What is the responsibility of a company, such as Fonterra or BP, in controlled t

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What is the responsibility of a company, such as Fonterra or BP, in controlled the actions of suppliers and sub-contractors?
iPad 9:43 AM Mini-Case: The Melamine Milk Crisis in China Melamine is a product that is used in the making of plastics and laminates. Unfortunately, it has also been illegally added to milk to boost its protein rating. The product is extremely dangerous once consumed and can cause kidney stones and renal failure (Pickert, 2008). In China, a scandal erupted in which dairy mid- dlemen were spiking milk with melamine after they had watered down the milk to extend the product usage. The higher protein content enabled these middlemen to command higher prices on the market (Long, Crandall, & Parnell, 2010). One Chinese company, the Sanlu Group, was purchasing melamine-laced milk for use in its baby formula. Initially, Sanlu management was unaware of the melamine presence in the product. However, some Sanlu staff eventually discovered the melamine but continued to produce and distribute their baby milk formula, even months afterward (DeLaurentis, 2009). The case is reminiscent of Beech-Nut's 1979 discovery, discussed earlier in the chapter, of fake apple juice concentrate that it had unknowingly purchased from one of its suppliers (Hartley, 1993). Rather than abandoning the supplier, Beech-Nut executives continued to use the supplier covertly and eventually found itself in the midst of a major crisis. The fallout from the Beech-Nutapple juice scandal did not include health problems for the babies that consumed its apple juice. Unfortunately, the same outcome would not be true for the Sanlu Group. On June 28, 2008, an infant with kidney stones was admitted to a hospital in Gansu's provincial capital of Lanzhou. The parents told doctors they had been feeding their baby milk produced by the Sanlu Group. Within two months, 14 infants with similar problems had been admitted to the hospital. Other cases were reported in provinces of the Ningxia Hui Autonomous region, Shandong. Jiangxi, Hubei, Shanxi, Jiangsu, Shandong. Anhui, and Hunan. All of the affected infants had been fed the milk formula produced by the Sanlu Group (Long et al, 2010) By September 2008, the cases o mine-induced sickness escalated overa much wider geographic area. The World Health Organization (WHO) reported more than 54,000 children in China had sought medical treatment, with four fatalities reported (Schlein, 2010). In other countries, reports of the melamine scandal began to surface. Bans on the Chinese-made milk products were reported in Japan, Malaysia, Bangladesh, Tanzania, and Gabon. The 27-nation European Union also put a ban on all baby food containing Chinese milk (Long et al., 2010) The Sanlu Group moved slowly in its response to the crisis. In fact, even before the hospitalization of children in June, the company had received complaints about its baby formula milk in March 2008. At that time, the Sanlu Group claimed its products had repeatedly passed quality tests, met national quality standards, and that sick babies must have been fed counterfeit milk powder that used the Sanlu brand name. However, the company later learned that melamine had indeed been introduced into its milk supply. The discovery occurred in early August when its co-owner, New Zealand-based Fonterra, used melamine-testing equipment to verify the presence of the substance. At that time, Fonterra owned 43 percent of the Sanlu Group "Sanlu Dairy, 2009). Although Sanlu confirmed the melamine contamination in August, it did not report the problem to the Chinese government,

Explanation / Answer

Responsibility of Fonterra, in controlling the actions of suppliers and sub contractors

- It should focus on eastablishing an ethical supply chain management process.

- There should be quality assurance management system.

- Engage only with those food manufacturers which keep records for at least two years of the sources of their raw materials as well as how they are processed.

- Develop an effective recall system for unsafe food products.

- Farmers have to keep record of amything which they produce.

- Impose severe penalties on those, who play with the system.

- Store the information of companies who have done this kind of trouble in past.

- Keep a risk contingency plan ready, In case one of your supplier is not able to supply, keep an approved alternate supplier ready.

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