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Economics of traceability for mitigation of food recall costs

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  • Resende-Filho, Moises
  • Buhr, Brian

Abstract

Traceability of food products and particularly meats is increasingly advocated as a means to provide consumer confidence in credence attributes (e.g., range fed, organic, country of origin) as well as for improved quality control. In the case of food safety, where there are failures in testing and there is not likely to be zero failure rates, traceability may also improve the overall process efficiency and cost effectiveness of recalls. This study relies on case observations to develop a general conceptual model of traceability for food product recall. This conceptual model incorporates quality control in a vertical food supply chain and identifies key factors (e.g. the nature of contamination event and shelf-life of the product) that affect the cost-benefit of traceability in a risk context. Our conceptual model is adapted and parameterized for the context of a simulated recall due to E. coli in ground beef. The results of our simulations indicate that traceability might be valuable in terms of its return in saved recall costs. In addition, the effect of improved quality control measures on the traceability value is simulated and discussed. The simulated results indicate that improved quality controls and traceability seem to be substitutes. Despite this, we argue that traceability might improve information as to the source of quality control failure and therefore might play a complimentary role in achieving quality control improvements.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 3650.

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Date of creation: 19 Jun 2007
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Handle: RePEc:pra:mprapa:3650

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Keywords: Food safety; quality control; recall; risk assessment; risk modeling; traceability;

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References

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  1. Pouliot, Sebastien & Sumner, Daniel A., 2006. "Traceability, Liability and Incentives for Food Safety and Quality," 2006 Annual meeting, July 23-26, Long Beach, CA 21121, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  2. Helen H. Jensen & Laurian J. Unnevehr & Miguel I. Gomez, 1998. "Costs of Improving Food Safety in the Meat Sector, The," Center for Agricultural and Rural Development (CARD) Publications 98-wp189, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  3. John A. Fox & David A. Hennessy, 1999. "Cost-Effective Hazard Control in Food Handling," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 81(2), pages 359-372.
  4. Dickinson, David L. & Bailey, DeeVon, 2002. "Meat Traceability: Are U.S. Consumers Willing To Pay For It?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 27(02), December.
  5. Michael R. Thomsen & Andrew M. McKenzie, 2001. "Market Incentives for Safe Foods: An Examination of Shareholder Losses from Meat and Poultry Recalls," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 83(3), pages 526-538.
  6. Bulut, Harun & Lawrence, John D., 2007. "Meat Slaughter and Processing Plants’ Traceability Levels Evidence From Iowa," 2007 Conference, April 16-17, 2007, Chicago, Illinois, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management 37576, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  7. Buhr, Brian L., 2003. "Traceability And Information Technology In The Meat Supply Chain: Implications For Firm Organization And Market Structure," Journal of Food Distribution Research, Food Distribution Research Society, vol. 34(03), November.
  8. Fritz, Melanie & Schiefer, Gerhard, 2009. "Tracking, tracing, and business process interests in food commodities: A multi-level decision complexity," International Journal of Production Economics, Elsevier, vol. 117(2), pages 317-329, February.
  9. Alfaro, Jos A. & Rbade, Luis A., 2009. "Traceability as a strategic tool to improve inventory management: A case study in the food industry," International Journal of Production Economics, Elsevier, vol. 118(1), pages 104-110, March.
  10. Jensen, Helen H. & Unnevehr, Laurian J. & Gomez, Miguel I., 1998. "Costs Of Improving Food Safety In The Meat Sector," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 30(01), July.
  11. Zijun Wang & Victoria Salin & Neal Hooker & David Leatham, 2002. "Stock market reaction to food recalls: a GARCH application," Applied Economics Letters, Taylor & Francis Journals, vol. 9(15), pages 979-987.
  12. Hooker, Neal H. & Nayga, Rodolfo M., Jr. & Siebert, John W., 1999. "Assessing The Economics Of Food Safety Activities: Studies Of Beef Slaughter And Meat Processing," Faculty Paper Series 24003, Texas A&M University, Department of Agricultural Economics.
  13. Gregg A. Jarrell & Sam Peltzman, 1984. "The Impact of Product Recalls on the Wealth of Sellers," University of Chicago - George G. Stigler Center for Study of Economy and State 33, Chicago - Center for Study of Economy and State.
  14. Scott A. Malcolm & Clare A. Narrod & Tanya Roberts & Michael Ollinger, 2004. "Evaluating the economic effectiveness of pathogen reduction technologies in cattle slaughter plants," Agribusiness, John Wiley & Sons, Ltd., vol. 20(1), pages 109-123.
  15. Golan, Elise H. & Krissoff, Barry & Kuchler, Fred & Calvin, Linda & Nelson, Kenneth E. & Price, Gregory K., 2004. "Traceability In The U.S. Food Supply: Economic Theory And Industry Studies," Agricultural Economics Reports 33939, United States Department of Agriculture, Economic Research Service.
  16. Shiptsova, Rimma & Thomsen, Michael R. & Goodwin, Harold L., Jr., 2002. "Producer Welfare Changes From Meat And Poultry Recalls," Journal of Food Distribution Research, Food Distribution Research Society, vol. 33(02), July.
  17. Trienekens, Jacques & Zuurbier, Peter, 2008. "Quality and safety standards in the food industry, developments and challenges," International Journal of Production Economics, Elsevier, vol. 113(1), pages 107-122, May.
  18. Resende-Filho, Moises & Buhr, Brian, 2006. "A Principal-Agent Model for Evaluating the Economic Value of a Beef Traceability System: A Case Study with Injection-site Lesions Control in Fed Cattle," MPRA Paper 467, University Library of Munich, Germany.
  19. Christophe Charlier & Egizio Valceschini, 2008. "Coordination for traceability in the food chain. A critical appraisal of European regulation," European Journal of Law and Economics, Springer, vol. 25(1), pages 1-15, February.
  20. Moises A. Resende-Filho & Brian L. Buhr, 2008. "A Principal-Agent Model for Evaluating the Economic Value of a Traceability System: A Case Study with Injection-site Lesion Control in Fed Cattle," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 90(4), pages 1091-1102.
  21. Ollinger, Michael & Moore, Danna L. & Chandran, Ram, 2004. "Meat And Poultry Plants' Food Safety Investments: Survey Findings," Technical Bulletins 33559, United States Department of Agriculture, Economic Research Service.
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Cited by:
  1. Roth, Michael & Doluschitz, Reiner, 2007. "KOSTEN-NUTZEN-ANALYSE FUR QUALITATSSICHERUNGS UND RUCKVERFOLGBARKEITSSYSTEME IN WERTSCHOPFUNGSKETTEN TIERISCHER PRODUKTE (German)," 47th Annual Conference, Weihenstephan, Germany, September 26-28, 2007 7589, German Association of Agricultural Economists (GEWISOLA).

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