In January of 2023, the New Era Partners team hit the road. We met with many large retail, food service, and distribution companies over the past few months, and one of the most frequent questions people ask is, “How much will it cost our organization to comply with the new FDA Food Traceability Rule, FSMA 204?”
Like many questions on complicated subjects, our answer is always, it depends on many things, but we urge you to prioritize these three considerations:
- How much will a compliance team cost?
- How is my supply chain organized?
- How sophisticated are your internal systems?
Once you better understand these three things, you’ll be in a stronger position to more accurately forecast your organization’s cost of compliance with FSMA 204 long before the January 20, 2026 compliance date.
This article will not suggest actual dollar amounts you can expect to spend because those amounts will be vastly different based on the size and complexity of your operation. Instead, we will focus on these three key areas where you can expect to allocate some budget.
Also, if you’re looking for more information on some commonly asked questions about FSMA 204, traceability solution provider iFoodDS has put together a guide on that as well.
How Much Will a FSMA 204 Compliance Team Cost?
Of all the costs on our list, this one has the most ambiguity. You’ll need to consider the individual salaries of each compliance team member and how many hours per month each member will contribute to compliance initiatives. Most compliance teams we work with have at least one person representing the following roles:
- IT
- Legal and/or regulatory
- Food Safety
- Supply Chain
- Operations
- Warehouse
- Restaurant or Store Management
- Supplier Management
While you’ll need to manage the cost of this team to your organization’s budget, this team must be staffed with competent, knowledgeable staff will save the company time, money, and reputation in the long run. Hiring staff that know the ins-and-outs of compliance will lead to a better food safety culture throughout your organization.
Efficient and well-thought-out decisions will make FSMA 204 compliance less costly overall. Suppose the compliance team collaborates early on a thorough and objective assessment of your internal systems. You’d be able to minimize surprises and identify the most efficient and effective path to compliance.
How Is My Supply Chain Organized?
As an enterprise organization, you likely have a complex supply chain with tens or hundreds of trading partners. Large processors have many suppliers and will likely ship to many distribution centers and customers. Grocery retail and foodservice operators often source from hundreds of suppliers, some regularly and some on an as-needed basis. You may have your own distribution centers, or you may use third-party distribution centers.
If you own and operate your distribution centers, FSMA 204 compliance will mainly be managed at the distribution level. You’ll need to ensure that:
- At receiving, your suppliers are providing the required shipping Key Data Elements (KDEs)
- At delivery, you are providing your stores or restaurants with the required shipping KDEs
If you use third-party distribution to restaurants or stores, the burden of capturing and storing receiving KDEs will fall more heavily on the restaurant and stores. Compliance spot checks will need to happen more frequently at each location to verify and validate that the product the distribution center said they were delivering is what was received. We recommend more frequent spot checks when first establishing your new traceability compliance program, then adjusting frequency based on confidence level and risk of non-compliance. You’ll find that some distributors will better comply with the new FDA Food Traceability rule than others.
However Your Network Is Set Up, It’s Complex and Has Its Own Unique Requirements.
Compliance with FSMA 204 forces enterprise retailers and foodservice companies to truly understand and track where their products come from, down to the facility where the product was packed or transformed. Most of the costs and time will come from this process and the systems required, but the impact doesn’t have to be prohibitive.
The FDA’s Food Traceability Rule does not require anyone to use one specific solution, but you do need to be able to share KDEs with your trading partners more easily. You can do that in any of the following ways:
- Import a flat file with your suppliers’ data into your own system.
- Use ASNs to gather data ahead of a shipment.
- Use an API to exchange data between your system and your suppliers’ systems.
- Implement a cloud-based traceability solution that stores shipping KDEs in the cloud, and talk to your suppliers about doing the same.
Using a cloud-based traceability software solution might seem more costly upfront, but once your organization has implemented this new solution, you will have created new efficiencies that can save you time. You’ll be able to easily capture, store and share KDEs with your trading partners.
Implementing such a solution across your supplier network means some costs may be shared, and workarounds to sharing data between trading partners who use different methods will be essentially non-existent.
The options are there for smaller organizations that may not have the budget to implement more costly solutions to use what works for them. As long as you can ingest their data, network collaboration is achievable and can fit all budget requirements or limitations.
How Sophisticated Are Your Internal Systems?
Once you better understand your supply chain network and the options available for capturing, storing, and sharing KDEs, you’ll need to evaluate your own systems. Process and management of compliance data is usually one of the first big tasks an organization tackles.
One of the main deliverables for FSMA 204 is the ability to create an electronic sortable spreadsheet with all required supply chain data within 24 hours of FDA’s request. Compliance with the FDA Food Traceability rule heavily depends on the right data going in and out of each operation.
It’s important to audit your existing systems and identify compliance data gaps early in your traceability compliance planning process. It can take months or even years for an enterprise organization to research, select, and implement technology to facilitate FSMA 204 compliance. You’ll want to keep in mind not only your organization’s needs but the requirements and capabilities of your supply chain partners, too.
When assisting clients with their internal audits we review all the following systems, if they have them:
- ERP System(s)
- Warehouse Management System(s)
- Traceability System(s)
- Quality Management Systems(s)
- Supplier Management System(s)
- Master Data Management System(s)
We look at what fields these systems have and if they are capable of tracking all the data required for FSMA 204 compliance, and that’s required for your organizations’ unique needs. Data tracking capabilities include, but are not limited to:
- Traceability lot codes
- Commodity, and if applicable variety of food. Can it also capture and store different pieces of data for foods on the Food Traceability List (FTL) vs. foods not on the FTL?
- Quantity and unit of measure of food.
- Location description for the immediate subsequent recipient (other than a transporter) of the food, or immediate previous source for the food, depending on the Critical Tracking Even (CTE) you are capturing KDEs for.
- Date you shipped or received the food, depending on the CTE you are capturing KDEs for.
After your systems audit is complete, your compliance team should evaluate whether or not it makes sense to look into a new system that can easily capture, store and share KDEs. We often see compliance data collected or stored in various disparate systems. The challenge is identifying where the data is stored and aggregating it in one place in order to generate an electronic sortable spreadsheet for the FDA within 24 hours. Your organization may choose to continue using more than one system to manage operations, but be sure you have a process for quickly exporting your KDEs into one sortable spreadsheet when required.
If you decide a new technology solution is a worthy investment, ensure your new solution partner meets these minimum requirements.
Conclusion
When reviewing the potential costs noted in this article, it’s important to consider that not every solution fits the needs of every organization. You must find the right balance for your business and your supplier network. More complex organizations will need more robust solutions, whereas smaller organizations can still manage compliance with a very small compliance team and a simple solution for capturing, maintaining, and sharing KDEs.
It’s important to note that the most important cost of all may be the cost of non-compliance. The risk of a failed audit, a costly recall, or a deadly outbreak can result in loss of revenue and costly fines, wasted product, a tarnished brand reputation, and more.
