Majority of Food Producers Spent at Least $10 Million Annually on Preventable Product Recalls

ST. PAUL, Minn. — According to a new study conducted by AMR Research, a majority of food and beverage companies surveyed participated in at least one product recall in 2007 with more than half of the losses associated with those recalls exceeding $10 million.

The study, which was developed in conjunction with Lawson Software (Nasdaq: LWSN), found that 40 percent of respondents had incurred losses of at least $20 million in 2007. This is despite the fact that traceability processes and systems can make many of these recalls avoidable.

The AMR Research study, "Traceability in the Food and Beverage Supply Chain," conducted by Research Directors Lora Cecere and Lucie Draper, and Senior Research Analyst Simon Jacobson, surveyed companies in the United States, the United Kingdom, France and Sweden. More information is available at www.lawson.com/pressroomtracestudy.

The study reveals that, on average, it takes food and beverage companies 14 days to sense the need for a recall and 34 days to enact it. By that time, less than 40 percent of the affected product can be collected because the rest either has already been consumed or thrown out, respondents said.

"Despite a perception among food companies that they're doing a good job managing product quality, the staggering cost of recalls proves 'business-as-usual' isn't working," said Rob Wiersma, industry strategy director for Lawson. "Food producers can be much more proactive in managing food safety to improve product quality and reduce supply chain risk."

While the food and beverage industry has been slow to adopt modern traceability software, many companies appear to recognize it may be time to change. More than three in four companies surveyed plan to spend money this year to improve their time to sense a quality issue and enact a recall. An equal share of respondents plan to invest in the improvement of supply chain traceability this year.

Companies that proactively manage product quality best, according to the AMR study, have five characteristics: multi-enterprise tracking, unit-level tracking, manufacturing automation, cross-functional team reviews of quality data and mature supply chain teams.

AMR Research conducted 251 web-based interviews in May 2008 for the "Traceability in the Food and Beverage Supply Chain" study. Respondents included companies within the food and beverage manufacturing industries in the United States as well as three European countries: France, Sweden and the United Kingdom. To qualify for the study, respondents had to represent companies with both a supply chain organization and annual revenue greater that $100 million (U.S. respondents only) or a currency equivalent to at least $50 million (European respondents only).