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Horsemeat scandal: the lesson from a Japanese car manufacturer Horsemeat scandal: the lesson from a Japanese car manufacturer
(7 months later)
The food fraud scandal is intensifying as meat from British horses is found in burgers and kebabs made in the UK.The food fraud scandal is intensifying as meat from British horses is found in burgers and kebabs made in the UK.
Pressure has been mounting on the Food Standards Agency to get to the bottom of it. It has vowed to carry out a "relentless" investigation and has ordered food businesses to carry out tests on all processed beef products. The first results are expected on Friday, although full results could take much longer.Pressure has been mounting on the Food Standards Agency to get to the bottom of it. It has vowed to carry out a "relentless" investigation and has ordered food businesses to carry out tests on all processed beef products. The first results are expected on Friday, although full results could take much longer.
Yet horsemeat arrives in our processed food – either from British abattoirs or oversees slaughterhouses – because the controls on what goes into our processed foods rely on form-filling. UK manufacturers and retailers such as supermarkets which are far removed from the sources of production and focused on cost, will always place the blame with suppliers rather than consider themselves to be responsible.Yet horsemeat arrives in our processed food – either from British abattoirs or oversees slaughterhouses – because the controls on what goes into our processed foods rely on form-filling. UK manufacturers and retailers such as supermarkets which are far removed from the sources of production and focused on cost, will always place the blame with suppliers rather than consider themselves to be responsible.
There are two lessons here for how to run the food industry: form-filling is not an effective means of control and pursuing lower costs in a narrow way is unwise.There are two lessons here for how to run the food industry: form-filling is not an effective means of control and pursuing lower costs in a narrow way is unwise.
I am reminded of a story about a US manufacturer visiting the Japanese car manufacturer Toyota in its heyday. He was with Toyota's head of procurement and was astonished that Toyota didn't play suppliers off against each other in pursuit of lower costs. Toyota's head of procurement was equally astonished and replied to say that his job required him to understand the complete chain of work, from raw materials through to finished production. Only from that position could he consider the contribution of suppliers.I am reminded of a story about a US manufacturer visiting the Japanese car manufacturer Toyota in its heyday. He was with Toyota's head of procurement and was astonished that Toyota didn't play suppliers off against each other in pursuit of lower costs. Toyota's head of procurement was equally astonished and replied to say that his job required him to understand the complete chain of work, from raw materials through to finished production. Only from that position could he consider the contribution of suppliers.
Further, he only sought one supplier for each component as the supplier was to work as part of the Toyota system. To move between suppliers for reasons of cost was the wrong way to think about cost. It could only make costs go up. The way to drive costs out of operations was, he knew, to manage value, not cost. In Toyota – an exemplar of supplier management – this means working in close co-operation to the common end of better quality; lower costs being a consequence rather than the raison d'etre.Further, he only sought one supplier for each component as the supplier was to work as part of the Toyota system. To move between suppliers for reasons of cost was the wrong way to think about cost. It could only make costs go up. The way to drive costs out of operations was, he knew, to manage value, not cost. In Toyota – an exemplar of supplier management – this means working in close co-operation to the common end of better quality; lower costs being a consequence rather than the raison d'etre.
The response to the horsemeat scandal will undoubtedly be greater regulation; it is an inevitable knee-jerk reaction. But we should not think that improving the form-filling will make any difference; we should not insist countries improve their commercial controls; we should not think testing everything that arrives on our shores would do anything other than hamper the system and add to costs paid for by the consumer. Business people show amazing ingenuity in getting around such control systems.The response to the horsemeat scandal will undoubtedly be greater regulation; it is an inevitable knee-jerk reaction. But we should not think that improving the form-filling will make any difference; we should not insist countries improve their commercial controls; we should not think testing everything that arrives on our shores would do anything other than hamper the system and add to costs paid for by the consumer. Business people show amazing ingenuity in getting around such control systems.
The culpable should reflect on their responsibility for breaking their psychological contract with their customers and understand that its roots are in their obsession with managing cost downwards. They and our political leaders should reflect on why this scandal should occur in an already heavily regulated sector.The culpable should reflect on their responsibility for breaking their psychological contract with their customers and understand that its roots are in their obsession with managing cost downwards. They and our political leaders should reflect on why this scandal should occur in an already heavily regulated sector.
The heart of the problem is the way we think about regulation; our theory of control leads us to want forms filled and samples tested, regulation is built on ideas of inspection and will always be too late. Regulation should instead be based on prevention and it should be clear that the responsibility lies full-square with the UK producers and retailers. Those responsible – the manufacturers and the supermarkets – should be working with UK farmers to establish relevant controls with which they would work together to drive up quality and drive down costs.The heart of the problem is the way we think about regulation; our theory of control leads us to want forms filled and samples tested, regulation is built on ideas of inspection and will always be too late. Regulation should instead be based on prevention and it should be clear that the responsibility lies full-square with the UK producers and retailers. Those responsible – the manufacturers and the supermarkets – should be working with UK farmers to establish relevant controls with which they would work together to drive up quality and drive down costs.
Instead of regulators specifying and then inspecting for compliance with what they imagine to be adequate controls, the UK producers and providers must be free to make decisions about controls and be held to account for their choices by a smarter and smaller regulatory function .Instead of regulators specifying and then inspecting for compliance with what they imagine to be adequate controls, the UK producers and providers must be free to make decisions about controls and be held to account for their choices by a smarter and smaller regulatory function .
Responsibility is an essential prerequisite for innovation, while compliance is innovation's enemy. Witness the Mid Staffs inquiry: Robert Francis QC acknowledged the dysfunctional consequences of form-filling, cost-management and regulation, but promised more of the same. Doing the wrong thing righter, whether with health or horsemeat, will make neither our healthcare nor our food any safer.Responsibility is an essential prerequisite for innovation, while compliance is innovation's enemy. Witness the Mid Staffs inquiry: Robert Francis QC acknowledged the dysfunctional consequences of form-filling, cost-management and regulation, but promised more of the same. Doing the wrong thing righter, whether with health or horsemeat, will make neither our healthcare nor our food any safer.
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