Pyramid auditing 'adds to manufacturers' costs'

07-Dec-2015 - Last updated on 07-Dec-2015 at 10:10 GMT

Pyramid auditing can lead to 'another pointless, non-risk based audit': PTF

Pyramid or cascade auditing – the practice of using third parties to conduct audits of food manufacturing premises – can result in needless expense, add to red tape and risks compromising the intellectual property (IP) of some businesses, warns the Provision Trade Federation (PTF).

Reporting industry concerns, PTF director general Terry Jones told Food Manufacture that such audits may result in a raft of information being demanded about the supply of raw materials, ingredients or finished products – including the names and addresses of the suppliers to first-tier direct suppliers.

“This is a growing problem – members have highlighted a number of real life examples where this system is being employed,” he said. “This further adds to the already growing burden of customer audit.” Companies at each stage of the process may be required to pay a fee but this practice was not being employed by retailers covered by the Groceries Supply Code of Practice (GSCOP).

“Manufacturers, processors and wholesalers do not want to give away their IP especially to a third party with whom they have no relationship,” said Jones.

‘Another pointless ... audit’

“They have all the processes in place to conduct traceability audits if so required by customers. They resent having to supply more information for yet another pointless, non-risk based audit which eats up resource but delivers no discernible benefit for customer or consumer for that matter.”

The PFT boss suspected large-scale businesses that may have a fixed or even declining technical resource with concerns about traceability and authenticity in the wake of the horsemeat scandal may have been “sold this scheme by slick sales operations”.

One solution to the problem may be if the GSCOP were to be extended to cover other large customers, the PTF would make a case for the grocery code adjudicator to look at the topic under the auspices of part 4 (prices and payments) of the GSCOP. This part of the code prohibited the tying of third party goods and services to payments.

A spokeswoman for the Food and Drink Federation (FDF) declined to comment on pyramid auditing because it had not looked into the topic. However, it underlined the contribution appropriate audits made to quality assurance.

‘Major role to play’

“Audits have a role to play as part of a robust assurance system,” said the spokeswoman. But they should be risk-based and their number reduced to allow resources to be focussed on proportionate measures, including the use of ‘earned recognition’, she said. Earned recognition refers to the practice minimising inspections for businesses with a good track record of audit compliance.

“The quality of audits undertaken is more important than their quantity,” said the spokeswoman. “Increasing the number of audits will add to the burden on industry without reducing food safety risks or the risk of food fraud. The FDF, therefore, strongly supports the extension of training and skills of auditors, including in the skills required to identify signs of food fraud.”

The British Retail Consortium was unable to comment on pyramid auditing.

Has your business been affected by pyramid auditing? If so, contact the author, in confidence, at michael.stones@wrbm.com.