 Good afternoon. I'm Paula Feldman, Director of Business Intelligence with PMMI. And I'd like to thank you for joining today's webinar on PMMI's Food Safety Modernization Act Update Report. Over the next hour, Jennifer Zieman with Proactive Worldwide Inc. will provide insight into the effect the FDA rules have had on packaging and processing operations now that they are in execution phases. Jennifer's experience-based proactive worldwide in the consumer and industrial goods practice began as a research analyst working on research projects for a wide array of businesses, from QSRs to Fortune 100 CPG companies. She now serves as an associate director guiding the research process for proactive consumer and industrial goods team. Today's webinar discussion will focus on the status of the FSMA implementation, the FSMA implementation and evolution, the impact of implementation, equipment spend, new equipment and services desired, data diagnostics and reporting, along with other topics. At the end of the presentation, which should last approximately 45 to 50 minutes, Jennifer will answer any questions you may have. So just a couple of housekeeping notes. Everyone's phone is on mute. If you have a question you would like to ask of myself or of Jennifer, please post it in the bottom left-hand corner in the chat box, and we will answer the questions at the end of the webinar. At this point, I'd like to hand the webinar over to Jennifer Zieman with Proactive Worldwide. Thank you, Paula. Hello, everyone. Thank you for joining us today. This study, as you may know, is an update to some research that had been completed previously by PMMI back in 2014, looking at the food safety and traceability work that was done for FSMA at that point in time. Since that point in time, there have been some changes in the process and have moved towards the execution phase, as Paula indicated. So our discussion today will focus on the results of our survey that spoke to a variety of individuals from food professionals within food companies, both large and small, food safety experts that are consultants in the industry, as well as several equipment OEMs who were working with these companies to try to find machinery that would work for their businesses. The survey ran from mid-April to mid-July and had 47 respondents share information with us. The segments covered quite a few of the segments of the food professional industry. Everything except seafood, meat, and pet food were addressed. When we look at the status of the FSMA implementation, since we last looked at this topic, it is evidence that many of the large food companies, as well as the OEMs that serve them, are well underway towards FSMA compliance. Most food companies feel that they're on track to meet any obligations that they have in terms of the compliance dates. However, industry experts, the food safety consultants that work with these companies are not quite as optimistic. More than half of those individuals felt that there were still areas in which companies are vulnerable and they feel that there are still things that the FDA needs to do to provide better guidance including issuing the documents that are the final guidance documents. It's also important to note that many of the smaller companies aren't expected to be compliant until 2017, so they're still really working through and trying to understand what does FSMA mean for their businesses. So from that perspective, there's still a lot of focus on training staff on procedures and protocols and establishing preventive controls. When it comes to the compliance timelines themselves, the top box on your screen that you see were the original published dates that the FDA had put forth. A few weeks after completing research for this project, the FDA announced that it was going to extend the compliance dates for certain elements of FSMA. Those timelines were pushed out one to two years to allow food companies and their suppliers to become more compliant. This was done in part because the FDA recognized that they could not respond to all of the clarifications that had been posed and they could not issue the guidance documents that were needed fast enough. So critical components of that were related to the foreign supplier verification program, the preventive controls for that also, as well as just in general the preventive controls for human food. When it comes to the actual implementation and evolution of FSMA for many of these organizations, most of the companies believe that the FSMA is not going to be a static document. It's not static law. It's going to be something that is going to continue to evolve over time. And it's going to take all of the companies, large and small, no matter where they are in the current process today, time to really fully feel the effect of the compliance and how well it's going to be working for their systems. You'll see as we go through the process in our discussion today that many of the companies are going through continual reviews to see and test how well the procedures that they put in place are actually going to be working. Most of the experts that we spoke to believe that it will be a full 10 years yet before we see companies at their peak of compliance with what FSMA truly intends to be. The interesting thing is when we were speaking with many of those food companies, they had felt prior to the FDA launching and really starting to put some teeth behind the FSMA that many other food industry safety groups were much further ahead than the FDA was. So they had already started to align their processes to these other groups such as Safe Quality Food or the British Retail Consortium. Since the FSMA has gone into effect and some of the compliance dates have gone active, they feel that the FSMA is actually more stringent in certain elements than these other groups and they feel that ultimately the other groups are going to start to tailor their operations into following some of the similar guidelines as the FSMA. One of the other interesting myths that came through when we were talking with both experts and food companies is that they have not seen to date very much in the way of FDA enforcement in terms of penalizing companies for not being compliant even though some of the dates have actually already gone into effect. They do believe that that's going to change especially since the FDA has announced that there will be audits beginning this coming January. But they think that the FDA is going to be a lot more lenient than it would be in times past given that they know that there's certain guidance documents that aren't available yet and that there's still a number of companies that have yet to reach their target dates especially for those smaller companies. So their confidence that it's companies put forth a good faith effort that they're likely not to be fined but just have to work with the FDA and their inspectors to become compliant. So what actions have actually been taken thus far? Most of it has centered around training and getting their individuals, someone at their organization, certified to be a product quality control individual. That has been the largest effort that most of the food companies have undertaken in the last 12 months. There's still a lot of discussion that goes on regarding controls and making sure that those preventative controls address allergens. That was a hot topic of discussion for many of the companies we spoke with. And documentation, the number of new templates that are needed and trying to address all of those requirements for making sure that they are providing the proper information back to the FDA is really a challenge for a lot of organizations. So they're really trying to figure out how to make that work within the systems that they have in place in their plan. When we ask respondents what are you going to be focusing on in the next 12 months as it comes to compliance with the FSMA, they indicated that a lot of it would be around the testing that I mentioned before, having their PQCI individuals actually work with the system and seeing if they can find any weak points in the documentation or in the protocols that they have in place and making modifications as needed. They are intending to work greater with consultants to have third parties come in and audit their facilities to make sure that not only have their own internal people said that their processes and protocols are up to snuff, but that also outside organizations have certified that. And then a lot of time will be spent working with their suppliers and trying to make sure that they have the documentation that they need from their supplier to make sure that they are compliant with FSMA. The impact has been most felt as you can kind of see with the documentation. The number of new templates needed and the way to record all of that data has been very challenging for many of the companies. They indicated that the methodology in which they are using it ranges from very sophisticated systems to quite simply pen and paper systems that they are putting into file cabinets. It runs the gamut depending on what size of organization you are speaking to. All of them are struggling to find a way to make it the most cost effective change in their organization. But that is something record management keeping is a hot topic for them and they are really working to figure out the best way to handle that. Companies that deal with foreign suppliers for food ingredients are also highly challenged with trying to make sure that they can audit their foreign suppliers to be FSMA compliant. That is one of the biggest requirements and one of the extensions that we saw a few slides back in terms of the timeline. That has been something that companies are struggling to figure out how they are going to do it when they don't have enough personnel to actually go out to every supplier that they have and audited on a regular basis. When we look at the segments that are most impacted it is really fresh vegetables and fresh fruits companies that have been feeling the impact in the last 12 months, 18 months at least as far as we have been speaking to. They have the most degree of change that needs to go into their businesses and we will hear a little bit further as we go on in our discussion today about how they have stronger needs than other segments for new equipment. Some of the smaller companies are also challenged just because of resources and lack of availability that they have in their industries or companies to actually make some of the changes they need or to be sure that the changes that they are making actually are in compliance. For those reasons third parties are actually becoming a stronger interest for a lot of organizations. Up to the last 12 months or so most companies said that they haven't looked for outside help on SSMA or not to a large degree. That is changing. A lot of companies expressed greater interest in what third party organizations might be able to bring to the table whether that was understanding what the rules meant in the case of smaller companies or whether it was in the case of larger companies ways to outsource SSMA implementation activities so that they can coordinate and make sure that they have the most effective program in place. Those are some of the major changes in terms of implementation and impact that has been going on in the last 12 months. When it comes to where are they spending on equipment most companies indicated that SSMA itself as a rule has not impacted what they are investing in in terms of equipment. They are saying that for most industries most food companies' segments there is not a great correlation between SSMA and what they need with equipment. Most of it is just saying that the design of the equipment for new equipment is going to be impacted. A lot of them are talking about the fact that they have to make changes in the way that they may be cleaning the equipment that they already have and that is probably the biggest area of contention or change that they've had to deal with but the actual investment in new equipment has been slow. The one exception is with food and vegetable processing companies. Those organizations said due to the extreme level of risk for contaminants and the fact that a lot of their equipment is older in nature they have had to make changes in terms of the equipment that they are using and have been spending to try to bring their equipment to be more able to be easily cleaned easily sanitized and not having as many nips and crannies where bacteria can lay. One other area to note as we are going through and looking at this companies in the food industry has also indicated that what they are looking for in terms of equipment may be things that have no have easily, excuse me are easily disassembled and removed so that they can clean it or are relatively smooth in nature with no nips and crannies so bacteria and food particles cannot get into there. Water resistant equipment is something that is of interest to them if they are using high pressure water to clean or if they are using solvents something that is easy enough to resist the solvents on their treads. Looking at some of the specifics for the equipment's desire you see the cleanability, the easy to maintain sanitary nature but you also see things like robust data collections starting to pop up in the equipment that they are desiring and that has a lot to do with the documentation that we mentioned earlier in our discussion. One thing also to note is that although food companies may have this perception that they need more equipment that are incorporating these elements of cleanability sanitary materials easy to maintain when we were speaking to the equipment OEM the counterpoint was given to us in the sense that they were saying that ever since SSMA first came into place back in 2011 some of these changes have already been incorporated into a lot of their machinery that they were putting out into the market. So there is definitely a disconnect between perception in the food industry and what OEMs of machinery actually are putting out in the marketplace. There is an area of opportunity in what is desired in terms of services from OEMs so consulting services are of interest to many of the food companies whether it is risk assessments on the equipment where might there be potential points of contaminants that could be building up on their existing equipment? How else can they make their facilities safer for SSMA? Those are some of the things that are of interest to them. Working more on communication how can they get their pieces of machinery to communicate together so that they can generate easier reports that something has been sanitized or that this piece of equipment links into their ERP system so that they can generate reports automatically and have less documentation. And then one point that was brought up and discussed by several larger food companies was the discussion about testing and validating machines through third parties so that they know that the equipment that they are purchasing has actually been proven to be meeting food safety requirements under normal usage parameters. So those are all top interest areas of food companies when it comes to the services that OEMs can be providing. Now, when we asked again the OEMs about consulting services since that seemed to be the number one topic area of services that most of the respondents actually mentioned, a good percentage of respondents in the OEM category said, yes, we actually do provide some level of consulting service to help our clients understand where their risks might be and their current equipment as to FSMA rules. Reducing contaminants and risk is a large focus for these organizations as you can imagine. And sanitary equipment design and new features help food companies manage that through the preventive controls that are used. However, most of the companies are focusing on smart manufacturing processes to really try to eliminate the contaminants and risks from even entering into their facilities. So when you talk to these food companies about how they're actually reducing these contaminants, they're talking about things like using advanced filtering and metal detection or having equipment that is easily disassembled so that they can get to the most difficult areas to clean. And then using more data captured from sensors that are built into the equipment to tell them when something is having a possible breakdown or a potential area of vulnerability. To mitigate the risks on the manufacturing line, companies are generally evaluating how their lines currently operate to reveal those risks and then making adjustments on the lines so that the staff works together and then communicating it down the line to all their plants and facilities so that once they've adopted a new protocol and process, it is quickly disseminated out through the group so that they don't have to have one facility operating differently than another facility or one line working differently than another line. That is the biggest way that they've been able to achieve greater reduction in mitigating the risk. They look to establish those hygienic zones and the manufacturing line to create those barriers and then try to make sure that when they do that that there's no ingredients that are being introduced at the beginning of the process that could be contaminating the line because that is where the greatest point of entry to the entire process can be. You've heard a lot today about data diagnostics and how important that is to the food companies. So the reporting element, as you can imagine, is very, very important to them as well. Food companies have said that the biggest gap that they see in the equipment that they're receiving is how the software can tie back and provide the reporting for them. Most of the FSMA data is maintained on homegrown systems or modules that they've carved out and created within their own ERP systems. It's not something that is plug-and-play. So it's something that is an area that they believe is an opportunity for companies to step into and offer them solutions. And that's something that they are very much interested in in ways that they can use other data analytic programs to help them manage the wealth of information that is coming through now with the FSMA guidance that they have to keep track of. The other thing that they're looking for is ways to make sure that they're able to document the machine downtime and actually analyze the data that comes back from that. So we were speaking with a variety of sources on this topic, and they said machine performance and the issues that are associated with that does impact FSMA performance and compliance. And really understanding when a machine is operating at its peak performance, say, they're working with a system where it's supposed to keep the food at a specific temperature throughout the entire process, if that machine is not operating at its peak and the temperature is fluctuating, that can cause bacteria to build up on the food and cause problems down the line. So having that machine data flow through faster and letting people know up through the manufacturing operation quicker is something that they're interested in having be seen by more levels of the organization other than just the person operating the line. One respondent that we spoke with mentioned how having a machine be down can even cost a company as much as $10 million per year, depending on how long it's down, and they are much more eager to pay for a machine at a higher cost if it's user-friendly and it can provide the data that they need to prevent the downtime, so having the predictive analytics components incorporated into that as well. And then a lot of the food companies that we spoke to when we were talking about how can the OEMs of the equipment help you with the maintenance and operation beyond just the data analytics components, training is usually seen as a costly endeavor for most of these food companies. They don't want to take employees off the line to be trained, so it's something that they're very slow to invest in. Manuals are kind of seen as nice to have, but they're very rarely used when people are on the line. So the way the food companies were kind of viewing it is they're looking for machine providers to provide training through an electronic library with very short, highly detailed videos for specific tasks because they think that that is something that they can easily have somebody to watch in a short burst of time and then be able to keep operating the machine. As we were talking with all of these food company respondents, food safety experts, and machinery providers, we were asking what are some of the things that you see as the biggest gaps? What are some areas that are most important if you were to look at designing new equipment, if you were to look at providing new services? What do you think is something that is most critical to convey? And the discussion came back to keep doing what you're doing when it comes to designing new machinery, keep up the sanitary design, keep making sure that it's easy to take apart and reassemble, or if you're going to do clean in place, make sure that it's water resistant and able to withstand the chemicals that might be used on the machinery, have an understanding of your client's business for that, incorporate more sensors and data systems to understand those sensors, and then develop a way to have those machines talk to one another so that throughout the whole line they're able to see it from start to finish. They'd also like to see more consulting-related services as we spoke about earlier. I think that that was something that came through multiple times as we were talking to individuals, and we'll continue to resonate as you go forward and talk with individuals. And then as we were talking, they also said that there's going to be a growing need for these partnerships with third-party organizations. They're not working in a world that's not connected any longer, and they fully see that if they're going to be having these third-party companies come in and audit their facilities for compliance, that the reports that are generated may find issues with the machinery that they have in place. It would be nice for them to be able to work closely with their machine provider and the third-party company that did the audit to find the resolution for those problems. One other area that we want to highlight as we go through the presentation today is a lot of the companies that we spoke to believe that the equipment that they had was functional and able to meet FSMA regulations because they're able to adopt new cleaning practices or new protocols to make sure that there isn't the contaminants introduced to the line. However, many of them also acknowledge that they hadn't had those third-party audits, hadn't had anybody else come in to look at the machines themselves, so they don't necessarily know what those risks are. So having the machinery providers actually be very close to the customer and walk out onto the lines and look at the equipment and point out where the potential areas of risk are is something that is viewed as a great benefit to them. Understanding where FSMA is going in the future and providing future guidance to them is also considered something that is of high interest to them. They figure if they can make sure to continue forward with new technologies as they're purchasing equipment and their provider knows the industry and what's coming, that that's more likely to be the provider that they want to work with. And then one last point that I wanted to raise is that there is a possibility that the FDA itself is going to be looking for partnerships. And when we were speaking with some of the food industry consultants that worked very closely with the FDA, they mentioned that the FDA is stretched very, very thin itself and having difficulties to meet all of its obligations when it comes to the FSMA. So they are looking for partners in a variety of different areas. One area that people suggested was working with machinery providers to do the validations to be the third-party auditors themselves and say that they could certify their machines to be compliant. So that is something that would be of interest to the FDA from that perspective. And there are a variety of different ways to look at the partnerships but whether it's with the food companies themselves, whether it's with food consultants and other third-party auditors or with the FDA, there's definite possibilities for partnerships moving forward. And with that, we can open it up to questions. I see one already. The question is, did end-users make reference to specific technologies or application to document validation data for FSMA? So did they make reference to specific technologies for FSMA? There was mention throughout the study about how different, I guess I'll say, it's all different templates and applications for reporting. So the documentation validation wasn't specific to any one particular application. But for the technology piece, we did have end-users make reference to wanting to have it communicate through their ERP systems. And I'm drawing a blank at the moment as to which ones were mentioned in terms of how they wanted the documentation to flow. I believe SAP was one that was mentioned that they would like to see that the machines have communication protocols that could feed into SAP. Any other questions? I don't see any right at the moment, Donna. I'm sorry, Jennifer. But I'd like to thank you for a lot of the information that was included in there. It was definitely an update from the previous report. And it's going to definitely affect the packaging processing industry, the focusing, the efforts on training and discussion on the controls and documentation. I think it's going to be a key point along with the specific technologies that the question was asked about. If no one else has any questions, I'd like to thank everyone today for joining the webinar and participating in this discussion. As a final note, you'll receive an email with an evaluation for today's webinar. Just take a moment to complete the evaluation. One to two minutes is all it will take. Let us know how we're doing. Let us know what other topics you might like to see reports on. And the complete report is available online on PMMI.org-slash-research. And it is free to all members, so they can just go online and download it. And the executive summary is also there available for anyone who is not a member. And we hope to see everyone at PackExpo. So if we don't have any other questions, Jennifer, thank you again for your time and your efforts. I greatly appreciate it. Thank you, Paula. Have a great day, everyone.