1. Leveraging & Harnessing Existing Systems and Enabling Technology Deborah White SVP & CLO Food Marketing Institute December 9-10, 2009 dwhite@fmi.org

2. Food Safety Priorities Prevention –Preventing adulteration at point of production should be highest priority –Only safe food should enter the food supply Response –Retail and distribution sectors utilize effective systems to remove adulterated food from the distribution system quickly once the food has been identified

3. Tracking Food Recent prolonged outbreak investigations highlight need to identify and find adulterated food that has entered the food chain more quickly Retail and food distribution industry complies with Bioterrorism Act “one up/one down” requirements New programs: –Maximize existing information –Pilot projects first –Interoperable –Consider all options for better identifying adulterated food in the supply chain, not just new recordkeeping requirements –Improve public health

4. Today’s Distribution System Today’s distribution center (DC) is highly efficient* –Hundreds of suppliers send millions of cases that are repackaged into thousands of shipments to hundreds of stores Median DC size: 583,655 ft2 –Range: 60,000 ft2  5,800,000 ft2 Avg Deliveries to DC: 500 per week –Range: 248  874 Median # cases received by DC: 510,000 per week –Range: 176,731  975,000 Median # cases shipped from DC  store: 2,200,000 per 4 weeks –Range: 120,000  13,804,000 Median # deliveries from DC  store: 1,972 per 4 weeks –Range: 54  12,783 Median pounds of food shipped: 47,500,000 lbs per 4 weeks *FMI, “Distribution Center Benchmarks,” 2007

5. Today’s Distribution System Simple Process: In-Bound (Records) –Wholesaler orders from vendor (Purchase Order) –Vendor ships order to DC (Shipping docs, manifest) Vendor bills DC (Invoice) –DC receives pallet from vendor (“License Plate”)

6. Today’s Distribution System Simple Process: Outbound (Records) –Store places order with warehouse (store order) –Selectors travel thru warehouse to pick individual cases to complete order 65% of DC’s use voice-directed order selection systems –Store order of hundreds of cases palletized –Order shipped to store (store invoice) –Order received by store Median: 42 cases stocked on shelf per hour

7. Today’s Distribution System Performance –Avg Cost To Handle Each Case Median: $0.39 per case (inbound + outbound) –Time To Handle Each Case 20.57 seconds per case (outbound) Additional distribution mechanisms –Cross-docking 94% of warehouses cross-dock product –Brokers Combined orders for lower volume items –Direct store delivery 30% of retail sales

8. Today’s Consumer Recession and economic woes are REAL Price of food is critical –Recession has impacted grocery shopping (70%) Shoppers “trading down,” substituting and eliminating to save money on groceries (Trends, 2009) –Low price is the single most important factor to consumers selecting a primary store (Trends, 2009) –36M Americans receiving federal food assistance (NYT, 11/29/09) 20,000 people added per day Consumers still time-starved (Trends, 2009) Nutrition important (Trends, 2009) –89% of consumers very/somewhat concerned about nutrition –92% of consumers believe home-cooked meals more nutritious

9. Important To Get It Right Increased distribution efficiencies have kept food prices low and supply abundant –Reducing efficiency increases cost and reduces abundance –Food retail/distribution system profits: $0.01 per dollar No choice but to pass costs through the chain Consumers are struggling – do not increase costs unless clear benefit to public health Any changes that will impact distribution system must improve public health and reduce burden of foodborne illness

10. Therefore… FMI supports improved ability to identify and locate contaminated food –Maximize existing information –Any new systems must be fully interoperable –Start with pilot projects involving all stakeholders –Look at all options Private sector/government collaboration & transparency is essential