At lunchtime one day last January, Jill Hein, an Iowa mother of
eight, took a jar of Peter Pan peanut butter—the kind
with Peter, in his feathered cap, on the label—out of her
pantry. She opened the lid. Everything seemed fine. No funny
odor. No odd color.
Beyond Peter Pan: Lessons from ConAgra’s Recalls
Five Best Practices for Recalls
Software to Smooth the Recall Road
Use Disasters to Fine-Tune Your Supply Chain
Time Line: 15 Years of Recalls
Tainted Goods from China and Other Supply Chain Risks
Hein fed the Peter Pan to one son and one daughter. Within
hours, they were cramping and vomiting. Hein’s
3-year-old boy, Bowen, had to be taken to the emergency
room the next day. Hein ate some herself two weeks later and
was hospitalized for dehydration. And renal failure.
Alone or with jelly, peanut butter is as classic as Elvis,
who preferred his on white bread, mashed with bananas and
fried. Americans eat 700 million pounds of crunchy and creamy
each year—enough, the Peanut Advisory Board says, to coat
the floor of the Grand Canyon.
Hein never expected a simple peanut butter sandwich to go so
Neither did ConAgra Foods, the $12 billion conglomerate that
makes Peter Pan.
One of ConAgra’s oldest and best-known brands, Peter
Pan brought in $109 million in sales last year, says
Information Resources, which tracks retail spending. ConAgra
also supplies some of Wal-Mart’s Great Value house brand
and sells peanut butter toppings to companies like Carvel and
Sonic, bringing total peanut butter sales to $147 million last
year. But when an outbreak of a rare salmonella strain was
traced to ConAgra peanut butter, the company would have to try
to get it all back.
The Peter Pan recall eventually involved 326 million pounds
of its own and Wal-Mart’s peanut butter, plus 99,953
cases of toppings. So far, ConAgra has spent more than $78
million dealing with an estimated $1 billion worth of
potentially infected product. Its peanut butter sales were down
63 percent in fiscal 2007, the company says.
No one knows how much ConAgra will need to spend to
re-establish trust in its product. Hiring Tinker Bell to ask
people to clap if they believe in Peter Pan won’t fix
Why Recalls Depend on the Supply Chain
Peanut butter isn’t ConAgra’s only recall
trouble, either. The company has had to call back hundreds of
pounds of ground beef in the past few years, and this month
ConAgra’s Banquet pot pies were recalled when at least
211 people in the U.S. got salmonella poisoning, which the
Centers for Disease Control and Prevention links to the pot
pies. That recall is ongoing.
But it’s not just ConAgra. Recalls are blooming like
flowers in spring: Dole’s e.coli bagged salads; Metz
Fresh’s salmonella spinach; REI’s faulty
children’s bikes; Mattel’s lead-painted and
choking-hazard toys, just to name a few. Federal records show
at least 628 recalls so far this year, and another
941 in 2006. (For more, check our History of Famous Recalls.)
Globalization accounts for some of this surge. Many U.S.
companies depend on overseas production, where quality controls
are difficult to monitor. And it’s not just hard goods
like toys from China. Food, too, arrives by container ship from
other countries, and sometimes it’s contaminated. So far
this year, for example, more than 8,660 cartons of cantaloupe
from Costa Rica have been recalled for salmonella risks,
according to U.S. Food and Drug Administration (FDA)
But mainly, things go wrong. That’s business.
“One risk every company faces is a recall,” says
Jane Barrett, an analyst at AMR Research in Boston. So if
recalls are inevitable, a CIO must help create a supply chain
ready to cope with them, she says, by quickly providing the
relevant data to facilitate the process. And a recall conducted
under pressure from federal regulators, an angry public and
plaintiff’s lawyers tests every supply chain management
decision a CIO makes.
Best practice calls for companies to be able to track and
trace the pedigree and whereabouts of the raw materials used to
make their products all the way through the manufacturing
process and out to end-point customers, says Steve David,
former CIO of Procter & Gamble. But many companies, for
many reasons, don’t have supply chains that can do that,
and that becomes evident in clumsy recalls that go on too long,
cost too much, and have the potential to damage corporate and
“The ugliness of bad data management really hits you
when you have a product recall,” David says.
As soon as the decision is made to recall a product,
companies should release consistent, correct information to
minimize brand damage, says Joe Barkai, a practice director at
Manufacturing Insights, a consulting firm that is a sister
company to CIO’s publisher. “But,” he says,
“now [traceability] is mainly a manual procedure.
Companies don’t have it automated.”
And that’s a problem. ConAgra, for example, had to
revise its recall twice as it learned more about how much
infected product it could have manufactured and where it might
have gone, according to FDA records. The original
Valentine’s Day 2007 announcement recalled peanut butter
made after May 2006. In early March, ConAgra expanded the scope
to December 2005 and added toppings made in its Humboldt,
Tenn., plant using peanut butter from its Sylvester, Ga.,
plant, where the original contamination had occurred. A week
later, ConAgra pushed the date back to October 2004—22
months before the first reported illness.
ConAgra declined to comment on the recall. Talking about how
its IT and supply chain managers perform recalls, a spokeswoman
says, “doesn’t align with our priorities.”
But it’s clear the experience revealed problems at
ConAgra. Paul Hall, vice president of global food safety, gave
a talk at the Food Marketing Institute in April, after the
recall was under way. The peanut butter recall taught ConAgra lessons other food manufacturers can use, he noted, including knowing where all of your product is going, such as toppings, and assessing ahead of time overall recall and traceability processes across your supply chain.
Hall himself is at ConAgra as a result of the recall. The
company created a global food safety group after the recall and hired him
to lead it.
Lead Paint and Other Horror Stories
When your boss sweats through hostile questions from Wall
Street or is sworn in to testify before Congress, as were both
ConAgra Senior Vice President of Operations David Colo and
Mattel CEO Bob Eckert, he doesn’t tap on a keyboard
looking for answers from the company’s factory floor
software. He’s got a piece of paper in his hands and a
trusted adviser whispering in his ear. He’s not working
with data; he needs information. IT leaders have to provide it,
turning numbers into ideas.
For example, in his testimony, Eckert outlined the history
of Mattel’s early August recall of those Chinese-made
toys containing lead paint.
When product samples failed lead tests performed for a
Mattel trading partner in France, Eckert said, Mattel product
integrity employees in China then inspected the manufacturing
records the company requires its Chinese contractors to keep,
showing data such as pigment tests that can be matched to
specific containers of paint in use on the factory floor. The
containers get stickers with batch number, test number and
other information. That data must be kept available for
By assessing data the factory handed over, as well as data
it couldn’t—such as authorization to use paint from
a source not approved by Mattel—Mattel tracked the lead
to yellow pigment in paint used on some parts of certain Dora
the Explorer and Sesame Street toddler toys.
“Based on what I saw within the first week of this
hitting them, they had a pretty solid contingency plan in
place,” says John Quelch, a business administration
professor at Harvard Business School. (Mattel declined a
request for an interview.)
CIOs who want to mitigate risk during a recall must move
information to where it needs to be: to the FDA or U.S.
Department of Agriculture or Consumer Product Safety
Commission, for example. Or to factory employees and to the
public, says Rick Blasgen, former senior vice president of integrated logistics at ConAgra.
Blasgen, who left ConAgra in 2005 to become president and
CEO of the Council of Supply Chain Management Professionals,
declined to talk specifically about ConAgra. But during his
three years there and his five years leading Nabisco’s
supply chain operations before that, he was part of several
recalls. “Particularly if there’s product that can
hurt someone, you stop what you’re doing and focus on
that,” he says. “You want to be as accurate as
Who Wants Yesterday’s Data? (You Do)
Accuracy, unfortunately, is not an absolute. Manufacturing
systems commonly fail to feed production-line information into
corporate data warehouses, where it could be kept to trace bad
products or bad ingredients down the road, says Fernando
Gonzalez, CIO of Byer California, a $300 million clothing
company. Gonzalez has managed IT at aerospace, medical device
and chemical companies before coming to Byer, and has been
involved in several recalls, including one of railroad car room
deodorizers contaminated by bacteria.
“If you can’t tell it was this production line
on this shift on these days,” Gonzalez says, “then
you’re stuck with an estimate and doing an expansive
recall just to be safe.”
Manufacturing execution systems, such as packages from Atos
Origin or Manugistics, keep that kind of data. SmartOps offers
a supply chain dashboard that managers inside and outside the
factory can use to watch manufacturing activity and be alerted
to problems, such as failures in quality control. (For more on manufacturing execution systems, see “Software for Hard
On the deodorizer recall, Gonzalez’s company could
trace the offending ingredient back to a supplier in the U.K.
But that supplier didn’t keep records to show whether the
raw materials had come in contact with other ingredients.
“All we could do was assume that everything from the U.K.
supplier was contaminated,” he says, adding that the
recall cost “several million dollars.”
Sometimes data isn’t stored long enough or outside
companies hired to manage your warehouses or ship your products
don’t retain their data as long as you do. Barkai,
at Manufacturing Insights, remembers wanting to study one year
of supply chain activities at a U.S. auto maker. “I was
told I would not be able to receive [the data] because they had
limited server space, so they purged it,” he says.
“Someone decided six months was good enough.”
When deciding how long to hold data, factor in the
product’s life span, as well as any local health
department requirements, federal antiterrorism legislation and
the potential for litigation if something goes wrong,
recommends a data security manager at ConAgra, who asked not to
be named. He said data collection during a recall is “an
arduous task” at the company, but “not a
scramble.” (For more tips, check out “5 Recall Best Practices.”)
How to Manage a Recall
As Blasgen explains, the central goal in a recall is to
figure out how much of the bad product was manufactured and
where it went.
To do that, he recommends starting by querying your
manufacturing execution system, which keeps data on production
lines, product batches, ingredients and conditions inside the
factory when products were made. ConAgra, according to its
website and other corporate communications, uses a mix of
Manugistics and SAP software in its factories to schedule and
monitor manufacturing runs.
Next, Blasgen says, IT managers should pull shipping records
from their transportation management systems. (Kewill Ship and
HighJump Software are typical systems.) Search for date, lot or
batch codes to figure out which distribution centers or
customers were sent the suspected bad product, Blasgen says.
Then match that information against data in the distribution
centers’ and customers’ receiving systems.
Those are the steps Blasgen recommends. But most supply
chains are not configured to allow a CIO to follow
them. “Do you see what’s happening?” Blasgen
asks. “Multiple systems with their own ways of querying a
nd no magic ‘recall button’ to press for any of
Fixing a Hole Where the Rain Leaked In
ConAgra had streamlined its supply chain with its $300
million “Project Nucleus” started in 2003 and
mostly led by Blasgen. The company closed factories,
consolidated distribution centers and standardized on SAP
enterprise resource planning software. Blasgen says that any
company that reworks its supply chain to be more efficient will
make and move products faster. That’s good when the
products are good and bad when they’re not.
Steve David, the former Procter & Gamble CIO, notes the
irony. “You take the bad with the good,” he
In recent financial statements filed with the Securities and
Exchange Commission, ConAgra claims savings of $275 million so
far from its supply chain revamp. That pot has helped offset
the $78 million ConAgra reportedly has spent to date on the
recall—costs that include customer notifications,
installing and staffing a toll-free hotline, consumer refunds,
and collecting and disposing of bad peanut butter.
Another $15 million to $20 million went to overhauling the
Sylvester factory. ConAgra bought a new peanut roaster,
upgraded finished-product testing procedures, built new factory
walls and designed other ways to keep peanut dust and raw
peanuts away from already roasted peanuts (heating to 165
degrees kills salmonella). It also put up a new roof and
installed a new sprinkler system. Why?
Because the company has a theory as to how salmonella got
into Peter Pan in the first place. For an undetermined period
of time, broken sprinkler heads dripped inside the Sylvester
plant while rainwater seeped through the factory’s leaky
The moisture from those sources may have awakened dormant
salmonella bacteria in peanut dust or in stocks of raw peanuts.
That what ConAgra’s Colo told Congress in April.
ConAgra’s finished-product tests missed the
contamination, Colo testified. The company then trucked jars to
distribution centers and from there to Wal-Mart, Dollar
General, Kroger and other supermarkets, warehouse clubs, food
distributors and restaurants across the U.S.
At last count, the Centers for Disease Control and
Prevention reports that 628 people in 47 states got sick.
“When we asked people who were sick, ‘Can you
take out your jar and tell us the brand and lot code?’
says Anandi Sheth, a CDC doctor who investigated the outbreak,
“we repeatedly saw Peter Pan and Great Value and lot code
That’s the data string ConAgra’s uses to
identify products made in Sylvester. For example, one bad batch
was coded “21115055 00 1037A.” After the 2111, the
5 indicated 2005, the year made; 055 was Julian date, for the
55th day of the year; 1037 was military time; and A showed
which production line within the factory.
How Recalls (and Peanut Butter) Stick
While Peter Pan returned to stores in time for
back-to-school shopping in late August, and a new “Miss
Georgia Peanut Festival” was crowned on schedule last
month at the annual event ConAgra sponsors, the company
predicts sales won’t return to pre-salmonella heights
ConAgra CFO André Hawaux told financial analysts in
June that peanut butter “will be a lower profit
contributor” next year, even compared with this troubled
year’s figure. That’s “due to relaunch
investments and lower [sales] volume planned,” he
Lawsuits abound. Parents are suing on behalf of their
children; a prisoner in upstate New York serving 12 years for
manslaughter got sick and he’s suing, too. In another
suit, a man says his wife, after eating Peter Pan, had to have
her gallbladder removed, which meant he subsequently
“suffered the loss of spousal and other services commonly
provided by his wife.”
Sixty-seven cases, including that of Hein, the Iowa mom,
were consolidated in Julyin U.S. District Court in Atlanta,
accusing the company of, among other charges, negligence and
liability for product defects. ConAgra has denied all
Hein and her children have recovered, but they no longer eat