BCM In The Food Chain: Joined-up Thinking Or Curate’s Egg?

Dr Helen Peck provides an insight into the findings of the latest study into resilience within the UK’s food chain and asks whether there is enough of a cohesive, market-wide approach to BCM to withstand a widespread incident.

Food supply is vital to us all. The supply chains that feed us are complex and far reaching. They are, according to some of the most widely used definitions from supply chain management, networks of interdependent organisations formed to facilitate high performing business models, deliver competitive advantage and ultimately better value to shareholders, customers and consumers. So far so good, but in reality they do much more. Supply chains are part of the fabric of our society. They link organisations, industries and economies and span the no-man’s land between the established remits of BCM and the civil contingencies agenda.

Food supply
In the UK, a situation threatening serious damage to human welfare constitutes an emergency under the Civil Contingencies Act. An event which may cause a disruption to the food supply is one of a number of possible scenarios covered by this definition. From a national security perspective too, the supply of food is designated as one of nine elements of the critical national infrastructure.

However, the characteristics of the food supply are quite different from most of the other elements of our critical infrastructure. The others are for the most part either: in the public sector (e.g. health, government and emergency services); concentrated in public sector oligopolies (e.g. privatised utilities) or in the case of finance, dominated by relatively few supposedly heavily regulated companies, currently hovering between private ownership and nationalisation.

In the UK, the production and supply of food has never been in public hands. It is a private sector endeavour, involving hundreds of thousands of businesses. Yet food has been at the centre of some of the most memorable national emergencies of recent times. Long before the financial system went into melt down and talk of toxic assets filled the air waves, food emergencies had demonstrated the need for a better understanding of systemic risk. With BSE in cattle it took stringent regulatory controls to prevent infection from rendered carcasses being re-introduced into the food chain, a practice that had amplified a naturally occurring low level risk into a high level full blown epidemic. In 2001, the outbreak of Foot & Mouth highlighted hitherto unrecognised interdependencies between sectors of industry as its effects rippled across the UK economy and beyond.

Supply chain vulnerability
It was Foot & Mouth preceded by another‘creeping crisis’ – the 2000 fuel protests – that first drew Cranfield University into research into supply chain vulnerability, risk and resilience and into contact with members of the Business Continuity Institute. As a newcomer to BCM, I had been faintly disappointed to see that early efforts to codify the disciplines’ aspirational remit actively sought to distance it from the concerns of emergency planning. PAS 56 explicitly aligned BCM with the operational risk concerns of corporate governance, encouraging continuity managers to focus on ‘quiet catastrophes’ that only affect and individual organisation. The earliest drafts of BS 25999 drew even clearer distinctions suggesting that “emergency planning pertains to activity that is conducted for the benefit of the public or society; business continuity management pertains to activity that is conducted for the benefit of a single organisation.”

Over the last five years, Cranfield University has completed two BCM studies into the UK’s food chains, both commissioned by Defra and supported by the Defra-chaired Food Chain Emergency Liaison Group (FCELG). The FCELG itself comprises representatives of central government departments, local government, industry trade associations and the Food Standards Agency. Its purpose is to facilitate dialogue between key stakeholders and assist in the management of all manner of food chain crises or major emergencies and, of course, their prevention. Such dialogue is essential if we are to bridge the gaps between industry and government objectives.

The research processGiven the profile of the sector, it was logical that the research should advance from a business continuity platform rather than civil contingencies perspective, all be it with a systems-based approach, i.e. looking at systemic risk rather than single firm best practice. The research looked at the scope, drivers and limitations of BCM in the food chains; and asked about actual disruptions, known weaknesses and near misses. It then threw in three scenarios for good measure:

• loss of energy supplies;
• loss of fuel for road transport; and
• loss of people (e.g. due to some form of life threatening zoonotic disease – a disease that can be transmitted between animals and humans).

Back in 2005, these scenarios were regarded as ‘wild cards’, but were included because the events had the potential to affect all organisations. Over 100 managers with responsibility for business continuity, operational risk, quality or supply chain management from more than 50 organisations have shared their continuity plans, experiences and their views in the course of this work. The first phase of the study, funded by what is now Defra’s Food Policy Unit, involved market-leading companies and three small businesses engaged in the manufacturing, transport, wholesale and retail stages of the grocery sector. The resulting report Resilience in the Food Chain was previewed to contributors on 2 February 2007. Release was scheduled for the following Monday, but was delayed as it coincided exactly with the first confirmed outbreak of the deadly H5N1 strain of Avian Influenza in the UK, at a turkey farm in Suffolk. On a more positive note, the event also coincided with the launch of the Centre for the Protection of National Infrastructure. The CPNI is charged with the protection of key national assets from malicious attack. Last year, CPNI produced PAS 96 Defending Food and Drink and ran the first of its biannual seminars aimed at engaging with those with a legitimate interest in food defence and updating them on current research in the field.

The second phase of the Defra study, entitled Business Continuity in Food Services looked at the diverse and complex food service sector. This time it was managers from food big contract catering and facilities management companies, ‘grab and go’ food retailers, international burger and sandwich chains, hotels, small delis, plus a hospital trust, a City Council and those involved with feeding the military who were encouraged to ‘tell it like it is’. The biggest food service wholesale distributors, ready meals suppliers, importers of meat and produce did the same. The report was completed in September 2008, and is likely to be cleared for release into the public domain this spring. In the meantime, it is fair to say that the overall picture that emerged was something of a ‘curate’s egg’.

The overall picture
With one or two notable exceptions, the food service sector is a late-comer to BCM, but starts from a higher base compared to the position of its grocery industry counterparts two years earlier. As in the grocery sector, BCM is being driven by a combination of compliance requirements, the fear of reputational damage and client pressure.

The few Stock Exchange-listed companies involved in this study tended to have well established, comprehensive BCM programmes in place, though the majority of players in the industry are small or medium-sized privately owned or private equity businesses. Here the General Food Law makes its presence felt. Lessons have been learned from BSE and under EU law all food has to be traceable from point of origin to final point of sale, to facilitate recalls should they be necessary. As a result, traceability was recognised as important even in the smallest proprietor owned deli. The large and medium-sized businesses had formal or ad hoc crisis management and recall procedures in place. The system was tested for real by the Food Standards Agency in 2005 when contaminated Worcestershire sauce caused the recall of around 600 product lines. It was food manufacturers, not retailers or food service businesses, which bore the cost.

The study found that across the food service sector dedicated BCM managers were extremely rare and BS 25999 was not widely used. Nevertheless, organisations large and small were managing operational risk or intuitively taking steps to safeguard mission critical assets and activities. However, the complex structure of the industry meant the largest companies were sometimes protecting head offices and activities such as contract management, marketing and finance, rather than food preparation and consumer facing service outlets. Similarly, the public sector organisations – responding to the Civil Contingencies Act – focused their efforts on their core activities, i.e. the provision of health services, education or defence rather than ancillary activities like catering or facilities management.

While the study showed that word of the British Standard was spreading, it was often because clients – notably financial service firms – had brought it to their suppliers’ attention, usually prompted by concerns over pandemic planning. In other cases, it was the MoD or NHS Trusts that had started asking their suppliers awkward questions about pandemic provision. All but the tiniest businesses were aware of the hazards a pandemic posed. Most were maintaininga watching brief and hoping existing switching options, agency labour or even government intervention would see them through. Widespread failures of the National Grid or a disruption to the fuel supplies yielded a number of similarly ill-worked through responses.

For the more mundane localised events, it was remarkable how often interorganisational rather then intra-organisational solutions formed the basis of continuity management. When distribution centres were lost to fire, food supply contract consortium member rushed to each others’ assistance. After the Buncefield explosion, grab and go chains praised the efforts of suppliers who made heroic efforts to overcome the loss of access. In the public sector and publicprivate partnerships, reciprocal feeding arrangements between hospitals and prisons or even emergency supplies from local fast food restaurants had provided short-term cover. The small business entrepreneurs, who were keen to been seen as ‘good citizens’, were in practice embedded within informal networks and routinely helped each other overcome temporary difficulties, while fellow branded franchisees selforganised to overcome the hiccups of everyday business life.

Stand or fall together
It is fair to say that the food industry’sdiversity is its strength, in terms of product and business models, which under normal circumstances provide a high degree of resilience. In theory, at least, alternative supply options abound. However, when it comes to the challenges facing individual businesses, the interdependencies within the supply chain mean that a single firm’s BCM remit may fall short of the mark because the food chain as a whole is definitely more than the sum of its parts. The industry is probably more susceptible than any other to bad publicity, with firms and foodstuffs often regarded by nervous consumers as guilty by association, very occasionally with good reason. As a result, the considerable effort has gone in to managing contamination-related systemic risk. Contamination aside, an event may be specific to a single organisation, but the solution is likely to be dependent on others. Where the challenge is widespread – affecting common assets or activities - we need to think differently again.

A quick flick through recent issues of Continuity shows that leading practitioners have been reassessing the scope of BCM for some time, urging businesses to look beyond the concerns of operational risk and contemplate the impact of systemic disruptions or critical national infrastructure failures. I support their efforts. Competitive business models and favourable markets have delivered extraordinary value to consumers over recent years but, when it matters most, we may yet find that we stand or fall together.

Dr Helen Peck is senior lecturer in Corporate and Supply Chain Risk for Cranfield University at the Defence Academy College of Management and Technology, Shrivenham, UK.

Contact: h.peck@cranfield.ac.uk

Aricle appeared in the March/April edition of Continuity Magazine