The failures at Peanut Corporation of America are tragedy in every way. This supplier failed to meet both regulatory and customer requirements. Its customers failed either to uncover or report the failures, and people died as a result. Now a healthy, everyday product is suspect, and faith in the U.S. food processing industry has been shaken by tainted product. Food contamination isn’t just a Chinese problem any more. According to Lora Cecere, an analyst at AMR Research and a food supply chain expert, food safety has ranked low in the U.S. as a supply risk concern (12th out of 15 in AMR surveys). However, in China it is ranked second. The peanut scare has been a wakeup call and confidence buster about U.S. food safety.

This situation illustrates an order-of-magnitude regulatory failure, compounded by lack of state inspection resources and lack of oversight. It also illustrates a worst-case scenario of supplier risk and abdication of responsibilities.

Why did this failure occur? In quality terms, the food industry relies more on inspection than prevention (and even inspections don’t always occur or are poorly done). And it is well known that quality inspection is far more expensive and far less reliable an approach than problem prevention. Preventive versus reactive is basic when it comes to quality.

While inspection is important in the food industry, preventive actions need to be institutionalized and enforced to avoid food contamination in the first place. Inspection, in fact, should focus on assessing preventive measures in the area of quality and safety. Do we want to know how many contaminated batches of food are found? Or worse, do we want the food industry to leave quality control in the hands (or stomachs) of the customer? Or would do we want verification that that all food safety rules and cleanliness standards are in fact followed to prevent contamination?

And when supplier evaluations and inspections are outsourced to third parties, how do customer firms assess those third parties and ensure that they are not, in fact, just the foxes guarding the chickens? The complexities of the supply chain no longer allow a reliance on good intentions or lackadaisical supply chain management practices downsized in the name of cost. Since second and third-tier suppliers, often invisible or barely visible to the customer, can adversely impact our food supply, understanding their operations and performance becomes essential. Food contamination falls into the category of supply risks that can be prevented (preferably) or mitigated. They are not an unavoidable natural disaster. Not only should companies consider these risks in their sourcing strategies, but they should also have robust supplier assessment systems, including regular site visits to higher risk suppliers, to prevent the occurrence of such failures. The costs of food contamination in illnesses and deaths, lawsuits, brand damage, consumer confidence – and even company bankruptcies and job loss – are far higher than the basic sourcing and supplier management activities needed to prevent them.

My new book, Supplier Evaluation and Performance Excellence: A Guide to Meaningful Metrics and Successful Results, has just been published this week. This is my first experience as a book author (although I did publish a shorter e-book in 1999 on Improving Company Performance Through Supply Chain Management Practices). The book is available through the publisher, J. Ross Publishing, and through Amazon.

There has been a huge gap in the literature on supplier evaluation, supplier performance management and supplier relationship management, which are all different sides of the same coin. There have been many articles published and some discussion in the blogosphere, but no actual book on the subject. Most importantly, there are few sources of information that actually tell you how to evaluate suppliers in any practical way or by following any particular business process.  There have been a number of webcasts lately, sponsored by software providers, that address supply risk. Software solutions can be an integral part of a supplier evaluation and performance management program. But what is missing? The business process. And that is exactly what I address in the book: how to create a business process as a vehicle for facilitating the reduction of risk and cost as well as performance improvement. Not just create slick scorecards, but get real results.

Some executives and practitioners from several well-known companies have been very interested in reviewing the book. Some of these companies include: Boeing, Wolters Kluwer, Caterpillar, and GlaxoSmithKline. The book is just shipping this week, so it has not yet been fully reviewed. But here are a few early comments from the back cover of the book:

“Finally, there is a practical guide to managing supplier performance. This much-needed book is a must read for all executives and practitioners who are looking for ways to measure and improve the performance of their suppliers and reduce supply risk.” –Charles Ballard, Supplier Development Manager, The Boeing Company

“This how-to books takes on supplier performance management (SPM) like never before–from development to implementation of effective SPM tailored to your particular work environment. Gordon does a great job of showing how to link SPM directly to the goals and objectives of your organization and gives great advice on how to establish the best methods for communicating performance results with the supply base to get the desired results.” –Gregg Brandyberry, Vice President, Global Systems & Procurement Processes, GlaxoSmithKline.