for the Newark, Del.-based Produce Marketing Association, said in an Oct. 21 e-mail that he now doesn’t anticipate the FDA to issue its guidance about traceability until the end of the year.

Calls and e-mails to the FDA about when the traceability guidance would be issued were not returned.

Sutton’s biggest issue with the traceability initiative is the scanning requirement.

“When you look at what is proposed out there with PTI, the scanning thing to me is very troublesome,” he said.
 
The Produce Traceability Imitative milestones call for handlers of fresh produce to scan and store the global trade item numbers on inbound cases in 2011 and for outbound cases in 2012.

Sutton said that scanning inbound and outbound cases at retail distribution centers would involve considerable expense.

Sutton has estimated that there are about 3.5 billion cases of produce shipped annually in the U.S.

Based on a $25 per hour labor rates at a typical distribution center, he said that would translate to about seven tenths of a cent for every second spent with a produce case.

Based on his calculations, Sutton said each case would take about 10 seconds total to scan inbound and outbound.

That would equal about 7 cents per case for labor at the distribution center, or about $245 million in added costs industry-wide based on the estimate of 3.5 billion cases shipped annually.

That’s not accounting for traceability costs for grower-shippers, which some industry leaders have estimated in the range of 10 cents to 20 cents per case.

Working with an estimate of 20 cents per case for grower-shippers and 7 cents per case at distribution centers, Sutton said the cost of the PTI mandated solution would be $945 million per year.

Dan Vache, vice president of supply chain management for United Fresh Produce Association, Washington, D.C., said there are a number of solutions that could work to solve the scanning issue at distribution centers.

He said Fleming hosted a buyer’s meeting of the traceability initiative on Oct. 29 to discuss the issue.

“There are a number of people working on solutions, including the retailers themselves,” Vache said Oct. 29.

Elliot Grant, founder and chief marketing officer for YottaMark, Redwood City, Calif., said Oct. 29 his company has been working on a PTI solution for retailers that will not require outbound case scanning.

“It’s early still and we haven’t solved all the problems but we have been working on a strategy that will I think will change the debate on this,” he said.

Grant said a number people, like Sutton, believe that scanning outbound cases at the distribution center will disrupt efficiency. However, he said innovations have already been developed to create efficiency for retailers.

In particular, Grant said the hybrid pallet tag solves the problem of scanning inbound produce cases coming into a facility. That hybrid pallet tag concept involves one or two bar codes on a pallet giving a summary of all the cases on a pallet, so retailers only have to scan the pallet tag and not every case.

For outbound cases, Grant said he is developing a solution that will not require scanning at all yet maintains complete traceability.

“It is quite straightforward, using systems that are well known and well understood,” he said.

Grant said it was premature to discuss specifics of the plan because it is being fine tuned. In addition, he said it is important to get “buy in” from retailers on the plan.

“At this point I’m very confident that pretty quickly we will have a solution for the outbound scanning side that everyone will say, ‘That’s going to work,’” he said.

A broker or small distributor will have to scan every outbound case, but Grant believes that might be the exception rather than the rule.

“For the majority of distributors, (this solution) will work, and it will work with almost no impact on their operations,” he said. “This really does eliminate the need of any physical scanning of cases at all once they are received into a distribution center.”

Sutton said the Produce Traceability Initiative should be mandatory if it is identified as the industrywide solution.

“The problem is that the produce industry is so fluid,” he said. “The guy out in Los Angeles selling and repacking tomatoes or whatever he is doing and buys off the Los Angeles market, how will you get him to comply? It’s a cash business.”

Likewise, he said “gunny sackers” that pick up product at packinghouses also represent a challenge to the PTI model. If someone is packing apples, he said there is a percentage that won’t make it to a retail store but are good enough to consume.

“Where do those go and how will they be tracked?” Sutton asked.

“I think all that needs to be considered; if we want true traceability systems through the entire industry then you have to include all those other things, and that will be very very difficult and very expensive to the industry and to consumers for that to happen,” Sutton said.

Sutton speculated the cost of PTI could put some shippers out of business. “Most shippers don’t make a lot of money and to now say here is another 2% you have to tack on there, that’ a pretty big deal to most shippers.”

He is also skeptical that retailers are willing to invest great expense to implement PTI.

“I know a few CEOs who are saying that is not a part of their program.”

In fact, Sutton believes current industry traceability is close to being sufficient.

“I think it is close; I don’t think you could walk away and say it is good enough,” he said. He suggested what FDA could do for industry is to target 10 to 15 different fields the agency needs in order to trace back produce. That will require the industry to come up with consistent terms for pack, size, description and other terms. “Let’s get consistent within the industry on how we look at these and then the FDA tells us what 10 or 15 fields they need in order to traceback,” he said.

“If everybody knows here are the 10 fields I have to track, then they can create the report or queries to provide that,” he said.

Sutton said the traceability initiative may hang in the balance with what the FDA says in coming months.

“If the FDA or the government doesn’t require (PTI), my guess is that it won’t get done,” Sutton said. “Our company and other companies will look at their systems and say, ‘this is good enough, we can trace back and we can provide the records within ‘X’ amount of time. We won’t spend any more money to do it,’” he said.

Albertsons current traceback systems don’t require the Global Trade Item Number and scanning of cases.