Chipotle and the Rising Importance of Traceability in the Food Industry Supply Chain

by Shahroze Husain | 02/11/2016

Chipotle Mexican Grill, Inc. an immensely popular and highly successful quick service restaurant chain serving build-your-own burritos, tacos and bowls, has been at the center of a string of food-borne illnesses since the second half of 2015 involving E-coli and salmonella, affecting hundreds of customers across the country that dined at the chain’s many restaurants. The outbreaks have taken a massive toll on the company as share prices have declined from $750 to $450 (as of 02/11/16), a 40% decrease since October 2015 while also affecting customer confidence in the brand and its food. The company is widely recognized for its “Food with Integrity” mission and its focus on serving 100% non-GMO ingredients and responsibly raised meat across its 1,900 outlets. Chipotle locally sources many of its ingredients for its restaurants from small independent farmers to keep items fresh resulting in a complex web that requires tracking of supply shipments all around the country.

Outbreaks similar to Chipotle have become fairly commonplace in the news across the US with a number of other companies issuing recalls to one or more items in the past few weeks alone—these include Wegmans (chicken), Walmart (beef), Blue Bell (ice cream), Costco and Starbucks (items containing E-coli contaminated celery from Taylor Farms Pacific, Inc.). Starbucks, which is a food service company like Chipotle, was able to issue a timely recall and ensure that no cases were reported of customers falling sick on consuming the contaminated products. Such news serves to highlight the real world significance of traceability initiatives in the supply chain.

How Food Traceability Works
Traceability systems are about controlling distribution and recalling items while ensuring the safety of consumers. Common track-and-trace solutions available today in the supply chain are barcode-based or RFID-based solutions and help track items by assigning unique barcodes or tags onto each item/case/pallet.

Chipotle’s traceability program requires raw ingredients and outbound products to be labeled using special GS1-128 barcode labels containing the following—product name, Global Trade Item Number (GTIN), batch/lot number, and pack and/or use-by date on each case of each product. The traceability extends to the pallet level as shipments of palletized cases are labeled with GS1 Serial Shipping Container Codes (SSCC). Supplies or produce that are conceived as harmful or susceptible can be easily traced back to the original supplier and recalls can be limited to a certain batch of the susceptible item(s), limiting the need for 100% recall of all items, which can become very expensive. By using this system Chipotle was quick to recall tainted tomatoes during its Salmonella outbreak and shift to a new supplier. However, challenges do remain as evidenced by its series of E.Coli outbreaks.

Chipotle’s mass network of local farmers poses hurdles to traceability because not all small independent farmers have the resources—money or infrastructure—in place to implement large scale track-and-trace initiatives thereby challenging traceability efforts during a recall. In addition, many food providers today fall behind in implementation due to the lack of strict regulations on traceability. Regulations for companies today remain unclear as the regulatory bodies involved have responsibilities and coverage areas which often overlap causing complications regarding what items are to be examined as well as how often or even if the food is inspected. The USDA regulates meat, poultry, and processed egg products and is responsible for overseeing production facilities as well. The FDA covers everything else and has authority for issuing recalls to manufacturers/producers.

A New Era of Traceability
The Food Safety Modernization Act (FSMA) established in 2011 sets regulations requiring food organizations to implement traceability initiatives in their respective supply chains. Quick service restaurant operators and food retailers alike source their food supplies from a variety of different vendors. The FSMA requires these vendors, many of whom have multiple plants and sources, to specifically identify the plant that manufactured the product so that it can be traced back to the original supplier during the event of a recall. Companies may be called upon to track and keep records for every unit of product in the issue of a recall. Traceability (initiatives and technology) is now established as a vital element in food production without which companies stand to expose themselves to significant risks and liabilities.

Following the recent list of challenges in their supply chain, Chipotle has committed to making big changes to its supply chain, food preparation and testing. The company plans to shift food preparation and testing to a central kitchen and then shipped to the outlets. It also plans to scale down its use of local ingredients as smaller suppliers are likely to face challenges adapting to new standards for food safety, testing, and tracing processes. All this will require Chipotle to change and improve its traceability systems as well as gain more control over the supply chain and sources.

Food traceability requires co-operation throughout the supply chain and needs suppliers and those who are preparing the meals in the restaurants to communicate. Traceability initiatives can allow companies to reduce their expenses in recalls, instead of recalling 100% of products companies can focus on recalling affected and potentially affected products. Companies like Edinburg, Texas-based Frontera Produce Ltd., a producer and distributor of fruits and vegetables, were able to limit their 2011 cilantro recall to only 12% of shipped produce for potential salmonella due to having automated track and trace systems in place. In addition, other companies such as Campbell Soup recently have used the UPC code and expiration dates for customers to easily identify and recall potentially hazardous products.

For more information and insights about traceability initiatives in the food, pharmaceuticals, and automotive industries be sure to review our latest report – Connecting the Dots: What is Driving Traceability Solutions Investment? Please feel free to download the Executive Brief or contact us to learn how to gain access to the full report at info@vdcresearch.com.


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