Contents 1.0 FROM THE CHIEF EXECUTIVE 2.0 QUALITY COMMITMENT

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1 Contents 1.0 FROM THE CHIEF EXECUTIVE 2.0 QUALITY COMMITMENT 3.0 QUALITY Principles 4.0 QUALITY STRUCTURE AND RESPONSIBILITIES 5.0 QUALITY SYSTEM ELEMENTS 5.1 Customer Satisfaction 5.2 Buildings, Facilities, Utilities and Equipment 5.3 Planning and Procurement 5.4 Manufacturing Control 5.5 Quality System Support 5.6 Product Sampling, Testing and Release 5.7 Warehousing, Logistics and Distribution 5.8 Product Recall and Withdrawal 5.9 Business Continuity Planning 5.10 Regulatory Compliance 6.0 MEASUREMENT AND REPORTING 7.0 GLOSSARY Quality Systems A

2 Quality Systems B

3 FROM THE CHIEF EXECUTIVE 1 FROM THE CHIEF EXECUTIVE

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5 1.0 From the Chief Executive Quality is everyone s responsibility. Every step of the way, from our farms to the market, we re trusted by customers and consumers to bring them only the best. Quality Systems 1

6 Our reputation for quality is a competitive advantage. It s an advantage we need to guard carefully, taking responsibility for our part in maintaining the trust of customers and consumers. The Fonterra Quality System ensures that wherever we are located in the world, we have a clear, consistent framework to deliver quality products and services to our customers. As you will see in this document, we leave nothing to chance. Theo Spierings Chief Executive Officer Quality Systems 2

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9 SCOPE The Fonterra Quality System applies to all Fonterra global operations including Fonterra owned and controlled businesses and joint ventures where Fonterra has management control. Quality Systems 5

10 2.0 Our Quality Commitment Our commitment to quality is in line with our value of 'Do What s Right'. FONTERRA IS COMMITTED TO: CUSTOMER SATISFACTION FOOD SAFETY REGULATORY COMPLIANCE Consistently satisfy and surpass customer and consumer expectations Produce and supply safe quality foods Fully comply with exporting and importing country requirements Enabled by people committed to quality and working together with customers to assure quality at every step through the supply chain Achieved through everyone, everywhere, understanding and adhering to the Fonterra Quality System Continually enhanced through prevention, measurement and improvement initiatives Reference: Fonterra Group Quality Policy Quality Systems 6

11 These commitments are achieved by everyone understanding and adhering to the Fonterra Quality System and by challenging ourselves to improve our quality and lift our standards. The Fonterra Quality System is in line with the Fonterra Policy Framework, and alongside the health and safety and sustainability frameworks. QUALITY GROUP POLICIES HEALTH & SAFETY GROUP STANDARDS SUSTAINABILITY Group Guidelines (Reference Documents) Business Unit Procedures Quality Systems 7

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13 3 QUALITY system elements QUALITY system elements

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15 3.0 Quality Principles We stand for uncompromising standards of quality, safety and integrity. THINK AND LIVE QUALITY Quality is alive at every step in our supply chain We ensure that what we do is right so the next person can get it right We always speak up when we see or perceive a quality issue DELIVER ON OUR PROMISE TO CUSTOMERS We understand who our customers are, listen to them and deliver on our promise Consumers trust our brands Our customers rely on us to consistently deliver safe products RIGHT FIRST TIME EVERY TIME We promote and manage our Quality System We measure quality to ensure we get it right We actively seek to understand quality risks CONTINUOUSLY IMPROVE QUALITY Quality is our competitive advantage We continually strive to lift standards Quality and customer feedback are shared to improve our products and services Quality Systems 11

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17 4 QUALITY STRUCTURE AND RESPONSIBILITIES QUALITY STRUCTURE & RESPONSIBILITIES

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19 4.0 Quality Structure and Responsibilities 4.1 Fonterra Quality System Structure To ensure consistent standards for quality are applied globally, we have Fonterra Quality Standards and Quality Reference Documents. These are accessible to all of our staff. FONTERRA QUALITY SYSTEM FONTERRA QUALITY STANDARDS Fonterra Business Unit Procedures Fonterra Business Unit Procedures Fonterra Business Unit Procedures Fonterra Business Unit Procedures Fonterra Business Unit Procedures Fonterra Partners Procedures Quality Reference Documents Fonterra Quality System Defines policy, principles, structure and measurement of quality within Fonterra. Fonterra Quality Standards Outcome based Standards, specifying a non-negotiable requirement to which compliance must be demonstrated. QUALITY Reference Documents Resource documents describing How To achieve the required outcome. Business Unit Procedures Standard Operating Procedures which specify the standard work processes to follow to ensure the Fonterra Quality System and Standards are implemented and complied with throughout individual Business Units. Quality Systems 15

20 4.0 Quality Structure & Responsibilities (continued) 4.2 Alignment with Group Policies The Fonterra Quality System is aligned with and supports Fonterra Group Policies such as health and safety, social, environmental, cultural, economic and biotechnology policies. 4.3 Quality Roles and Responsibilities Everyone, everywhere contributes to quality. By working together, we will satisfy the requirements of our Quality Policy. Responsibility for quality starts at the top. Our Board of Directors are responsible for setting the strategic direction of our business and for the approval of all Group Policies. Business Unit leadership teams are responsible for adhering to quality standards and demonstrating commitment to quality standards through the establishment of Business Unit procedures. A Quality Lead of each Business Unit is ultimately responsible for the quality of the products and services provided. This is achieved through the delegation of operational accountability for quality commitment and regulatory compliance to specified personnel within the Business Unit. Business Unit leadership teams annually establish quality objectives. Performance against these objectives is routinely measured and reported. For the Fonterra Quality System to be successful there must be total commitment to quality from management and total involvement from everyone at all levels throughout our organisation. To ensure the ongoing development and maintenance of the Fonterra Quality System, management will provide the required trained resources with the appropriate decision making authority. 4.4 Staff Training Our people are critical in the delivery of high quality and safe products. They are our eyes, our ears and our conscience throughout the whole supply chain. Training builds a performance culture by: Ensuring staff understand quality concepts. Ensuring staff understand the competencies required. Providing staff with appropriate learning and development opportunities. Quality Systems 16

21 All staff receive a level of training that ensures awareness of the relevant quality, food safety and regulatory requirements. Our regular global staff survey contains questions that track the level of knowledge and commitment of our people to quality. On-the-job training is based around documented standard operating procedures which are developed for all tasks within Fonterra s operations that have the potential to impact quality. These procedures are task specific and provide the information necessary to successfully perform the activity to produce and deliver high quality products and services to our customers. New staff are trained in the standard operation procedures specific to their position. These enable them to carry out their duties in a manner that will maintain a safe work environment and ensure high quality outputs are produced. 4.5 Business Partners Around the world we work with many different suppliers, agents, consultants and business partners. Doing business in many different countries and cultures can sometimes be challenging because of different regulations, standards or commonly accepted practices. Where Fonterra has joint venture partners without management control, we must be confident their policies are consistent with Fonterra s. Suppliers to Fonterra are required to ensure their products, goods and services comply with the issued Fonterra Quality Requirements, laws and regulations of the country of manufacture, and the import country market access requirements as appropriate. Wherever Fonterra works in the world, we maintain the highest standards of integrity and professionalism. We always do what s right. Fonterra requires business partners to ensure: Fonterra's reputation is upheld. Fonterra quality requirements are complied with. Active monitoring and reporting of quality performance is undertaken. Quality Systems 17

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23 5 Quality Principles 5.1 Customer Satisfaction 5.2 Buildings, Facilities, Utilities and Equipment 5.3 Planning and Procurement 5.4 Manufacturing Control 5.5 Quality System Support 5.6 Product Sampling, Testing and Release 5.7 Warehousing, Logistics and Distribution 5.8 Product Recall and Withdrawal 5.9 Business Continuity Planning 5.10 Regulatory Compliance QUALITY PRINCIPLES

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25 5.0 Quality System Elements 5.1 customer satisfaction Commitment to Customers and Consumers Our business is based on great customer relationships and our strategy is to grow lasting customer partnerships. How we treat our customers and consumers is important to achieving those partnerships. They look to us to honour our commitments to them, contribute to their success and maintain the highest possible quality and safety standards. Customers want to know that when they partner with us, they are not putting their reputations at risk. We provide reassurance by acting ethically, honourably and honestly. The customer s input into the product development phase is crucial to ensure we understand what our customer requires of the products we provide. The expectations of our customers and consumers are constantly changing and rising as people focus on healthier lifestyles and changing world economies. Our challenge is not only to meet the expectations of our customers and consumers but to also exceed them. This can only be achieved by our commitment to continually improve our products and services. Fonterra strives to ensure that we always produce high quality, safe food products. We live by our commitment to customers and consumers that the products we make are safe. We comply with all the relevant food laws and regulations in countries we manufacture, export to or where we sell products domestically. The marketing and advertising of Fonterra products is honest and responsible. We label our products correctly and truthfully. We do not make false or misleading claims or impressions about our products or those of our competitors. We do not promote unsafe or irresponsible consumption and our advertising and marketing avoids messages which could be offensive to any group. We understand and respect third party intellectual property rights. Our regular customer survey provides Fonterra with the voice of the customer. It offers customers the opportunity to provide their opinion on our products and our services. This enables us to identify areas for improvement and where to focus resources Design and Manufacture of Quality Food Life expectancy is increasing and society in general is becoming increasingly aware of the need to live a healthier lifestyle. Products that have served us well in the past will not necessarily continue to provide future business opportunities. Our future success and that of our customers depends on our ability to continually develop, manufacture and supply safe, high quality products that meet changing customer and consumer needs. This is achieved through a structured approach to the development of new products and the continuous improvement to existing products, processes, technology and packaging. A risk assessment is performed during the development of new products. This is designed to assess and mitigate potential food safety risks or other risks that may be associated with the product, its ingredients, or the packaging. Shelf life is established and validated for new products during the product development phase. It takes into account the product formulation, processing, packaging and storage conditions prior to consumption. To continually ensure the validity of the shelf life, the product is subjected to regular shelf life verification and review processes. Consumers are increasingly focusing on what the food contains and the benefits it provides. This information is available in advertising and promotional material and on consumer pack labels. It is generated during the development phase and is truly representative of Quality Systems 19

26 5.0 Quality System Elements (continued) Design AND Manufacture of Quality Food (continued) the product. Label claims are substantiated through scientific evidence and support Fonterra s socially responsible attitude towards balanced diet and nutrient adequacy. All products marketed and sold by Fonterra comply with respective laws and regulations affecting labelling, marketing and sale of foods in the country of sale Biotechnology Management Fonterra supports the application of new technologies and advances in agricultural science, including opportunities offered by modern biotechnology when their positive effects on food safety, environment, agricultural practices and production efficiency are scientifically confirmed. Fonterra is undertaking long-term biotechnology research, with the future option of commercialising developments in a responsible manner according to the needs and wishes of customers and key stakeholders. Confidence in our products is crucial Product Specification Accurate description of products and their characteristics is essential to ensure customer expectations are met. In Fonterra, key product information is identified in a product specification, which follows a documented process to control the specification development, change and approval process. The specification development, update and approval process includes input from all key parties to reflect customers needs Complaint Management Our products are manufactured and distributed to customers and consumers globally. The responsibility for the quality of our product does not stop at the end of manufacture. It continues until the product is consumed. When customers are not satisfied with the quality of the products they purchase they have the right to complain. All complaints are seen as an opportunity for improvement. For a customer to take the time to complain, they are clearly dissatisfied with what they have purchased. A rapid response to the complaint is crucial to retaining the customer. To ensure complaints are treated with the importance they deserve, a documented process is employed to manage all complaints Quality Service Quality is not restricted to the manufacture and delivery of products. We pride ourselves on our relationships with our customers. These partnerships are developed over time through the way we interact with our customers and the quality of the information that we produce. Quality Systems 20

27 5.2 Buildings, Facilities, Utilities and Equipment Security Our products will ultimately be consumed. To protect them from malicious contamination of our food, the security of our manufacturing, distribution and storage facilities is of critical importance. During production each key step in the process is controlled and monitored to ensure only product that meets the specification requirements is forwarded to our customers. However, there are opportunities within the supply chain where criminal tampering of raw materials and products may occur. To assure customers of the integrity of products, Fonterra implements strategies throughout the supply chain to prevent tampering. Of equal importance is the security of our information systems, automation and process control systems and documentation Engineering Engineering and maintenance play a pivotal role in the manufacture and storage of quality products. Our Engineering and Projects Division sets the standards applied to production, testing, and storage facilities, processing equipment and support services. Our Engineers project manage the design and construction of the facilities, the equipment and service installation and they provide the maintenance services required to ensure the plant and equipment is maintained to the highest standard to enable quality products to be manufactured. The manufacturing facilities must provide a secure environment for the manufacture and storage of high quality products. A risk based assessment of the manufacturing and storage environment is performed to identify the structural protection that is required during key steps of the manufacturing process to guarantee product quality is maintained. Where there is the possibility of product contamination following the final microbiological critical control point, the manufacturing environment must provide the protection required to minimise the potential for product contamination from the environment and personnel. Regular inspections of the facilities are performed to ensure they are maintained to the required standards. The provision of the high quality services such as water, steam, air, electricity, gases, cooling and refrigeration is crucial to the manufacture of quality product. These are available in the quantities required and they are of a standard that will not detrimentally impact product quality. Where required, specialty products such as Nutritionals and Excipient Lactose, require a higher level of engineering support to maintain the validated state of the manufacturing process. Documented procedures ensure the validated state is maintained Exclusion of Pests Fonterra operates pest management programmes to protect the products, ingredients, processing aids and packaging from damage and / or infestation. Good building design and maintenance, and the implementation of good manufacturing practices prevent pests from accessing manufacturing and storage facilities. The programme identifies unacceptable pest activity and a documented response plan is actioned to prevent product contamination. Quality Systems 21

28 5.0 Quality System Elements (continued) Exclusion of Pests (continued) All chemicals, poisons and traps used to control pests do not pose risks to the safety of products and plant. They are approved for use in the appropriate environment and comply with the local regulatory requirements. The effectiveness of the pest management programme is routinely reviewed and documented changes are implemented as required. 5.3 Planning and Procurement Planning and Scheduling Customers need to be assured that we will deliver the quantity of product they request, to the agreed quality standards, when they require it. A structured planning and scheduling process is employed that allows us to confidently commit to agreed delivery dates. Market demand is captured and validated then matched with raw material supply before a production plan is generated. Consideration is given to the availability of plant, staff, raw materials, ingredients, processing aids and packaging prior to committing to a production date and time Approval of Suppliers Our manufacturing operations produce a wide range of products from bulk commodity ingredients to consumer products including formulated baby foods. To successfully manufacture our product range, a wide variety of goods such as raw materials, ingredients, packaging, promotional items and services are required. These goods are sourced from suppliers locally and globally. To ensure the quality of the products we manufacture, we must be assured that the wide variety of materials we purchase meet our requirements. Prior to purchasing products and services that have the potential to impact on the suitability of dairy product for its intended use, we ensure that the supplier is able to provide what is required, to the quality, quantity, food safe manufacturing environment required and is able to do this on a sustainable basis. No goods and/ or services are purchased from a supplier until the supplier has been approved to supply the goods and/or services via the Fonterra approved supplier programme. To ensure the quality of the products or services provided, a specification is agreed with the supplier. This details key requirements to be met by the supplier for the supply of the products or services. Included in the specification is the need to maintain traceability information and to declare the allergen (as required), genetic modification and religious status of the product. Any change to the supplier's agreed process is approved by Fonterra. Incidents that have the potential to detrimentally impact Fonterra s product quality are advised to Fonterra. Suppliers performance is routinely monitored by the inspection process implemented at receipt, and any reported issues identified during processing or use are managed through the Vendor Management and Development Programme. Routine audits are undertaken to ensure the supplier is able to produce products to Fonterra's requirements. Results from the inspection process, routine audits, and complaint process are included in the regular supplier performance reviews. Quality Systems 22

29 5.3.3 Inward Goods Management Suppliers are responsible for ensuring the goods supplied meet the specification requirements. This is identified in the specification. A risk assessment process for incoming goods is documented and identifies testing and/or checking to be performed at receipt. All goods are signed off as meeting the acceptance criteria prior to being accepted. Following acceptance, goods are moved to their respective storage areas. During storage every care is taken to maintain the quality of the goods prior to use. Sufficient storage capacity is required to enable segregated storage areas for the receipt / holding of incoming goods from accepted goods. Inward goods are subject to effective stock rotation and reconciliation. Stock discrepancies are investigated. Where materials do not meet acceptance requirements following inspection at receipt, documented quarantine and release / reject procedures clearly identify how these goods are to be handled Raw Milk Harvesting, Collection and Transport Raw milk is harvested, stored and transported in a manner that prevents adulteration, contamination, deterioration or other damage. Raw milk shall be fresh, unadulterated and free from contaminants. The maintenance of milk quality starts on the farm. We ensure that the farm meets identified standards and is producing safe, quality, traceable milk. To ensure the quality of the milk does not deteriorate following harvesting and prior to collection, control over the on-farm storage process is important. Tankers and trains used for the transportation of raw milk from the farm to the processing plants are designed and constructed to ensure that milk is not contaminated or damaged in any way during collection and transportation. Tankers are subjected to a regular cleaning process that ensures milk quality is maintained during transportation. Routine assessments of the effectiveness of the tanker cleaning process are performed to verify cleaning effectiveness. Samples are taken at farm and / or tanker and are tested to identify the component and microbiological levels in the raw milk required for payments purposes. 5.4 Manufacturing Control Good Manufacturing Practice (GMP) Good Manufacturing Practice (GMP) is a set of procedures and practices that state what is acceptable and not acceptable for the manufacture, storage and distribution of quality food products. GMP serves to ensure the prerequisite programmes required to support the Hazard Analysis Critical Control Point (HACCP) plan are appropriately managed. Quality Systems 23

30 5.0 Quality System Elements (continued) Good Manufacturing Practice (GMP) (continued) GMP captures the collective experience developed over time in areas such as food manufacture, process and product technology, and process and environmental hygiene. GMP is preventive in its approach with the aim of producing and delivering quality food products to the customer. GMP spans the areas of: - Premises and environment - Goods management - Water and services - Equipment - Processing conditions - Cleaning and sanitation - Glass and wood management - Storage and transport - Security Hazard Analysis Critical Control Point (HACCP) The Hazard Analysis Critical Control Point (HACCP) is a system which identifies, evaluates and controls hazards which are significant for food safety. Fonterra implements formal risk management programmes based on HACCP principles, identifying risks to quality and implementing appropriate mitigation plans. The HACCP process ensures the focus is on the prevention of quality issues rather than relying on end product testing to identify problems. The food safety hazards controlled by the HACCP plan are microbiological, physical and chemical in nature, including allergens. The HACCP system is applied to all processes including inward goods, manufacturing, warehousing and distribution and covers all inputs to, and all outputs from, the process Validation and Verification Validation Validation establishes documented evidence that provides a high degree of assurance that a process will consistently produce a product meeting pre-determined specification and quality requirements. Validation is a worldwide regulatory requirement in many industries such as pharmaceutical and nutritional and is fundamental to Good Manufacturing Practice. Where required, key processes are validated to meet customer and regulatory requirements. Verification Verification is the ongoing check carried out to determine whether a programme has been operated in compliance with quality procedures and standards. Verification is generally performed daily, such as Critical Control Point records which are checked, verified, and countersigned by supervising personnel. Other verification procedures include specific checks and measurements to demonstrate that the HACCP Plan is working effectively and meets the food safety objectives. These checks are not part of the routine now-time monitoring of the process. Verification is after time a confirmation that the outcome has been achieved. Quality Systems 24

31 5.4.4 Heat Treatment Raw milk and other ingredients contain potentially harmful microorganisms that must be controlled by an effective heat treatment step to protect the health of consumers. To ensure the safety of our products, all milk components are subjected to a validated and verified heat and hold process step. This will ensure heat treatment requirements are met, public health hazards associated with pathogenic organisms in milk or foods are eliminated, and spoilage organisms are reduced to an acceptable level for the shelf-life of the product. Where the manufacturing process requires the addition of ingredients post heat treatment, the HACCP Plan includes adequate control procedures to ensure the potential microbial risk to product is managed Foreign Matter Control Foreign matter is any unexpected contaminant found in a product and includes glass, metal, rubber, grease etc. The control of foreign matter throughout the process is critical to ensure product quality is maintained. Foreign matter control is achieved by ensuring objects in the environment are adequately controlled so as to not contaminate product. Identified foreign matter risks are eliminated or controlled such that risk to the product is minimised. Controls include building and intrusive maintenance procedures, routine checking of the processing environment and equipment for potential sources of foreign matter, management of glass, hard plastic and wood. Where in-line filters, strainers, sifters, screens or magnets are used to control foreign matter, documented monitoring programmes demonstrate that the item of equipment is operating effectively. Where foreign matter detection devices such as metal detectors and / or x-ray machines are installed, they will at least be capable of detecting metal of a size relevant to the product being manufactured and the finished product pack size. Product identified as containing foreign matter is rejected and procedures identify the process required to manage rejected product such that it cannot be returned to the production line Pathogen Management Effective heat treatment of raw milk and materials, and management of ingredients added post heat treatment, controls pathogen risks in finished product. It is critical to ensure pasteurised product is not recontaminated by pathogens originating from the environment. This is achieved through the development and implementation of a documented environmental pathogen management plan for facilities that process dairy material, and store ingredients, packaging material and finished product. Effective pathogen management plans include a method to control pathogens, monitor their presence, and clearly define response for when pathogens are detected. The processing site is broken down into specific hygiene zones to increase the effectiveness of the control, monitoring and response activities. Quality Systems 25

32 5.0 Quality System Elements (continued) Allergen Management Where applicable, allergens are controlled and labelled to prevent allergic reaction in consumers. Allergen control is achieved using a documented plan designed to prevent allergens contaminating products required to be allergen free. The allergen status of goods supplied is captured by contractual agreement. Where required, a dedicated, segregated storage area is used for allergenic materials to minimise the potential for cross contamination between allergenic and non allergenic materials, and between materials containing different allergens. Production planning, product scheduling and documented cleaning activities are used to limit the potential for cross contamination between allergen and non-allergen containing products Cleaning and Sanitation Maintaining a clean and sanitary operation is critical for the sustained production and delivery of high quality products. Documented cleaning and sanitation programmes ensure processes, processing equipment, processing areas, and storage and distribution facilities are maintained in a suitable state. Cleaning programmes are validated to demonstrate that all aspects are adequately cleaned and sanitised. Cleaning processes are verified through provision of evidence. Cleaning utensils are appropriate for the intended use and do not pose a risk to product quality. To minimise the potential for cross contamination from cleaning utensils inside processing areas, the utensils are colour coded or clearly identified as specific to the designated zone in which they are used. Waste materials are clearly identified, collected, removed and disposed of in a manner that enhances sustainability, prevents contamination of products and processing areas, and protects public health and Fonterra s reputation Net Contents Control Ensuring the net pack content is accurately achieved is required to maintain customer satisfaction, minimise product losses, and meet regulatory requirements. Instruments used for weight control are suitable for their intended use and suitably calibrated. Statistical weight control is used wherever possible. Where statistical control is not possible, manual methods are used to ensure only packs of the required weight range are released to the customer Packing and Packaging Packaging is used to protect our product, minimise damage and plays an important role throughout lifecycle of the product. It protects the product from the atmosphere, micro-organisms and pests from the time of packing until it is consumed and it also the first perception the customer has of the product. This requires packaging to be both functional and aesthetically pleasing. Quality Systems 26

33 Both primary and secondary packaging is of sufficient quality to protect the product during transit to the market place and on to the customer. It must be able to withstand the rigours of the packing process it is developed for, and in some instances must withstand additional processing such as sterilisation. Such aspects are considered during the packaging development phase. Due to the importance of packaging in preserving product quality during its stated shelf life, there is a controlled process in place for the development and approval of new packaging. The development process includes a risk assessment step used to identify the quality characteristics that are to be protected during the product's shelf life. Specifications provide accurate descriptions of packaging characteristics. Ideally the security of products is demonstrated by the use of tamper evident packaging. Packaging is recycled where possible. If recycling is not possible, waste packaging is disposed of in a way that minimises the impact on the environment. Marketing material and additional promotional items are controlled during the development phase to the same extent as the packaging Traceability, Labelling and Coding To enable the accurate identification and, if required, retrieval of product, the traceability system is capable of tracing final product from the source of all raw materials used to manufacture the product, through processing, to finished product distribution chain to the customer. To ensure the effectiveness of the traceability system, it is tested and validated annually and improvements identified are documented and implemented. Effective product traceability is achieved by coding each product unit with key information that enables traceability from in-market back through the distribution chain to the manufacturer. Key labelling information includes the manufacture or packing factory, the date of manufacture or packing, the best before date and the quality unit number. Additional labelling requirements applicable to the country of manufacture and the import country may be required. To ensure the integrity of the product is maintained throughout its stated shelf life, product packs are labelled in a manner that cannot be interfered with Religious Requirements Increasingly our products are destined for customers whose religious faith has specific requirements that must be understood and met. We ensure that we fully comply with the requirements of the respective religious groups. These specific religious requirements are identified in the relevant product specification and are managed via Business Unit procedures. Manufacturing facilities that are certified to produce products for the specific religious faiths are subjected to audit and approval processes by certifying authorities. Quality Systems 27

34 5.0 Quality System Elements (continued) Rework When non-conforming product is reworked, strict documented controls are used to ensure the quality of the finished product. Impact on quality, food safety, allergen, genetic modification and religious status, is considered prior to the commencement of reworking. Total traceability is maintained throughout the process. 5.5 Quality System Support Documentation When planning, manufacturing, storing and transporting food products, it is vitally important to demonstrate control over the process. What needs to be achieved, how it is to be achieved and proving what was achieved is demonstrated using documented procedures and records. To provide the level of control required to produce consistent quality products, all tasks affecting quality are fully described and routinely reviewed. Documented records demonstrate conformance to requirements throughout the supply chain. Documentation relating to product quality is readily retrievable for at least the shelf life of the product or as required by the applicable regulatory authority, whichever is longer. Each document that forms part of the Fonterra Quality System has a unique identifier and version number or date. There is a process in place to ensure that only the most up to date versions are in use Continual Improvement Continual improvement is an essential, proactive process for the continued development and growth of Fonterra. It is a never ending process which applies not only to quality but to everything we do within our operations. Continual improvement not only helps to produce quality products and services that meet and exceed our customers expectations, it also helps to improve operational performance and business profitability. The Fonterra Quality System ensures a continuous improvement process exists via design processes, system and process audits, validation, product verification, management review and corrective and preventative actions Audit Programme To ensure the Fonterra Quality System is implemented and operating as required, all operations are annually audited to identify areas of non-compliance and opportunity for improvement. Audits are performed by suitably trained auditors who are independent of the area being audited. Customers may request to audit our process for compliance against their own quality requirements. Such audits are undertaken at a mutually agreed time with the auditor accompanied by a representative of the Business Unit audited. Actions arising from audits are registered and tracked through to agreed closure with the auditor. A review of the audit actions forms part of the management review process. Quality Systems 28

35 5.5.4 Non-conformance Fonterra s quality processes are designed to ensure the safety and integrity of our products and services. Despite the best intentions, there are times when things do not go as planned. Quality issues may be identified during processing and final product testing; verification steps and audits may identify non-conformances and customer enquiries or complaints may be received. Where a non-conformance or issue is identified which is key to product safety, regulatory compliance or quality, the issue is managed using the documented Non-conformance Process. This process enables tracking of actions through to closure in a timely manner, and aims to prevent a repeat incident. During the investigation process all aspects affecting quality such as machines, method, material, manpower, environment and end to end supply chain are considered. A corrective action plan with implementation timeframe and assigned responsibilities is developed. Effectiveness checks are performed to ensure corrective and preventive actions are effectively implemented to prevent future issues Change Control The commitment to continuous improvement results in changes being made to processes and systems. To enable the change to be successful, the process is controlled and documented and there is approval from stakeholders. As a consequence there is no detrimental impact on personal or food safety and quality. An effectiveness review identifies whether or not the change has been successful or whether more work is required to achieve the desired outcome. 5.6 Product Sampling, Testing and Release Product Sampling and Testing To deliver on our quality principle Right First Time Every Time the manufacturing process is controlled to ensure our product meets customers' requirements. The identification and control of product quality at key points throughout the process provides the operator with information which can be acted on to ensure the process remains in control and the required product quality is achieved. In-process sample locations and sampling techniques provide samples for testing which are truly representative of the product at the designated point in the process. Chemical, physical, microbiological, functional and sensory testing is performed in accordance with an agreed sampling and testing regime to confirm final product quality complies with specification. Testing is performed by laboratories accredited to an internationally recognised quality standard, or where the laboratory does not have such accreditation, it is required to demonstrate that it has quality systems in place to ensure method validation, verification and equipment calibration occurs as necessary. Samples representative of a product lot are retained until at least the validated shelf-life of the product or the stated expiry date. The packaging material used for retention samples reflects the actual product packaging capabilities, such as moisture proof or air barrier capable. Quality Systems 29

36 5.0 Quality System Elements (continued) Calibration and Verification of Measuring Devices Equipment used for measuring and controlling the quality of product must be accurate. To achieve this, all critical measuring devices shall have a current calibration certificate. A calibration and verification schedule is maintained and identifies all critical devices and reference instruments, with the current calibration status. To maintain the calibrated state critical devices and reference instruments are protected from adjustments that would invalidate the measurement results. The calibration and verification of critical devices and reference instruments is traceable to a recognised national or international standard. Where there is no such standard, the basis used for the calibration or verification is recorded Sublotting Sublots are separately identified lots of product within a larger batch. At times, manufactured product may not meet specification requirements first time. In situations where product is identified as being outside specification limits, guidelines exist detailing what is to happen with this product. The process for handling of sublotted product is clearly documented. Sublotting of product failing specification on food safety issues is not allowed Sensory Evaluation Ensuring consistent sensory quality of Fonterra products is crucial to building customer loyalty. Sensory quality of product is verified by performing routine sensory evaluation assessments. Sensory evaluation is performed in a controlled environment by panellists trained as competent to evaluate samples. Panellists are subjected to routine screening to ensure they are able to consistently perform sensory evaluation to the required standard Chemical Contaminants Monitoring Programme The drive to continuously increase on-farm production requires more innovative farming practices to be employed to increase milk flow and maintain animal health. To ensure the impact of these practices does not detrimentally impact milk quality, an appropriate chemical contaminants monitoring programme is operated. This programme routinely monitors the management and control of chemical residues and contaminants in raw milk, verifying milk conforms to international maximum residue limits. To ensure testing of raw milk targets the appropriate contaminants, a risk assessment is carried out to determine which contaminants will be routinely monitored and the frequency of monitoring. This monitoring programme includes tests for adulteration of the raw milk. As required, final product testing takes place to monitor chemical or other contaminants which may be introduced to product via ingredients or during processing. A risk assessment is performed to identify which contaminants to monitor and the frequency of monitoring Contract Laboratories Where it is appropriate to contract out analytical work, the laboratory should be accredited by a recognised body to an international standard. Where accreditation is not available, the laboratory is required to demonstrate that it has the quality systems and procedures in place to give confidence in the validity of the methods and accuracy of results. Quality Systems 30

37 5.6.7 Statistical Methods Wherever possible, statistics should be used in key decision making activities. Decisions based on the statistical analysis of data provides a more balanced and robust outcome. Documented procedures clearly identify the process to be followed in instances where statistical methods are employed Product Release At Fonterra we are committed to produce and supply safe products, that consistently satisfy and surpass customer expectations and fully comply with country of manufacture and importing country requirements. To meet these commitments, documented procedures accurately define the process required to ensure the quality is verified against the customer s expectations via internal product specifications. Only product that meets those expectations is released to the next step in the process and ultimately to the customer Management of Non Conforming Product In situations where final product is identified as non-conforming to specified requirements, documented procedures clearly identify the hold, release and/ or rejection processes to be followed and those authorised to make such decisions. When identified, non conforming goods are placed on hold and appropriately controlled or segregated so that they cannot be forwarded to their intended destination without appropriate authorisation. Product that is deemed to be unsafe or not fit for human or animal consumption is disposed of in such a manner that ensures it is not able to re-enter the food chain and in a manner so as to ensure the company image is protected at all times. 5.7 Warehousing, Logistics and Distribution Facilities used for the receipt, storage and dispatch of all goods are maintained so that the quality and integrity of the products stored is maintained at all times. Precautions are taken to protect the product from contaminants such as insects, rodents, odours, unapproved chemicals, excessive temperature fluctuations and physical damage. Where temperature controlled storage is required, temperatures are monitored and recorded, to demonstrate compliance. Regular and systematic cleaning and maintenance schedules are developed and maintained, to ensure premises and equipment are in a clean and hygienic condition, and pose no risk to product. A documented inspection plan ensures incoming and outgoing product logistics carriers are free of anything that may contaminate finished products. The stock management system provides complete traceability of all items into, during and out from storage enabling the dispatch of product on a first in first out basis. To deliver on our quality principle, we ensure delivery to our customers is in full and on time. Management practices minimise the potential for any cross-contamination. Cross-contamination includes (but is not exclusive to) allergenic versus Quality Systems 31

38 5.0 Quality System Elements (continued) 5.7 Warehousing, Logistics and Distribution (continued) non-allergenic goods and also to goods of any specific religious status. Management practises include, goods being contained in packaging (cartons, multiwalled bags, sealed containers), stored on separate pallets, and pallets are frequently covered with plastic film. Strict control of personnel and vehicular activities is imposed to ensure product security is not compromised. 5.8 Product Recall and Withdrawal Product withdrawals or recalls are required in situations where it is deemed necessary to remove product from the supply chain. Withdrawals or recalls are required when product is identified as likely to pose a food safety risk to the customer, non-conforming, in breach of regulatory requirements, or may have substantial economic impact on Fonterra. To ensure we are able to react to a product withdrawal or recall, all operations have documented procedures and a mock recall is initiated on a regular basis. Management of the withdrawal or recall team is assigned to a designated senior manager. The recall team includes people from all affected areas of the supply chain and support functions and should operate as part of the Business Continuity Plan Processes where appropriate. Whether the recall is mock or an actual recall, all actions are fully documented. A formal review is undertaken at the completion of any recall and aspects for improvement noted. 5.9 Business Continuity Planning A key commitment to our customers is that we will deliver on our promise to them. To ensure this is consistently achieved, Fonterra operates a formal risk based business continuity programme. This programme focuses on making sure plans identify potential adverse impacts that could threaten our organisation. It provides a framework for building resilience and effective responses that safeguard the interests of our key stakeholders, reputation, brand and value creating activities. Fonterra also works to identify emerging issues which may impact on food quality and assess the potential impact of these, taking action to mitigate any potential risk Regulatory Compliance Fonterra takes its responsibility for food assurance from farm to world markets seriously. To ensure products are fit for purpose, the Fonterra Quality System aligns with FSSC requirements. In addition, Fonterra commits to comply with the regulatory requirements of the countries of manufacture and destination. To enable this, all operations have ready access to, and understanding of, all relevant regulatory requirements. Where the requirements of the Fonterra Quality System exceed those of the respective regulatory authority in the country of manufacture or import country, the Fonterra Quality System requirements prevail. Quality Systems 32

39 6 MEASUREMENT AND REPORTING measurement AND REPORTING

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41 6.0 Measurement and Reporting 6.1 Quality Key Performance Indicators and Reporting We are committed to making our products the first choice of customers and consumers wherever we do business. To support this commitment, annual quality objectives are established within specific business plans to ensure quality is an integral part of all operations. Business plans including the quality objective are communicated to all staff and feedback on performance is routinely provided. Quality measures focus on Delivered In Full On Time (DIFOT), First Time Quality, Audit Performance and Complaint Measurement. 6.2 Customer Satisfaction Measurement Customers are crucial to our success. Without customers we would not be in business. Our annual customer survey ensures we are in touch with our customers and providing the products, services and solutions they require. Continuous improvement opportunities are identified and acted upon. Quality Systems 33