Thursday, May 21, 2015

US Senate Passes Obama's Trade Accord

Today the US Senate voted in favor of a major, 12-nation Pacific trade accord.

Amendments relevant to regulatory landscape include a proposal to strip from the current Pacific trade deal a chapter that grants corporations the right to challenge regulations in member nations that harm the value of their investments. In other words, companies would have to comply with regional regulatory boundaries. And not tie things up in court.

This Senate vote helped the president’s trade agenda move forward.

This Senate vote will most likely clear a path for approval of a crucial piece of what the New York Times calls "President Obama’s ambitious trade agenda." Most seem to think we will see it pass during the final vote, as early as Friday, May 22.

"It’s an agenda that is good for U.S. businesses, but most importantly, it is good for American workers," Obama said.

Will keep an eye on this one.

Thursday, May 14, 2015

Gartner Darling Inditex Fined For Fashion

On April 27th, 2015, Inditex said it will donate $1.37 million in humanitarian aid to Nepal. Today, Inditex was slated in the Top 5 of the newly released Gartner Top 25 Supply Chains in the world, ranked by arguably the top business analysts in the world. Being on this list at all is an honor. To make the top five is incredible.

But then, also today, news dropped saying Inditex could be fined up to $8.35 million by the Brazilian government for non-humanitarian working conditions there. The charges say Inditex failed to appropriately address worker abuses in supply chain hubs located in Brazil.
Inditex shines in the textiles business

In 2011, reports the Guardian, Inditex promised it would thoroughly check on conditions for workers and cooperate with suppliers to improve matters, after an unflattering report from authorities in Brazil indicated sub-par practices and at least one sweatshop. The Brazilian ministry said today that Inditex didn't follow through on its promises to make adjustments.
The [Briazilian] ministry’s latest report claims that instead of improving conditions in factories which had been checked and found wanting, Inditex cut off relations. It claimed that, as a result 31 companies were forced to close. - Guardian
A spokesperson for Inditex said a lot of the claims against them were very minor, and on top of that, the claims weren't communicated until now, which is too late to address them.

Bear in mind Inditex is a parent company made up of almost 100 smaller companies. They deal in activities related to textile design, production and distribution. Imagine the supply chain challenges there!

Gartner tried to — and was apparently quite impressed.

Brazilian hot weeks

Is Brazil desperate for attention? Seems like it sometimes. While the nation enjoys a respectable position in the global scheme of things, perhaps the position is more volatile than we thought. In the past weeks there are murmurings that it's not as sunny as it seems south of the equator.

For example, Coca-Cola's CEO, Muhtar Kent, during Coke's first-quarter earnings call, had this to say about Brazil, while he summarized markets across the globe:
In Latin America, Mexico is ... relatively stable and continues to track closer to the Unites States because they are so closely linked. Brazil continues to deteriorate faster than we expected, I would say that. - Business Insider
Gartner analysts are pretty experienced in sussing things out. But we can't forget the legacy of worker abuse in Apple's supply chain (Foxconn). And still, Gartner ranks Apple's supply chain best practices so highly that a new category was created just for them in the Gartner annual rankings, a category called the Masters.

Maybe you have to take the bad with the good. Maybe nobody's chain is perfect.

On that note, the center for research on multinational corporations (SOMO), a Dutch campaign group, said the Brazilian government’s effort to hold companies to account for human rights violations in their production chain is important (source: Guardian UK). Fair enough.

It would be hard to master, even for Apple Inc and Proctor & Gamble (P&G), a perfect supply chain.

The idea is to get as close to mastery as we can.

Monday, May 4, 2015

Like a Virgin: Olive Oil Gets More Class Action

In the food supply chain, crazy things can happen. That's why the FDA and industry have been working so hard on the Food Safety Modernization Act (FSMA). There's trouble in olive oil regarding dilution, questionable grading, mislabeling and so on. It's been well documented in many places. Maybe most notably in the book by Tom Mueller called — if you can appreciate this amusing title — Extra Virginity: The Sublime and Scandalous World of Olive Oil.

The upshot is that in 2009, independent tests done at the University of California Davis Olive Center found that 69% of all store-bought extra virgin olive oil purchased in California failed to meet extra virgin olive oil standards.

Yes, you read that right, the University of California Davis has an olive center.
And apparently it's a good thing they do.

Class act?

Since 2009, class action suits have been filed against Filippo Berio and Bertolli distributors for olive oil fraud. Together these two companies comprise a significant portion of olive oil that's imported from Italy. These recent cases were filed in October 2014.

The claims:
  1. What was labeled "extra-virgin" was partly refined oil and was not "extra virgin" as labeled
  2. Designation of the oil's origin was hidden on the back of the bottle, the words "Imported from Italy" displayed on the front misled consumers into thinking the olives originated and were pressed in Italy
For the record, these brands failed to meet Extra Virgin Olive Oil (EVOO) standards in 2009:
  1. Bertolli
  2. Carapelli
  3. Colavita
  4. Filippo Berio
  5. Mazzola
  6. Mezzetta
  7. Newman’s Own
  8. Pompeian
  9. Rachel Ray
  10. Safeway
  11. Star
  12. Whole Foods
This is a supply chain issue. The majority of olive-oil brands in supermarkets come from distributors. Middlemen. Before that the oil doesn't necessarily come from the grower (or, in most cases, growers). With so many hands in the vat, it’s tough to know when and where adulteration or spoilage occurs unless there’s an inspection at every step of the way. And then there are the shippers and retailers involved — even the best oils will deteriorate if left in a hot truck or near a sunny window. (In the end, you might want to think seriously about local, or at least Californian, olive oil.)

The issues that cloud olive oil are well documented. And the really good thing about this is that the issues with olive oil aren't just limited to olive oil. It's an excellent case study in things to watch for in farm to fork supply networking and regulation.

In other words, what happened to Olive can happen to anyone, can happen to Franks, can happen to fish, fruit and flavorings. The whole enchilada.

Monday, April 27, 2015

How Dow Prepares for REACH Deadline

If a supply chain passes through the European Union, chances are the compliance department has an eye on REACH regulation compliance. REACH is the EU regulation on Registration, Evaluation, Authorization and Restriction of Chemicals; it entered into force on 1st June 2007 and preparation for the next deadline should have started already but if not should start soon (says the European Chemical Agency).
Getting started

How does Dow kow-tow?

So how are major players like Dow preparing for the next REACH regulation deadline? Specifically, how is Dow gathering information to fulfill the legal requirements for the substances they are preparing to register?

In a recent interview with Dr. René Hunziker from Dow Europe GmbH, insights were gained into how Dow is gathering information to fulfill the legal requirements for the substances they are preparing to register in 2018.

Hunziker's message is: start now, plan a testing strategy and use the available support to help you.

A major challenge for Dow, Hunziker says, is to make sure that the many substances produced by third parties and imported by Dow as co-formulated products or as monomers of polymers in their products are compliant.

Attention should still be paid to validating at an early stage whether your substance really is covered under the existing registration. "Even if this is the case, there may still be uses unique to your company that require further justification on their safe use," Hunziker points out.

It's a good article. Find the whole piece here. It's a good way to start the dialogue in your own company about the next REACH deadline.

Wednesday, April 22, 2015

Brazil Buys Kraft - Heinz

A note on the Kraft Foods - Heinz merger.

Once combined, the Kraft Heinz Company will be one of the largest food and beverage conglomerates in the world, with nearly $28 billion in annual sales, and is expected to have a market value of more than $80 billion (see New York Times for more).

The interesting thing about this is that both Kraft and Heinz are already owned by a Brazilian private investment group.

Contrary to popular view, it's not like two iconic American companies have decided to marry. That ship sailed long ago. These two companies are already owned and operated by entities outside of the U.S. In Brazil.

So who owns Heinz-Kraft?

In 2010, 3G Capital acquired the stock of Burger King for $24.00 per share, or $4.0 billion, including the assumption of Burger King's outstanding debt. The Burger chain was then combined with Tim Hortons. The merger has been good for shareholders. [Update April 27: Burger King reports best quarterly sales gain in a decade.]

What the firm does is acquire control of companies then combine them as appropriate. In this case, consider this:
"Combining our two businesses, we’ll create the third-largest food and beverage company in North America and the fifth-largest food and beverage company in the world," Alex Behring, the managing partner of 3G, who will be chairman of Kraft Heinz, said on a call with investors. "The company will enjoy significantly enhanced scale in its key North American market, not only at retail but also in the food service channel." - from the New York Times
Fortune Magazine says 3G isn't known for a gentle, indulgent management style. Which should surprise no one.

From a food supply chain perspective, the F&B industry gets more and more interesting. It's less and less "iconic family restaurant" themed and more and more like a game of Monopoly.

Tuesday, April 14, 2015

Don't Try Biocides

Remember the song by Queen, called Don't Try Suicide? Maybe I'm dating myself. Regardless, the song is here and the lyrics are here. The song came to mind this week while reviewing the latest in European regulatory activity regarding biocides. Here's where we are with attempting biocidal behavior in the EU.

Last fall, the European Chemical Agency (ECHA) Biocidal Products Committee adopted 10 opinions and thereby made significant additions to the list of chemicals covered by Europe's biocidal regulation.

The total number of opinions slated to be delivered by ECHA is expected to grow. The forecast by the agency itself is that the list will go from 80 in January 2015 to 300 in 2020, in just five years. The Biocides regulation is getting a lot of focus in the EU and requires attention by any company shipping product into Europe or manufacturing there.

What are biocides?

Biocides are chemicals used to suppress organisms that are harmful to human or animal health, or that cause damage to natural or manufactured materials. These harmful organisms include pests and germs (i.e. moulds and bacteria). Examples of biocidal products are insect repellents, disinfectants and industrial chemicals like anti-fouling paints for ships and material preservatives. However, because of their intrinsic properties biocides can pose risks to humans, animals and the environment.

The new "Biocides Regulation" entered into force on September 1, 2013. (It repealed Directive 98/8/EC.)

Biocides and nanomaterials 

Note that this regulation is the first piece of legislation to build in the new Commission definition on nanomaterials. That definition is as follows:
  •     A natural, incidental or manufactured material containing particles, in an unbound state or as an aggregate or as an agglomerate and where, for 50 % or more of the particles in the number size distribution, one or more external dimensions is in the size range 1 nm - 100 nm
  •     In specific cases and where warranted by concerns for the environment, health, safety or competitiveness the number size distribution threshold of 50 % may be replaced by a threshold between 1 and 50 %
  •     By derogation from the above, fullerenes, graphene flakes and single wall carbon nanotubes with one or more external dimensions below 1 nm should be considered as nanomaterials

More about biocides

The ECHA Guidance on biocides legislation describes how to fulfill the information requirements set by the Biocidal Products Regulation, Regulation (EU) 528/2012) (BPR). (The guidance also describes how to perform the required assessments.) Further, it explains the guiding principles for the evaluation of the applications to be performed by the authorities.

In addition to the BPR guidance, Biocidal Products Directive (BPD) guidance and other related documents are still considered applicable for new submissions under the BPR in the areas where the BPR guidance is under preparation. Furthermore, these documents are still valid in relation to applications for active substances for Annex I inclusion or applications for product authorization under the BPD that may still be under evaluation. Keep in mind that the Commission may have addressed some of the obligations in further detail in the Biocides competent authorities meetings documents. Consultations advised if you want to dive deeper.

We tried to shrink down the essential pieces for you here, For more, explore this page from ECHA.

Friday, April 10, 2015

Top 10 Nations Most Resilient to Supply Chain Disruptions

The 2015 Oxford Metrica FM Global Resilience Index ranks the supply chain resilience of 130 countries and territories around the world. The ranks look at economic factors, risk level and quality of a supply chain itself.

Sometimes this type of report is more marketing document than anything else. The list is compiled to encourage risk management dollars to be routed in a certain direction, or to show the value of dollars spent last year in certain areas, usually in an area where the agency compiling the list happened to be a key consultant. So these rankings are, while not arbitrary, not exactly scientific either.

Keeping that in mind, let's take a look at the rankings, which seem roughly on pace with what global supply chain watchers might expect.

Here are the OM / FM Index 2015 top ten nations in terms of supply chain resiliency:
  1. Norway
  2. Switzerland
  3. Netherlands
  4. Ireland
  5. Luxembourg
  6. Germany
  7. Qatar (?!)
  8. Canada
  9. Finland
Qatar and Finland moved into the top 10 this year, says the report. Maybe. Taiwan has moved up the rankings the most (marketing alert!) due, says the report, "to a substantial improvement in the country’s commitment to risk management." I won't bore you with the details here — definitely read the report yourself if curious. Just allow yourself "marketing alerts!" in how to approach reports of this nature.

Lowest rankings include:
  1. Venezuela (worst, a ranking so unsurprising it's almost a surprise!)
  2. Ukraine (107)
  3. Kazakhstan (102)

Other rankings of interest:
  1. UK ranks 20th (remember, this is a ranking of resiliency, agility, quick-adaption which is presumably not UK's strength)
  2. France is 19th
That all kind of makes sense. The United States is divided up into regions in the report, with region 3, the central area, coming in 10th on the list. The other two regions are in the top 20 (marketing alert!).  All three regions could presumably be higher with the implementation of some corrective risk management programs; that applies to France and the UK too.

Fastest risers in the list, a.k.a. nations showing most improvement in the supply chain resiliency index:
  1. Taiwan
  2. Guyana
  3. Romania
  4. Bolivia
  5. Peru
  6. Armenia
  7. Ecuador
  8. Azerbaijan
  9. Kenya
  10. Uruguay
The entire report can be found here.

A word about Oxford Metrica, the team who produces the report: Oxford Metrica is an independent analytics and advisory firm. So while it's always good to read rankings, it's even better to appreciate the context of their publication. I guess I made the point, huh.

I liked this ranking in particular because it has basis in fact and is an interesting measure, beyond the usual "supply chain rankings." The usual big, vague "supply chain ranking" lists are published by Gartner and the like each year, and Apple is always in first place. Oh, hey, marketing alert!