New FDA regulations impact food and beverage companies

Electronic records and execution functionality could play a role in meeting new FDA regulations, finding appropriate insurance coverage. Manufacturing execution systems can help.


With the January 2011 U.S. Food Safety Modernization Act (FSMA), food and beverage makers face increasing U.S. Food and Drug Administration (FDA) regulation and a possible related increase in insurance claims. At the same time, supply chains are growing longer and more complex, while consumers are demanding improved quality and safety. Manufacturing execution systems (MES) solutions can alleviate some of these pressures by managing the manufacturing process more effectively, helping meet FDA compliance requirements and supporting any insurance claims made.

A manufacturing execution system (MES) can address areas for manufacturing improvement and managing food safety and traceability. Courtesy: STICorp

The FSMA protects consumers from defective food and beverage products being accidently shipped to retail outlets. Focus areas include preventative controls and capabilities to track and trace defective product batches. However, this regulatory focus in fact has a wider impact.

“Product recalls have already generated both a dramatic rise in insurance coverage litigation under traditional insurance policies and the development of new products by the insurance industry specifically designed for the product recall exposure,” Robert D. Chesler, a partner at Lowenstein Sandler, Roseland, N.J., said.

The insurance marketplace offers product-recall insurance policies, Chesler explained.  Two types exist: first party and third party.  First-party policies cover a company’s own product-recall expenses, while third-party policies coverage third-party claims arising from a company’s product recall.  Large food companies increasingly require their suppliers to purchase such insurance. 

“These policies are still in development, and a food company must carefully review the marketplace to locate the policy that best fits its needs,” Chesler said.

He further notes that general-liability and first-party property insurance policies are a first line of defense but have only limited applicability.  General-liability policies, which usually include product coverage, respond to claims for bodily injury and property damage.  This coverage is obviously critical if contaminated food products reach the marketplace, but it does not cover the economic costs connected with a recall.  The policies provide coverage only for those costs involved with a recall of a company’s own product or bodily injury, and not for third-party physical damage.

“Moreover, these policies increasingly contain product-recall exclusions,” Chesler said. “First-party property policies provide coverage for the company’s own product that has not been shipped and must be destroyed. However, these policies contain contamination exclusions upon which insurers rely to deny coverage.”

By allowing food and beverage makers to accurately and rapidly track product supply and distribution chains, an MES can play a role in working with insurance companies, as well as in meeting new regulations.

The FDA expects manufacturers to maintain records of key manufacturing data that will allow it to determine if the manufacturer is in compliance with its directives and regulations. Two of the most important areas of focus are preventative controls and the ability to track and trace defective products that have been accidentally shipped to retail outlets.

This means that up-to-date and accurate manufacturing data needs to be recorded, for example, on ingredients used and their sources, manufacturing processes, recipes used, and other relevant data. This information in turn helps to pinpoint when and how a product batch was manufactured and where it was shipped.

The FDA now has “mandatory” recall powers, which when invoked, can be best complied with by a manufacturer with up-to-date information. Rapid recall of defective products can help offset the negative impact of consumer health and safety concerns, as well as a brand`s image and reputation.

An information technology solution is available from several vendors to optimize the performance of manufacturing facilities and better comply with FDA regulations. Commonly referred to as an MES, this type solution has been successfully deployed by numerous food and beverage manufacturers.

MES delivers a set of functionalities that deliver a detailed “digital” view of operations at a glance, as well as the ability to record data on every step of the production process from quality assurance to equipment maintenance and beyond. MES manages key steps in a manufacturing process, including improving recipe management; enforcing corporate quality and safety standards; reducing product variability, energy, and raw material costs; and optimizing production planning.

What’s new about today’s MES solutions is the speed and ease of their deployment, lowering costs and providing a rapid and effective path to improving the performance of present manufacturing facilities. A recent webinar on food safety and traceability highlighted the importance of modern MES solutions in the current regulatory and insurance environment. These are: (1) supply chains are growing longer and more complex, (2) consumers are demanding improved quality and safety, and (3) compliance with new government regulations is becoming more challenging.

- Peter Walker is STICorp North America business leader and Steve Diggines is European business leader. STICorp is a leading GE Intelligent Platforms MES systems integration partner.

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