In wake of E. coli outbreaks, Chipotle
rethinks supply chain
The supply chain model that made Chipotle Mexican Grill stand out from its competitors appears to be at the heart of the crisis that befell the burrito-making restaurant chain last year.
Since its inception in 2008, Denver-based Chipotle has followed what some consider the trendy farm-to-table, or farm-to-fork, ethos: using fresh food and ingredients sourced locally from mom-and-pop operators. By some estimates, up to 10% of Chipotle’s ingredients had been locally sourced, but now that percentage is expected to drop.1
Since late last year when more than 500 people fell ill after eating at fast-casual Chipotle restaurants, that farm-to-table approach is something Chipotle is rethinking because locally sourced ingredients are thought by many to be behind the foodborne illness outbreaks throughout the country.
Most large restaurant chains implement a centralized, nationalized process and work with large producers and distributors. Big contracts are at stake, so those supply chain members are more willing to make changes as required, such as adhering to more stringent food testing, according to food experts.2
"Instead of dealing with one firm, dealing with a hundred firms does increase risk," said John Gray, an associate professor of operations at Ohio State University’s Fisher College of Business. Simply put, gathering ingredients from multiple local farms also increases the chances of contamination. In addition, there are varying food safety and farming standards around the country, and farming practices—such as fertilizing with fresh manure—present significant threats.3
Last fall, 43 Chipotle restaurants in Washington state and Oregon were shut down after health authorities linked an E. coli outbreak to six restaurants in the region. Illnesses contracted at Chipotle eateries were then reported in seven more states.4
In December 2015, at least 80 students at Boston College got sick after eating at a Chipotle, leading the company to close another restaurant. Boston health officials said the cause was norovirus, a common virus, while citing the restaurant for two health violations: improper handling of poultry and the presence of a sick employee.5
In response to what has become one of the eatery’s biggest health and PR challenges—which now expands to a federal criminal probe into the matter—Chipotle has gone on the offensive to regain customer trust.
It pledged to sanitize its operations, hired food safety consultants and announced it would introduce more-stringent testing of its ingredients. Company executives and health officials say they may never know what caused the outbreak because any contaminated ingredients are now long gone.6
It’s also been difficult to determine which foods and ingredients were common to the various Chipotle locations, according to Ian Williams, the long-time chief of outbreak response and prevention at the Centers for Disease Control and Prevention, because of a lack of recordkeeping by Chipotle.7
"One of the challenges here has been that we have been able to identify the restaurants where people ate, but because of the way Chipotle does its recordkeeping, we have been unable to figure out what food is in common across all those restaurants," Williams said.8
Chipotle has hired IEH Labs, a Seattle-based company, to help improve safety standards and produce-testing procedures before distribution.9
"This is an industrial-strength program," said Monsour Samadpour, IEH president and CEO, and says the systems Chipotle is implementing are innovative and more advanced than procedures used by its competitors.10
Local farmers and mom-and-pop suppliers may have difficulty meeting the new standards of high-resolution microbe and pathogen testing. If they are unable or unwilling to comply with these requirements, they will be cut from supply chain operations, said Chipotle founder and co-chief executive, Steve Ells.11
Other changes will include a centralized production process. Cheese, for example, will arrive at restaurants already shredded, and tomatoes and cilantro—both types of produce that are more vulnerable to bacteria—will be chopped and tested in a central location before being packaged and shipped to restaurants.12
Some changes also shift the risk along the supply chain toward suppliers, requiring them to use DNA-based tests on small batches of ingredients before shipping them to restaurants.13
In addition to more centralized operations, there will now be weekly food safety audits by field operations leaders, quarterly food safety audits by the safety, security and risk team, and external assessments by IEH Laboratories. Chipotle officials said the firm also will start end-of-shelf-life testing to ensure ingredients retain their quality throughout their shelf life. Restaurant staff will receive enhanced training.14
Ells would not say how much the new testing in its supply chain and safety protocols within restaurants are costing the chain of more than 1,900 restaurants. But he said neither customers nor suppliers will pay to start the new testing requirements.15
Will Chipotle’s challenges make other national chains think twice about sourcing locally? Incorporating local ingredients in large-scale operations is still possible and desirable; it’s positive for the environment and the economy, according to the U.S. Food and Drug Administration. But until varying food safety standards and issues across municipal, county and state lines are addressed, some say national restaurant chains opting for locally sourced ingredients may have taken a big step back.16
—compiled by Mark Edmund, associate editor
- Julie Jargon, "Chipotle Pulls Back on Local Ingredients," Wall Street Journal, Dec. 15, 2015, http://tinyurl.com/wall-street-chipotle.
- Ethan Wolff-Mann, "Chipotle Scandal Could Ruin Locally-Sourced Food for Restaurant Chains," Time, Jan. 7, 2016, http://tinyurl.com/time-chipotle-local.
- Roberto A. Ferdman, "This Is a Terrible Sign for Chipotle," Washington Post, Jan. 6, 2016. http://tinyurl.com/wash-post-chipotle.
- The Strategic Sourceror, "How Chipotle Plans to Adjust Safety of Supply Chain," Dec. 16, 2015, http://tinyurl.com/adjust-supply-chain.
- Dan Flynn, "Chipotle Outbreak Illness Count Hits 514 as CMG Stock Dives Below $500," Food Safety News, Dec. 23, 2015, http://tinyurl.com/stock-dives.
- Stephanie Strom, "Chipotle E. Coli Cases Rise, With 5 More Ill in Midwest," New York Times, Dec. 21, 2015, http://tinyurl.com/nyt-chipotle-cases-rise.
- The Strategic Sourceror, "How Chipotle Plans to Adjust Safety of Supply Chain," see reference 6.
- Emma Court, "Can Chipotle’s Farm-to-Fork Approach Be Sustained?" Market Watch, Jan. 7, 2016, http://tinyurl.com/mkt-watch-farm-fork.
- Marino Donati, "Chipotle Boosts Supply Chain Safety After U.S. Food Poisoning Outbreak," Supply Management, Dec. 21, 2015, http://tinyurl.com/supply-mgmt-chipotle.
- Associated Press, "Chipotle Says It Won’t Charge More for Improved Food Safety," Dec. 16, 2015, http://tinyurl.com/ap-chipotle-food-safety.
- Wolff-Mann, "Chipotle Scandal Could Ruin Locally-Sourced Food for Restaurant Chains," see reference 2.
Research Finds Link Between CEO Pay, Product Recalls
Abundant stock-option pay—an incentive many boards of directors use to encourage CEOs to pursue high-risk initiatives—may often lead to more product safety problems, according to research from the University of Notre Dame.
Adam J. Wowak, Michael J. Mannor and Kaitlin D. Wowak of Notre Dame’s Mendoza College of Business wrote that CEOs are assumed to have a natural tendency toward risk aversion, which stems from a desire to avoid the substantial personal losses—including their income, reputation and job—that can result from risky initiatives.
To counterbalance this tendency, researchers wrote, boards of directors have used stock options to motivate CEOs to pursue higher-risk initiatives with the potential to increase shareholder wealth.
"Specifically, we found a positive relationship between the proportion of CEO pay consisting of stock options, measured over a two-year period, and the occurrence of product recalls in the subsequent year," Adam J. Wowak said. "Our results are consistent with prior research showing that option-heavy pay arrangements engender aggressive risk-taking by CEOs, who stand to benefit greatly from future increases in share prices but lose nothing if share prices fall."
The researchers also found the link between options and product recalls was strongest for CEOs who hadn’t been in their positions for long, whereas longer-tenured CEOs weren’t as susceptible to their effects.
To read more about the study’s findings, visit http://tinyurl.com/ceo-recalls.
Who’s Who in Q?
NAME: Juliana Van Winkle.
RESIDENCE: Racine, WI.
EDUCATION: MBA from Lake Forest Graduate School of Management in Illinois.
INTRODUCTION TO QUALITY: While working as a manufacturing engineer, Van Winkle was introduced to quality systems during internal auditor training for ISO/TS 16949. This experience in reviewing processes influenced Van Winkle’s appreciation for developing a robust quality system.
CURRENT JOB: North America quality systems and supplier quality engineering manager at the Modine Manufacturing Co., based in Racine.
PREVIOUS JOB: Van Winkle served as a coach for Modine’s improvement systems—the Modine Operating System and Modine Production System—at plant and regional levels. Van Winkle said it was a great experience to mentor others in process improvement activities.
ASQ ACTIVITIES: She is a member of ASQ’s Racine-Kenosha-Walworth Section.
OTHER ACTIVITIES/ACHIEVEMENTS: Van Winkle volunteers through the United Way, including being a reading tutor at a local school.
RECENT HONORS: Last year, Van Winkle was selected as an honoree for the Manufacturing Institute’s STEP (science, technology, engineering and production) Ahead Awards. The awards celebrate the achievements of women at all levels of manufacturing and promote the work of women in the industry.
FAVORITE WAYS TO RELAX: Kayaking, volleyball, racquetball, hiking and other outdoor activities.
More Details on Lean and Six Sigma Conference Released
ASQ’s Lean and Six Sigma Conference will be held Feb. 29-March 1 in Phoenix.
The theme of this year’s conference is "Leadership at Every Level." Focus areas at the two-day event include: lean and Six Sigma fundamentals; lean and Six Sigma implementation; new and unique applications of lean and Six Sigma; useful tips for sustaining results; and lean and Six Sigma in the service industry.
Keynote speakers scheduled to appear at the event are:
- Pam Henderson, CEO of NewEdge Inc., who developed an approach to innovation that helps organizations create sustainable growth. She wrote You Can Kill an Idea, But You Can’t Kill an Opportunity! How to Discover New Sources of Growth for Your Organization (Wiley, 2015).
- Patricia C. La Londe, a supply chain management executive with expertise in leading teams in supplier quality, global sourcing, mergers, acquisitions, divestitures and integrations across diverse businesses. She is also chair of ASQ’s Board of Directors.
- Dave Verduyn, president of C2C Solutions Inc., who has trained engineers and product developers in methods including systematic innovation, voice of the customer, quality function deployment, cost reduction, value analysis and other design for lean Six Sigma activities.
To learn more about the conference or to register, visit http://asq.org/conferences/six-sigma.
THE SIXTH INTERNATIONAL Conference on Lean Six Sigma will be held May 30-31 at Heriot-Watt University’s Edinburgh campus in Scotland, U.K. The two-day event will feature speakers and workshops on different aspects of Six Sigma and lean production strategies. For more information, visit http://tinyurl.com/lss-conf-scotland.
THE U.S. DEPARTMENT of Transportation proposed high-tech changes to the National Highway Traffic Safety Administration’s five-star safety ratings for new vehicles. The department said the changes will improve on the well-known safety ratings by adding another crash test, using new and more human-like crash test dummies, rating crash-avoidance advanced technologies and assessing pedestrian protection. For more details, visit http://tinyurl.com/5-star-rating-changes.
Qualified Applicants Elude Manufacturers, Survey Reveals
More manufacturers are struggling to find qualified applicants for open positions, according to data from ASQ’s 2016 Manufacturing Outlook Survey.
Of those who responded to the survey, 51% said the lack of qualified applicants is their greatest hurdle when hiring for vacant positions. That’s up from the 44% who noted hiring challenges in 2011, when ASQ last surveyed manufacturers.
According to the more recent data, 25% of respondents said their biggest challenge is the time it takes to hire a new employee, while 17% cited a lack of budget to fill open positions.
But many manufacturers aren’t sitting idle: 55% said they’ve hired an agency to help find skilled applicants, and 41% said they are working with local colleges on programs that teach the skills they need.
"With the Baby Boomer generation retiring and leaving manufacturers with vacant positions, the shortage of qualified applicants remains a clear concern for manufacturers," said Cecilia Kimberlin, ASQ past chair. "It’s pivotal that workers get the training and education they need to fill these roles and be successful in the high-tech manufacturing field—whether that’s through on-the-job training, or through an organization like ASQ."
ASQ fields the Manufacturing Outlook Survey periodically to gauge manufacturing professionals’ views. More than 900 manufacturing professionals responded in late 2015 to the most recent survey. For more information from the survey, visit http://tinyurl.com/manufacturers-talent-shortage.
Innovation, Supply Chain the Focus of Reports
Innovation and quality rely on each other for success, and when paired, they can have a positive impact on an organization’s bottom line, according a recent ASQ-APQC research report, "Innovation and Quality Go Hand in Hand."
To create a culture of innovation and drive profitability, organizations must better understand and appreciate customer demands, develop an interest and willingness to do things differently, and implement new and proven ideas that align with the organization, Scott Alexander, vice president of sourcing, innovation and marketing for Resource Optimization & Innovation (ROi), said in the report.
Alexander oversees innovation strategy at ROi, which identifies and develops solutions for supply chain-related issues in the healthcare sector. ASQ and APQC interviewed Alexander for his expertise on identifying, developing and commercializing innovative solutions to supply chain issues that reduce the total cost of care for health systems.
The report was released with a study on supply chains and key performance indicators (KPI) as part of ASQ’s Global State of Quality 2 Research. The research examines the state of quality and continuous improvement worldwide, providing organizations with insights into gaps and opportunities.
The latest research expands on the inaugural 2013 research, which provided the first-ever view of quality and continuous improvement on a global scale.
In the report on supply chain KPIs, Bradley Feuling of the China-based Kong and Allan Consulting Co. Ltd. said that customer demands must be considered when developing supply chain KPI goals.
"Your KPIs have to be in line with the goals of your customers," Feuling said. "Every organization’s supply chain is different, and its KPIs and metrics reflect that. That’s why you have to consider your customers—they are the ones who are determining what’s best for their organization and their supply chain."
The spotlight reports can be downloaded at no cost at globalstateofquality.org. The full report for the Global State of Quality 2 Research, which includes quantitative and qualitative data, will be presented at ASQ’s World Conference on Quality and Improvement, May 16-18, in Milwaukee.
FELLOW HONORED ASQ’s Quality Management Division named Jd Marhevko the recipient of the 2015 Howard Jones Award, the division’s highest individual honor for outstanding long-term service and leadership. Marhevko, an ASQ fellow, is vice president of quality/lean management systems and environmental health and safety for Accuride Corp. in Saline, MI. She has held several leadership positions within the ASQ division, including chair.
NOMINATIONS FOR EDITOR Nominations are being sought for editor of ASQ’s Software Quality Professional (SQP) journal. The peer-reviewed quarterly journal publishes case studies, experience-based reports and state-of-the-art reviews to provide practitioners with an understanding of those software quality practices that have proven effective in many industries, applications and organizational settings. For more information about SQP, visit http://asq.org/pub/sqp. Contact Taz Daughtrey, chair of the editor search committee, at email@example.com for more information about the editor position.
CALL FOR PAPERS A call for papers has been issued by ASQ’s Audit Division for its 25th annual conference, scheduled for Oct. 20-21 in Memphis, TN. The deadline to submit proposals is April 1. For more details on the call for papers, visit http://tinyurl.com/audit-conf-papers.
ANAB ACQUISITION The ANSI-ASQ National Accreditation Board (ANAB) has acquired Accreditation Services Bureau, doing business as Laboratory Accreditation Bureau (L-A-B). Like ANAB, L-A-B provides accreditation based on international standards for testing and calibration laboratories. The acquisition allows ANAB to serve a broader base of customers and meet growing market demand for accreditation services while providing uninterrupted service to customers, said John Knappenberger, ANAB president and CEO.
NEW CASE STUDIES ASQ’s Knowledge Center has released two new case studies. One describes how a hospital in New Hampshire used control charts as part of its continuous improvement philosophy. Visit http://tinyurl.com/asq-case-study-healthcare to read the full case study. The other study chronicles how Six Sigma was used manage and track projects within the YMCA’s youth development department and helped improve the culture of the organization’s summer daycamp. Visit http://tinyurl.com/asq-ymca-case-study to download the full case study.
Journal Plans Special Issues
ASQ’s Journal for Quality Technology (JQT) has issued a call for papers for three special issues editors are planning. The issues will focus on:
- Statistical process control for big data streams.
- Reliability and maintenance modeling with big data.
- Quality engineering in advanced manufacturing.
All papers must be prepared in accordance with the JQT’s editorial guidelines, and will be reviewed following the journal’s regular process. Papers are due Aug. 31. A final decision on whether a paper is accepted will be made by July 31, 2017. The special issues will be published in late 2017 or early 2018.
More information about the special issues’ topics can be found in the "Call for Papers" in JQT’s January edition at http://asq.org/pub/jqt. There, you also can find a link to author guidelines.
4 Organizations Named 2015 Baldrige Recipients
Four organizations were named recipients of the 2015 Malcolm Baldrige National Quality Award. Announced late last year, they are:
- MidwayUSA, Columbia, MO (small business category).
- Charter School of San Diego (education category).
- Charleston Area Medical Center Health System, Charleston, WV (healthcare category).
- Mid-America Transplant Services, St. Louis (nonprofit category).
The 2015 Baldrige Awards will be presented at a ceremony during the Quest for Excellence conference April 3-6 in Baltimore.
In a recent promotion, ASQ compared its ASQ Certified Quality Engineer Study Guide to the Quality Council of Indiana’s Primer. The features of these products are different and do not support direct comparison. ASQ apologizes for any confusion this promotion may have created.