China: When Scrapping Programs Turn Toxic

Usually, we tend to think of scrap programs as a win/win from a procurement and supplier standpoint. Not only do scrap programs help save the environment, they can result in material cost savings for all organizations involved. In fact, scrap programs are one of the strategies that supplier development teams often recommend to their supply base as a cost cutting measure. Whether they’re in the metals, plastics, or corrugated areas -- not to mention many other categories -- scrap programs usually pay-off quickly on multiple fronts. At least until now. Some Chinese companies have gotten more than creative with their scrap programs. It turns out that we can blame the melamine milk and food product scandals at least in part on chemical scrap programs.

According to a recent Wall Street Journal article (registration required), "Chemical factories that make melamine sell their scrap cheaply -- the origin of the chemical in the supply chain." But what's all the more remarkable is not that these programs existed and how companies purposefully allowed the scrap to enter the food supply chain -- it's that such behavior was openly tolerated. The article notes that, "Before melamine-laced milk killed and sickened Chinese babies and led to recalls around the world, the routine spiking of milk with illicit substances was an open secret in China's dairy regions, according to the accounts of farmers and others with knowledge of the industry … China's biggest local seller of liquid milk, Mengniu Dairy Co., and multinational food company Nestlé SA both say they were aware that Chinese farmers and traders added unauthorized substances to raw milk, but that they didn't know melamine was among them."

What were some of the other adulterants that companies tolerated in the food supply chain? "Fresh-keeping liquid", a "viscous yellow liquid containing fat and a combination of preservatives and antibiotics," was also actively used and tolerated. One wonders if such adulterants had their own SKU or part number inside the factories responsible for producing the tainted products …

Jason Busch

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