Shop Costco.com for electronics, computers, furniture, outdoor living, appliances, jewelry and more. Enjoy low warehouse prices on name-brands products delivered to your door. Costco’s current goal is to divert 80% of waste generated within our global operations. Examples of our waste management diversion programs include donations, anaerobic digestion, recycling, composting, animal feed and waste to energy programs. Costco is committed to expanding these programs through partnerships, efficiencies and technologies. The hiring process for managers with Costco may take several forms. New employees may complete a job application to receive hiring consideration with Costco. Many job seekers who strive for management positions often come up from within Costco. No matter the avenue taken, Costco managers earn average salaries between $60k and $90k per year. This confidential, free resource program is completely separate from Costco and is available to all employees and their families from the very first day of employment. The EAP program uses professional counselors who are dedicated to Costco employees and trained to. A Costco manager, that’s who, said James Sinegal, who founded Costco in 1983 and was CEO until his retirement in 2011. Sinegal and Miner spoke to professor Zeynep Ton’s “Management of Services: Concepts, Design, and Delivery” class May 7, where Sinegal described the culture he spent decades cultivating at the company and that he considers critical to its success.
CASE STUDY | October/November 2012
Costco Wholesale: Food Safety from the Top Down
By Food Safety Magazine
When customers buy food products at Costco, they are assured of the company’s highest commitment to food safety. This basic expectation is met every day for more than 56 million Costco members shopping in 605 membership warehouse stores located in 40 U.S. states, Puerto Rico, Canada, Mexico, the United Kingdom, Japan, South Korea, Taiwan and Australia. R. Craig Wilson, vice president, food safety and quality assurance, with Costco Wholesale, along with his international staff of 27 food safety professionals, operates with the following mantra: Food safety should be absolutely invisible to Costco’s members.
The primary reason that Costco’s food safety program is successful is that it is part of the corporate culture: Executive and senior management understand how important food safety is and are incredibly supportive of all food safety efforts, issuing the group mission statement: Promote continuous improvement in product quality, and product safety systems, for the benefit of our members and vendors.
The Issaquah, WA–based wholesale club operator is the largest such company in the U.S., with sales of $87.05 billion in FY 2011. Costco offers between 3,700 and 4,000 different brand-name products to its members at any given time, with fresh food, groceries and related items that constitute approximately 50% of the company’s business. The warehouse buildings average 135,000 square feet, with ample space dedicated to the company’s in-building service deli, food court and fresh food and grocery department operations. As part of its mission to provide club members with high-quality products at substantially lower prices than traditional wholesale or retail outlets, Costco also makes available the Kirkland Signature private-label product line, which includes food items such as coffee, juice and cookies. In addition, Costco Wholesale Industries, a division of the company, operates a food packaging manufacturing business in San Diego, CA, and Monroe, NJ, and a meat processing facility in Tracy, CA.
Costco’s food safety program is composed of a four-point plan: a company-wide food safety training; food safety operations in the warehouse club buildings, which involve a unique use of Sanitation Standard Operating Procedures (SSOPs) and Hazard Analysis and Critical Control Points (HACCP) developed to work in a retail setting; knowledge-building food safety vendor audits; and quality assurance.
Continuous Training and Education
Two levels of food safety education and training programs were developed in-house with the certifications and examinations administered by Costco staff in each building to maintain the company’s cultural advantage. Educating all employees, whether they work in food or nonfood areas, about food safety is another way in which Costco keeps food safety invisible to its members.
All managers are required to take Level 2 Food Safety Manager Training every 3 years. This supports Costco’s commitment to cross-training its employees. Says Wilson, “This is a dynamic company. We could have someone who’s working in a nonfood-related area today, but tomorrow, he receives a promotion and is managing a foods area. Our food safety training and certification program enables employees to have the knowledge they need to successfully move into different departments during their career.” Costco’s Manager Certification is a nationally recognized training program that is endorsed by the National Environmental Health Association and the American National Standards Institute. All hourly employees who handle food are required to take Costco U (in-house computer training system) Level 1 Food Safety Training annually. Costco Food Safety developed the hourly certification training program in conjunction with MediaPro.
Costco U provides a comprehensive introduction that covers SSOPs for all areas and advises employees on their roles and responsibilities in ensuring safe foods. Currently, Costco can offer the training in English, Spanish, Cantonese, Japanese and French. After viewing Costco U’s food safety training, each employee is tested and awarded a completion certificate that is recognized by local health departments.
Costco has created easily understandable protocols and procedures available in both print and electronic formats in all of its warehouse buildings and processing/packaging operations. The system encourages employees to proactively interact with corporate food safety management, which further supports the emphasis on prevention and control found in HACCP plans and in the Costco culture. One measure of the program’s success is the fact that many organizations want to emulate it. Costco shares program information with local health inspectors, food safety officials from the states of Washington, Oregon, Illinois and Michigan, among others, who use the company’s program as part of their training. “The satisfying part about having a program like this is when health inspectors come into our buildings at locations around the world, not just in the U.S., and tell us that they are extremely impressed. We’re very open about sharing all of the information we have with these organizations,” says Wilson.
Operations: An Ongoing Resource
Food safety operations serve as a daily resource for Costco buildings, buying offices, risk management, human resources and the call center/member services group, which deal with the following concerns:
•Inspection issues
•Environmental issues
•Member issues
•Employee issues
•SSOP issues
•HACCP issues
•Depot issues
•General building sanitation issues
Each Costco location is required to respond to every type of inspection [health department, credentialing opportunities online (COOL), U.S. Department of Agriculture (USDA), etc.] with a written letter, outlining findings of inspection and any corrective actions taken. A copy of the letter is sent to the corporate regional vice president as well as to food safety operations, which tracks all inspections and response letters, and issues a report each period outlining the findings, later using these findings to target training and update programs.
This, says Wilson, is one of the distinguishing elements of Costco’s SSOP/HACCP program. “One of the biggest challenges for any food scientist or engineer is to take a concept that’s reasonably difficult and communicate it so that everybody understands. That’s our focus: Make it simple so it’s not a big deal. Our main goal was to come up with a simplified, understandable process designed for and accessible to that 18-year-old high school graduate who is actually doing the work in order to make the program efficacious.”
Costco began its retail SSOP/HACCP program approximately 12 years ago, using the government guidelines originally created for food processing operations. It then customized SSOP and HACCP-type criteria for each kind of food-related area in its buildings. The company’s goal included structuring its SSOP/HACCP program to exceed federal guidelines, whenever possible, and to incorporate related food safety protocols from sources such as the U.S. Food and Drug Administration (FDA) Food Code and local health inspection agency rules into appropriate departments in each building. The result was a set of specific HACCP plans for each food department—and for each item, in some cases—all focusing on validated Critical Control Points, with specific updated Food Code criteria included for the service delis and food courts, for example.
To implement an HACCP plan that works, notes Wilson, a company must have good SSOPs in place. “If you look at federal HACCP guidelines with regard to SSOPs for a meat, seafood or cereal facility, you’ll find that they are very complicated and written in such a fashion that perhaps only a sanitarian can understand. However, the person in the facility who does the work may never see the SSOP. Because we’re committed to making food safety procedures easy to understand for all employees, we’ve taken a completely different approach to developing the SSOP. We believe that a Sanitation Standard Operating Procedure should be focused on the people who are doing the work. This means give employees a tool that makes sense, a tool that validates their work and then is reviewed by management.
“As a result, these SSOPs have been developed digitally with very limited text because those doing the work must be able to look at them and relate them to what they’re doing. The employee can see exactly what is expected from a food safety standpoint—how to set up and operate a slicer or grinder, how to wash it, how to reduce cross-contamination of food contact surfaces or food-handling areas using appropriate hand washing and personal hygiene techniques, how to monitor food product-specific temperature and holding times and so on. He can also see what corrective actions must be taken and what documents or logs must be completed.
“Of course, there are SSOPs and HACCP criteria for each and every department, and every component of a HACCP plan that you would find in a big meat or seafood plant you will find in the manual here. The difference is that this is simple and easy to follow, and is available on a computer in each one of the buildings, so if there’s a question about an SSOP, the employee can go right to their department computer, pull up the SSOP and take a look at it.”
Vendor Auditing for Quality Assurance
Another element of Costco’s food safety program that has been imitated by many others is its extensive vendor audit program. Twelve years ago, the company looked at the large number of vendors from which it purchased food products and considered strategies to better assess the safety and quality of the products supplied. At the time, the Costco Quality Assurance Department conducted cursory checks of vendor products, Wilson notes, but the company decided to develop a more interactive vendor audit program. The result is that Costco’s system is considered by many of its suppliers as the premier vendor operation auditing program in this sector of the food industry. Additionally, Costco has invested in a documentation retention and electronic storage service in which all vendors supplying food to Costco must be registered with and have audits (both food safety and animal welfare, see below) posted to the service’s site by the auditing company. The site is also used to post other certifications related to products supplied to Costco. Wilson notes that it has been beneficial to have all documents stored in a single location.
Food Safety
In FY 2010, 6,925 food safety audits were completed by Costco-approved third-party auditing companies, focused on sanitation, HACCP, vendor ingredient programs, traceback, food defense/biosecurity and corrective actions. Of the completed audits, 39% of vendors achieved an “excellent” rating (audit score > 95%), 41% of vendors achieved a “good” rating (audit score between 90% and 95%) and 14% of vendors achieved a “fair” rating (audit score between 85% and 90%). The audits are not punitive but are focused on improving the safety of the products supplied to Costco and were designed to meet the company’s requirement that all food vendors have an annual food safety audit.
Animal Welfare
In FY 2010, 304 animal welfare audits were performed and 100% of vendors achieved an excellent rating. These audits were designed to ensure that all animals converted to food are treated in the most humane way possible on a consistent basis and that vendors comply with standards set by both USDA/FDA as well as Costco.
Wilson believes that this nod from manufacturers and vendors is due, in part, to the fact that the audits make their own systems better. “Our vendors have embraced the auditing program with open arms, because it’s making them better vendors and it’s ensuring that our members are getting exactly what our buyers want them to get: high-quality food items all the way through. We even negotiate the audit price for our vendors so that they don’t have to pay a ton of money for the audits. It’s a real hand-in-hand, win-win situation with our vendors.”
Wilson adds, “We spend a lot of time with our vendors, and if the audit shows that there are some unmet requirements, we’ll help that vendor do whatever they need to do to meet the criteria. For example, we provide resource lists to vendors to assist them in finding industry consultants, trade association and academic experts, and service providers such as pest control and testing companies. We do this to assist vendors who want to begin to or continue to do business with us.” The buying staff, who are all food-safety certified by Costco’s Food Safety Training program, schedule food safety audits with all new vendors, says Wilson, but the auditing program has a loftier aim. “Our goal is to audit every one of our vendors every year. We haven’t yet reached that goal because of the enormous number of vendors with whom we do business, but it is a goal that we continue to work toward achieving.”
Quality Assurance Drives Food Safety
The quality assurance (QA) department provides the science behind the food safety system, offering food safety and QA support to all of Costco’s warehouse, manufacturing, packaging and private-label operations.
Food product samples are analyzed by the QA team against the specifications that have been set by the buying staff. The department also works with third-party laboratories for chemistry and microbiology in addition to the company’s own microbiological laboratories located in its ground beef processing plant and repackaging facilities. QA also coordinates sampling and testing of products scheduled for export and items to be tested in other countries in which Costco operates.
“Having a strong technical arm gives us credibility in everything that we do,” states Wilson. “Not only do we have the programs, but we have the capability to get and use the data to support the programs, which we feel is a very important element of our success on many fronts.
“The pathogen testing that we perform at the Tracy, California, meat plant, where we use polymerase chain reaction technology all the way through, is fully supported up here by our QA department. Our ground beef operation produces about a half a million pounds of ground beef a day, both raw and cooked, and we can effectively collect and analyze data on the microbiological quality of every single grind.”
The data generated by the QA department is ultimately shared with vendor suppliers for continuous improvement, feeding into the training and operations steps of the food safety program.
Unique Approach to Shopper Protection
Costco has a unique approach when it comes to protecting their members and providing appropriate notification for a recalled food or nonfood item. The company can block the sale of any item in the system within minutes of a recall notification.
Costco can notify each member, who purchased an item that was included in a Class 1 recall by telephone within hours of an incident announcement, and a follow-up letter with even more details to help answer a member’s concerns. The system is based on membership data collected at point of sale for each item sold.
This recall approach is used as a model by USDA, FDA, the Consumer Product Safety Commission and the Environmental Protection Agency.
The basis for the system is the “one step back (supplier), one step forward (customer)” approach of recall traceback. The item affected is blocked and pulled from shelves quickly, even before an official regulatory announcement. Members are notified, often at an average of 870,000 calls per hour on the day of the incident (Class 1/Quality recalls). Costco never waits to protect their members: It is part of the company culture and management’s commitment to food safety.
Similac Recall
Possible contamination of Similac baby formula was noted in 2010 and 252,631 members were contacted less than 24 hours from the notification.
Danielle Salami Products
A recall was issued in 2010 due to Salmonella contamination; 396,892 members were contacted, and the product was pulled from locations 8 days prior to any issued press release.
The Costco Way of Food Safety
“We have more than 164,000 employees, and when you look at making a program like this work with so many people involved, it can sound daunting,” adds Wilson. “But with our built-in culture that supports food safety coupled with the way that Costco is structured, we really have a food safety staff that consists of 164,000 employees, and so we’re successful.
“I’m a firm believer that there’s not one person in our company who wants to make somebody sick. It’s a matter of how we teach people to give them a clear understanding of their role in keeping food safe and then giving them the right tools to do the right job.”
While Costco’s four-point food safety plan is an established success, the company isn’t completely satisfied. “We don’t look at food safety as a competitive advantage,” states Wilson. “If there is anything that we do that can be of benefit to the safety of the nation’s food supply, we’re more than willing to share that with the industry. Our food safety programs are under constant review, and we continue to focus on how we can improve them, simplify them for everybody across the board and still expect excellent results.”
Where Do We Go from Here?
All areas of Costco’s food safety program are under constant review, change and improvement; nothing is allowed to remain static.
The company’s goal is to always be ahead of and a contributor to the regulatory agencies with which it works while keeping their members and buildings as a primary focus.
With simplicity in mind, the following challenges have been identified for improvement in the coming year:
•Food Safety Training
Expand Level 1 Food Safety Training to all hourly employees in the locations. Improve warehouse adherence to Level 1 Food Safety Training requirement (currently at approximately 87% compliance).
•Food Safety Operations
SOPs/SSOPs under constant review; change as necessary to accommodate new equipment, new procedures and best practices.
Health department inspection follow-up, using information obtained from inspections to target training at the building level.
Develop better ways to track follow-through with SSOPs.
•Food Safety Vendor Audits
Continually increase expectations for vendors based on best practices.
•Quality Assurance
Evaluate new food safety technologies for possible implementation.
Finally, the biggest challenge but certainly an achievable goal moving forward is to continue to improve member communications and understand new communication formats, including social media, for the ultimate protection of our members worldwide.
Many thanks to R. Craig Wilson, vice president of QA, food & product safety, merchandise services at Costco Wholesale, for his contributions to the article.
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