Understanding Incentives for Food Suppliers to UpGrade Their Food Safety Controls

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Understanding Incentives for Food Suppliers to
Up-Grade Their Food Safety Controls

• Spencer Henson
• University of Guelph

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Outline

• The cost-benefit equation
• Nature of costs benefits
• Understanding the wider incentives
• Impact on business performance
• Implications

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The Cost-Benefit Equation
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Costs of HACCP Implementation
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Nature of the Costs

• Lumpy investments important
• Many costs highly visible from the outset
• Significant opportunity costs
• Are the resources available?

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Benefits of HACCP Implementation
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Cost of Quality

• Elements
• Wastage
• Reworking
• Customer complaints
• Implications
• Increased costs
• Loss of markets
• Loss of market positioning
• Lack of quality costing

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HACCP Implementation and Prevalence of Salmonella
in the United States
Large Plants
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HACCP Implementation and Prevalence of Salmonella
in the United States
Small Plants
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Benefits of HACCP Implementation in UK Dairy
Sector
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Expected Benefits of HACCP Implementation in UK
Dairy Sector
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The Cost-Benefit Equation
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Porter Hypothesis

• Firms may not voluntarily innovate even if net
  benefit
• Regulatory-induced innovation
• Factors
• Inertia
• Opportunity cost of investments
• Insignificant benefits

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Wider Incentives to Adopt Enhanced Food Safety
Controls

• Financial implications/Cost
• Human resource efficiency
• Procedural efficiency
• Good practice
• Sales
• Reputation
• Commercial pressure
• Existing regulation
• Anticipated regulation
• Liability

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Incentives to be Food Safety Responsive
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Nature of Incentives

• Operating Environment
• Regulatory system
• Market demands
• Industry structure
• Market competition
• Networks
• Etc..

• Firm
• Size
• Ownership
• Managerial structure
• Strategy
• Etc

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Factors Influencing Food Safety Responsiveness

• Markets served
• Customers
• Commodity
• Operations
• Inspection regime

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HACCP and Business Performance
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Implications

• Need to understand costs and benefits
• Expectations matter
• Must recognise the intangibles
• Are wider incentives at play
• Can influence business performance
• Need to work with the incentives

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On-going Research

• HACCP implementation in Ontario
• Traceability systems in Canadian dairy processing
  sector