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True Crime: Fooling the Food Supply Chain

by APICS CEO Abe Eshkenazi CSCP, CPA, CAE | September/October 2013 | 0 | 0

APICS Supply Chain Management NowLook past the clever Bloomberg Businessweek headline, “The Honey Launderers: Uncovering the Largest Food Fraud in US History,” and you find a complicated tale of intrigue, money, and supply chains. (Thanks to member Joseph Witkowski, CPIM, CSCP, for sharing this news on the APICS Supply Chain Channel.)

The article dives into the complex details of Hamburg, Germany-based ALW Food Group’s plot to import millions of pounds of Chinese honey and hide its true origins. In the end, 10 ALW executives were accused of a global conspiracy to commit $80 million in food fraud. Two went to jail and the others, who live in Germany, are on Interpol’s list of wanted people.

Apparently, honey is a hot business. “Americans consume more honey than anyone else in the world, nearly 400 million pounds every year,” writes Susan Berfield. “About half of that is used by food companies in cereals, bread, cookies, and all sorts of other processed food.” In 2001, the US government imposed steep import duties on Chinese honey because US beekeepers accused Chinese companies of selling honey at artificially low prices.

Emails seized by investigators mention falsifying reports from a German lab, creating fake documents for US customs agents, shipping Chinese honey through other countries, and setting up a Chinese company eligible for lower US tariffs.

“ALW relied on a network of brokers from China and Taiwan, who shipped honey from China to India, Malaysia, Indonesia, Russia, South Korea, Mongolia, Thailand, Taiwan, and the Philippines,” Berfield writes. “The 50-gallon drums would be relabeled in these countries and sent on to the US. Often the honey was filtered to remove the pollen, which could help identify its origin. Some of the honey was adulterated with rice sugar, molasses, or fructose syrup.”

One expert quoted in the article warns that honey is just one example of the food supply chain’s vulnerability to potential danger. For example, some Chinese beekeepers use the antibiotic chloramphenicol to prevent foulbrood disease, which is devastating to bee populations. However, this particular antibiotic is banned from food in the United States. “We don’t know how it works, and we have to know how it works if we want to be able to identify hazards,” said Karen Everstine, a research associate at the National Center for Food Protection and Defense.

Hiring trained professionals

The Bloomberg Businessweek article includes an infographic titled “The Honey Trap,” but those in the APICS community will recognize it as a complicated supply chain meant to obfuscate the honey’s origins. The honey situation created potential problems for a wide variety of food manufacturers. Consider the following definition of risk mitigation from forthcoming APICS Dictionary, 14th edition: “Reducing the exposure to risk, either by its likelihood or its impact.”

These days, supply chain management professionals have to be experts in risk mitigation as well as supply chains. Ignorance of risk might not get you on Interpol’s list of wanted criminals, but it will keep you from advancing in your career. And it will keep your company susceptible to the unknown.

In addition to risk content that is included in APICS Certified in Production and Inventory Management (CPIM) and APICS Certified Supply Chain Professional (CSCP) programs, we now offer the APICS Risk Management certificate. This is a comprehensive, forward-looking program that prepares professionals to participate in the development of global risk mitigation strategy. By earning this certificate, you demonstrate your commitment to protecting your employer from supply chain risk__and balancing anticipated rewards and risks in the decision-making process. For more information on the APICS Risk Management certificate, visit apics.org/risk.

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