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Critical technologies for compliance and risk management for consumer packaged goods companies

April 23, 2009
By Ravi Shankar


As we’ve seen in recent years, with listeria contamination of
ready-to-eat meats and the peanut butter salmonella outbreak of early
2009, product recalls are a very real aspect of doing business in the
food sector of the consumer packaged goods industry (CPG).

Streamlining Data
Ravi Shankar writes that when a critical incident such as a recall occurs, it is essential to have the ability to see clearly into product systems, distribution systems and customer-facing systems, and to be able to co-ordinate the data between them.

As we’ve seen in recent years, with listeria contamination of ready-to-eat meats and the peanut butter salmonella outbreak of early 2009, product recalls are a very real aspect of doing business in the food sector of the consumer packaged goods industry (CPG).  There’s growing evidence that the public is becoming more aware of and concerned about product safety issues, and as a result they are changing their buying behaviors based on this increased awareness.

As noted in a recent Washington Post story, a 2007 Gallup poll found that, “62 percent of Americans said they avoided buying certain brands or types of food due to a food safety warning or recall in the previous 12 months.”

A panel conducted by the University of Guelph’s International Food Economy Research Group (InFERG) indicated that after the Maple Leaf recall, the proportion of consumers who said they never eat ready-to-eat meats increased dramatically. 
Public awareness is leading directly to government and industry action.

Product Recalls
The consumer goods market is trending toward increased regulation, and manufacturers and distributors will need to increase transparency into their operations, and broaden their capability to accommodate recalls and comply with notification rules.  This will require increased visibility into product-oriented information systems and a greater ability to reach out to business partners and customers in order to communicate effectively when a recall occurs.  For these reasons, smart decision-makers in the CPG space are now seeking technology investments to help establish good governance models that will in turn help them maintain regulatory compliance, lower operational risk and ensure successful performance at critical times.

Master Data Management (MDM) is  this kind of investment and it offers the potential to substantially advance consumer product companies’ compliance efforts.  MDM is a comprehensive method of enabling an enterprise to link all of its critical data to one file, called a master file, that provides a common point of reference. 

MDM ensures that critical enterprise data is validated as correct, consistent and complete when it is circulated for consumption by internal or external business processes, applications or users. But not all MDM technologies can address the various compliance requirements facing today’s consumer product businesses.  Case studies show that an integrated, model-driven and flexible MDM platform provides the functionality needed to meet complex compliance requirements and lower risk.  One area of the CPG industry in particular provides an excellent example of where an integrated MDM capability can provide enormous benefit: product recalls.

The Data Challenge
Quite often, companies in the consumer goods industry use different systems for each of their various customer and partner communication channels.  Customer service representatives use CRM applications to capture contact preferences, while opt-out preferences for mail or fax might get entered into a different database.  Also, manufacturers might use a separate web content management system for online interactions.  As a result, multiple copies of the same customer’s record can get duplicated across different systems.  When a customer communicates via phone call that they do not want to be contacted, this information would probably be entered or updated in the CRM application but perhaps not in the other two systems.

The result is that discrepancies begin to arise in customer records, leading to gaps in customer preferences.  Without a holistic view of customer preferences, the effectiveness of outreach campaigns suffers.  For instance, a marketing campaign targeting product users who have contacted the company through its website would ignore the opt-out preference phoned in by the customer and updated in the CRM system.  As a result, the company would continue mailing its marketing literature to the customer who had already communicated his or her choice to totally opt-out of any such communication.  These incidents can result in fines by the FTC; and the continuation of such practices will often result in customer dissatisfaction which can lead to attrition and brand dilution.

Recall Compliance
A useful model of how a new regulatory environment might operate is to look at how the Consumer Product Safety Commission (CPSC) currently regulates toys, child care products and other general consumer goods.  Rather than take an adamantly adversarial stance, the CPSC’s Office of Compliance actively encourages regulated companies to accept product recalls as an unfortunate reality of business, and to develop a robust capability to uncover and report problems as quickly as possible.  Then, the companies are urged to conduct mass recalls as quickly and efficiently as possible.

To this end, the CPSC sets out various actions consumer goods companies should take in preparing for and conducting recalls.  Many of these actions directly depend on effective data governance and the capability to manage data across disparate IT systems.  To directly quote the CPSC Recall Handbook, CPSC staff advise that, “Maintaining accurate records about the design, production, distribution, and marketing of each product for the duration of its expected life is essential for a company to conduct an effective, economical product recall.”  Included in this group of records and information are:

  •     Production records
  •     Distribution records
  •     Quality control records

Despite the importance of capturing this kind of data and ensuring that it is accurate and reliably accessible, it is not uncommon for packaged goods companies to capture and maintain product information in various systems that may be maintained in the U.S. or even overseas at distribution facilities.  In the event of a critical incident such as recall, it is essential to have the ability to see clearly into product systems, distribution systems and customer-facing systems, and to be able to coordinate the data between them.

Master Data Management
Master Data Management can provide food and consumer goods manufacturers with consistent, complete and accurate product information and consumer, contact,opt-in/ opt-out and communication preference information—even when it is captured and stored in different systems.  Companies can use this information to both identify its problematic products, report on recall activities to the relevant regulatory agency, and then to effectively reach out to customers to ensure the product recall campaign is as effective as possible.  In an MDM framework, if opt-out information is entered into the CRM system, that opt-out information will quickly be reflected in the web content management system and other customer-facing systems.  This means that any campaign using data from the central MDM system would always use the correct preference setting, regardless of the system of origin.

Configurability is important here. If the MDM system is rigid in its functionality, (i.e. if it has a fixed data model), then you may end up compromising your compliance initiatives in order to adapt to the limitations of the technology.  Further, such systems make it difficult to extend the compliance efforts to other lines of business or geographies.  By ensuring the MDM technology supports the following ten requirements, you will be well on you way to laying the foundation for a complete compliance program with the ability to evolve it to address unforeseen future requirements across the organization.

  • Manages multiple business data entities within a single MDM platform. Using an MDM platform that can handle multiple data types, an organization can begin to ensure compliance within a single business division.
  • Permits data governance at both the project and/or enterprise level.  It is critical that the underlying MDM platform is able to support the compliance-related data governance policies and processes defined by your organization.
  • Works with your standard workflow tool. Workflow is an important component of both MDM and data governance, as it can be used to monitor compliance in real-time and automatically alert the appropriate personnel of any potential violations.
  • Handles complex relationships and hierarchies. Make sure your MDM request for proposal requires a solution that is capable of modeling complex business-to-business (B2B) and business-to-consumer (B2C) hierarchies within the same MDM platform.
  •  Provides support for Service Oriented Architecture (SOA) services. Since MDM is the foundation technology that provides reliable data, any changes made to the MDM environment will ultimately result in changes to the dependent SOA services, and consequently to the SOA applications.  You need to ensure the MDM platform can automatically generate changes to the SOA services whenever its data model is updated with new attributes, entities, or sources.
  • Allows for data to be cleansed inside of the MDM platform. Data cleansing needs to be centralized within the MDM system in order to provide clean data for compliance reporting.
  •  Enables both deterministic and probabilistic matching.  The MDM platform should support a combination of these matching techniques, with each being able to address a particular class of data matching.  A single technique, such as probabilistic, will not likely be able to find all valid match candidates, or worse may generate false matches.
  • Creates a golden master record with the best field-level information and stores it centrally.  It is important that the MDM system is able to automatically create a golden record for any master data type (i.e. customer, product, asset, etc.) to enable compliance monitoring and reporting.
  • Stores history and lineage. The ability to store history of all changes and the lineage of how the duplicate has merged is a very important requirement to support compliance.  Any compliance initiative will require the ability to audit such data changes over several years.
  • Supports both analytical and operational usage. Compliance monitoring is performed within an operational system while compliance reporting is performed using a business intelligence tool or data warehouse.

Successful Regulatory Compliance

Successful regulatory compliance begins with an integrated and flexible MDM platform. Taking the time to build the foundation for a sound master data management program is critical to the success of any compliance effort.  The ten requirements listed above will enable you to identify and evaluate a suitable technology platform – a prerequisite when managing your organization’s master data assets and essential to establishing a consistent master data foundation.

 Ravi Shankar

Once your organization starts to make its departmental compliance projects operational, you are likely to find that your larger compliance requirements will expand to include other lines of business or geographies.  For example, recalling a food product might first become operational within United States and then be expanded to include other countries.  Therefore, it is important to carefully evaluate all MDM options and choose a solution that includes these ten critical requirements.  It is equally important to assess the MDM platform’s ability to support the ten core capabilities right out-of-the-box, as they should be integrated components of a complete enterprise-wide MDM platform.  In this way, you will be able to mitigate technology risk and improve your return on investment since additional integration and customization will not be necessary in order to make the system operational.  Another benefit gained by having these ten MDM components integrated within the same MDM platform is that software deployment is much faster and easier to migrate over time.  Finally, it is wise to check vendor references to evaluate the enterprise-wide deployments of their customers and to ensure that the vendor’s MDM solution is both proven and includes all 10 enterprise MDM platform capabilities.

Ravi Shankar is Senior Director of Product Marketing at Siperian, Inc., a provider of a flexible master data management platform.