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Despite Progress Made,
Feedback On PTI Reveals Real Problems

Jim Prevor’s Perishable Pundit, October 16, 2009

Our coverage of traceability has been extensive, and our recent piece brought much controversy. In fact some of the association folks weren’t all that happy that we ran the piece, expressing to us a wish that we had exercised “more discretion.”

Of course, when a person holding a responsible position in the industry is willing to sign his or her name to a letter commenting on an important industry issue, we would be doing an enormous disservice to our readership, and to the industry at large, to squelch such opinions.

And, in fact, one thing the associations need to look at concerning traceability now and also for future initiatives is how to do things like the Produce Traceability Initiative in an environment in which people feel free to speak the truth throughout the process.

Immediately after we ran Dan Sutton’s letter, we received calls from a number of mid-size shippers that wanted to thank us. The problem they felt is that, in their opinion, they had been de facto frozen out of the discussions. Large companies with prominent food safety experts can speak in these meetings without fear that anyone will doubt their commitment to food safety. So if Alec Leach from Taylor Farms or Jim Lugg from Fresh Express voice a problem with a proposal, it is clear that this is because there is a problem with the proposal.

In contrast, mid-size shippers are all too easily dismissed as not being concerned with food safety. So they tend to clam up in the meetings if they are there at all.

There was a well-attended workshop on PTI at the recent PMA convention. The workshop was supposed to be a kind of “nuts & bolts” how-to, yet the questions from the floor seemed more focused on “should we?” rather than “how-to.”

Now Gary Fleming, Vice President of Industry Technology and Standards at PMA, emphasized that “Should we?” is not really the question as, speaking of PTI, he emphasized that it was definitely happening.

He may be right, especially depending on what definition of “happening” one chooses to adopt.

Still, right or wrong, it is vaguely reminiscent of Richard Nixon declaring, “I am not a crook” — true or not, the fact that Nixon had to say it indicated he was in a lot of trouble.

Our sense is that the Produce Traceability Initiative is in a lot of trouble.

In the first place, the association of PTI with Mom and Apple Pie has simply made honesty impossible for many companies. We had a chance to sit down with several of the signatories to the PTI on the buy side; these were folks who had previously expressed concern about the initiative privately to the Pundit. When we inquired about why they signed, given the reservations they had expressed, we got basically the same answer from each: That their competitors had signed and that they didn’t want to appear not progressive or not caring about food safety and so they signed.

All have some kind of traceability programs right now and are thus in varying degrees of compliance with the initial stages of PTI, but none of them have appropriated the money to conform to the latter stages of PTI and tell us they have no definitive plans to do so.

There are also whole sectors of the industry that seem to have no intention of implementing PTI. Is there, for example, even one terminal market wholesaler who is doing anything to implement PTI?

There is a whole roster of technical issues: For example, some say field packers have problems with it, as do those who sell or receive mixed pallets.

Yet even if the technical problems could be solved, the signatories to the agreement actually spend the money to implement it, and if the sectors not participating in the agreement could be persuaded to join in, there is still a major question necessary to accomplish the realization of PTI: Will buyers constrain their supply chains to PTI-compliant product? No buyer has made a public commitment to do so and few, on either the buy or sell side, seem to believe it likely.

In other words, one can put all the scanners in and rewrite programs to accommodate GTINs but, in the end, if PTI-compliant product costs $8 a case and non-PTI-compliant product costs $7.50 a case, if the buyer purchases the cheaper product, the whole system breaks down.

Although cost is a major issue, there is also a major feeling that the whole thing is unnecessary. Part of it is the sense that those switching over to PTI already have excellent traceability. If one is selling direct to a major retailer, that is a pretty easy thing to trace. In many ways, the PTI is sort of backward, starting with the sectors of the industry that have the best traceability. Maybe we should have started with a bunch of small restaurants and local purveyors and built a system from there.

The other big question, repeated over and over again by shippers of every size, was whether all the specificity that the PTI aims for would actually make any difference. Imagine a shipper who is selling to Wal-Mart, say 10,000 cases a day. This shipper has to call up Wal-Mart and explain that 692 cases, identified with specificity due to the PTI, are possibly laced with E. coli 0157:H7 and are being recalled.

Will Wal-Mart, or any other buyer, accept the specificity of this case-level initiative? Or will they, to use the phrase ubiquitous in these circumstances, “err on the side of caution” and throw every box delivered that day or maybe every box from that shipper in the dump?

Remember the buyer will bill back any costs related to this recall or dumping to the seller, so what incentive does the buyer have to not be ultra-cautious? But if it doesn’t make a difference and buyers are going to dump everything regardless of the traceability system, then why is it essential to spend a lot of money to get down to the case level?

PTI is far along now and, good or bad, we doubt it will be changed much simply because we could not imagine getting industry consensus on an alternative. The degree to which it will actually “happen” is very dependent on what the government does. If the government leaves many options for companies, we suspect that various companies will use those various options. Big buyers such as Wal-Mart may demand GTINs and such for their own internal systems, but others will be more flexible and whole sectors of the industry will be on different systems.

Our real concern is that this process has revealed a problem that will arise again: The associations try to nudge the industry in a positive direction; the identification of the direction as positive creates PR difficulties for companies concerned about the initiatives, and this shuts off important feedback that the associations need to hear. This limitation of the feedback loop results in less-than-optimal outcomes, including “façade outcomes” in which consensus is thought to exist but actually does not.

How to avoid this is tricky. Clearly a demand for specific commitments that have consequences if not followed could surface some of the hidden problems. For example, the associations could have said, “We can’t ask producers to spend money on PTI unless they have an assurance that those who don’t spend money on PTI can’t under-price them, so we need a commitment from buyers to constrain their supply chain to PTI-compliant product, or we can’t proceed.” Such a declaration would have surfaced the actual willingness of the buying community to commit to PTI.It would have answered the question as to whether buyer commitment was shallow or deep. After all, a public commitment to vendors could result in lawsuits if the buyers renege later, so it would be a real measure of seriousness.

Beyond demanding commitments with consequences, there may be methodological initiatives that could help surface real feelings. Although meetings, e-mails and conference calls can seem to be good exchanges, perhaps methodologies need to be developed for people to submit anonymous feedback, even if for credibility sake we restrict the anonymity to members of a task force or board. Perhaps even votes on whether to propose something should have to pass an anonymous vote.

As an industry, we may want to consider consulting some game theorists to discuss how these negotiations can be designed to not only get an agreement, but to sustain complete and honest input throughout the process.

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