The Overlooked Cost Cutter
Musculoskeletal disorders (MSDs) accounted for one-third of all occupational injuries and illnesses in 2013, according to the Bureau of Labor Statistics. Costs for workers’ comp claims involving MSDs are already around $26,000 on average, and can increase when costs associated with absenteeism, retraining, and lost productivity are taken into consideration.
Despite these numbers, there are few proactive methods in place to identify risk factors for the development of a musculoskeletal injury and prevent it from occurring. Rather, approaches to these types of injuries are typically reactionary.
“Companies respond when an employee asks, by which time they already have pain or discomfort,” said Nate Rogoff, software specialist with Humanscale, a manufacturer of ergonomic products. “Ergonomists aren’t able to get ahead.”
Stats compiled by Humanscale show that there is only one certified ergonomist for every 100,000 workers in the United States. Many companies simply overlook the impact that improved ergonomics can have on decreasing injury claims and boosting productivity.
“Most employers do not proportionally allocate their resources — their time, talent and treasure — related to their injury experience and exposures,” said Tom Hilgen, senior risk control consultant at Willis Risk & Analytics. An article written by Hilgen details one company that was allocating only 5 percent of its cost-control resources to ergonomics, even though musculoskeletal injuries accounted for 50 percent of its incurred costs.
Ergonomists’ limited reach is further constricted by corporate silos that separate initiatives by risk management, safety and human resources departments.
“Safety and risk management have their own metrics, and operations have their own metrics, but they often are not aligning them. There needs to be the right alignment of business metrics that includes the impact of MSDs properly and how they affect costs associated with injuries, with absenteeism, turnover, and production quality and schedule,” Hilgen said.
Stats compiled by Humanscale show that there is only one certified ergonomist for every 100,000 workers in the United States.
Collection and sharing of the right data can help companies predict what injuries are likely to occur in which workers, rather than wait for them to appear.
Lagging indicators like type of injury, total count and total dollar amount of claims, and top causes of injuries can help employers pinpoint their top exposures, Hilgen said. But it’s also imperative to track the performance of existing ergonomics interventions.
“The best predictor of future performance is how well are they doing on a daily, weekly, monthly basis in terms of prevention of MSDs,” he said. “We call that a scorecard. We look at their ergonomics processes and score them between zero and 100 to see how they’re doing in terms of implementing best practices for prevention of MSDs.”
But best practices circle back to the professional ergonomists who come in such short supply. In addition to integrating efforts across an organization, employers need to strengthen the expert base from which they draw their best practices.
There are some tools that companies can use to help streamline and focus their efforts on MSD prevention.
Alan Hedge, a professor in the Department of Design and Environmental Analysis at Cornell University developed a software tool called Sonexes that uses predictive analytics to predict work-related MSDs based on the risk factors within a particular work environment.
“[The tool] uses a rule-based algorithm or expert system which utilizes the knowledge and expertise of an ergonomist or practitioner through the software,” said Rogoff, a colleague of Hedge’s. The program checks results from an employee’s checkups against its rule-based system — based on established best practice — to produce a prediction of potential injuries.
“It was created to assist practitioners and ergonomists because they’re so outnumbered,” Rogoff said. “It allows them to gain visibility on their entire employee workforce at the same time. Within the software, they can drill down to different departments and identify high-risk individuals. It allows them to better prioritize their interventions.”
As safety, wellness and employee health initiatives grow inextricably linked, large companies are being called more and more to break down silos, improve communication and share data across all departments. Ergonomics can get lost in these efforts, but the high costs associated with MSDs certainly demand some attention.
Take-Home Exposure a Widespread Problem
More than 1.5 million workers are potentially at risk of lead exposure. The problem can lead to contamination of others unless proper steps are taken, according to the government.
A routine, well child exam showed that a 2-year-old girl had a blood lead level that was nearly three times the amount the Centers for Disease Control and Prevention recommends as a reference level.
“This serves as a warning the child may be exposed to lead at home or in the environment and may require case management,” according to the National Institute for Occupational Safety and Health. “It also allows parents, doctors, public health officials, and communities to take action earlier to reduce the child’s future exposure to lead.”
In this case, the exposure was work-related. A post on the NIOSH science blog explained that the agency has found so-called take-home exposure to be a widespread problem.
Investigators conducted a lead risk assessment of the girl’s home but found no lead-based paint. However, there was lead dust on the floor of the family’s laundry room.
“Upon further testing of the family, [the father] was found to have a BLL of 25 micrograms per deciliter (µg/dL). NIOSH defines an elevated BLL for those over age 16 to be 10 µg/dL or more,” according to the post. The father “told the lead risk assessor that he typically came home from work at the e-scrap recycling facility with dust in his hair and on his clothes. He routinely picked up and played with his 2-year-old daughter Sarah when he arrived home, then would take a shower and throw his clothes in the laundry before sitting down for dinner.”
The agency determined that the father and his coworkers were exposed to lead as they performed various tasks at the e-scrap recycling facility such as crushing cathode ray tubes from discarded televisions and computer monitors.
“Without access to showers at work or uniforms that could be left at work for laundering, employees of the e-scrap recycling facility risked contaminating their personal clothes, vehicles, and homes with lead,” the post said. “The Occupational Safety and Health Administration estimates that approximately 804,000 workers in general industry and an additional 838,000 workers in construction are potentially exposed to lead as a result of the production, use, maintenance, recycling, and disposal of lead material and products.”
The government recommends employers help prevent take-home exposure by:
- Reducing exposure in the workplace.
- Having employees shower and change clothes before going home and leaving soiled clothing at work for laundering. They should also store street clothes in areas separate from work clothes.
- Prohibiting removal of toxic substances or contaminated items from the workplace.
“Preventing take-home exposure is critical because decontaminating homes and vehicles is not always effective,” according to the post. “Normal house cleaning and laundry methods are inadequate, and decontamination can expose the people doing the cleaning and laundry.”
In the case above, the father quit his job at the e-scrap recycling facility. Three months later, his daughter’s BLL had decreased substantially.
Pathogens, Allergens and Globalization – Oh My!
In 2014, a particular brand of cumin was used by dozens of food manufacturers to produce everything from spice mixes, hummus and bread crumbs to seasoned beef, poultry and pork products.
Yet, unbeknownst to these manufacturers, a potentially deadly contaminant was lurking…
What followed was the largest allergy-related recall since the U.S. Food Allergen Labeling and Consumer Protection Act became law in 2006. Retailers pulled 600,000 pounds of meat off the market, as well as hundreds of other products. As of May 2015, reports of peanut contaminated cumin were still being posted by FDA.
Food manufacturing executives have long known that a product contamination event is a looming risk to their business. While pathogens remain a threat, the dramatic increase in food allergen recalls coupled with distant, global supply chains creates an even more unpredictable and perilous exposure.
Recently peanut, an allergen in cumin, has joined the increasing list of unlikely contaminants, taking its place among a growing list that includes melamine, mineral oil, Sudan red and others.
“I have seen bacterial contaminations that are more damaging to a company’s finances than if a fire burnt down the entire plant.”
— Nicky Alexandru, global head of Crisis Management at AIG
“An event such as the cumin contamination has a domino effect in the supply chain,” said Nicky Alexandru, global head of Crisis Management at AIG, which was the first company to provide contaminated product coverage almost 30 years ago. “With an ingredient like the cumin being used in hundreds of products, the third party damages add up quickly and may bankrupt the supplier. This leaves manufacturers with no ability to recoup their losses.”
“The result is that a single contaminated ingredient may cause damage on a global scale,” added Robert Nevin, vice president at Lexington Insurance Company, an AIG company.
Quality and food safety professionals are able to drive product safety in their own manufacturing operations utilizing processes like kill steps and foreign material detection. But such measures are ineffective against an unexpected contaminant. “Food and beverage manufacturers are constantly challenged to anticipate and foresee unlikely sources of potential contamination leading to product recall,” said Alexandru. “They understandably have more control over their own manufacturing environment but can’t always predict a distant supply chain failure.”
And while companies of various sizes are impacted by a contamination, small to medium size manufacturers are at particular risk. With less of a capital cushion, many of these companies could be forced out of business.
Historically, manufacturing executives were hindered in their risk mitigation efforts by a perceived inability to quantify the exposure. After all, one can’t manage what one can’t measure. But AIG has developed a new approach to calculate the monetary exposure for the individual analysis of the three major elements of a product contamination event: product recall and replacement, restoring a safe manufacturing environment and loss of market. With this more precise cost calculation in hand, risk managers and brokers can pursue more successful risk mitigation and management strategies.
Product Recall and Replacement
Whether the contamination is a microorganism or an allergen, the immediate steps are always the same. The affected products are identified, recalled and destroyed. New product has to be manufactured and shipped to fill the void created by the recall.
The recall and replacement element can be estimated using company data or models, such as NOVI. Most companies can estimate the maximum amount of product available in the stream of commerce at any point in time. NOVI, a free online tool provided by AIG, estimates the recall exposures associated with a contamination event.
Restore a Safe Manufacturing Environment
Once the recall is underway, concurrent resources are focused on removing the contamination from the manufacturing process, and restarting production.
“Unfortunately, this phase often results in shell-shocked managers,” said Nevin. “Most contingency planning focuses on the costs associated with the recall but fail to adequately plan for cleanup and downtime.”
“The losses associated with this phase can be similar to a fire or other property loss that causes the operation to shut down. The consequential financial loss is the same whether the plant is shut down due to a fire or a pathogen contamination.” added Alexandru. “And then you have to factor in the clean-up costs.”
Locating the source of pathogen contamination can make disinfecting a plant after a contamination event more difficult. A single microorganism living in a pipe or in a crevice can create an ongoing contamination.
“I have seen microbial contaminations that are more damaging to a company’s finances than if a fire burnt down the entire plant,” observed Alexandru.
Handling an allergen contamination can be more straightforward because it may be restricted to a single batch. That is, unless there is ingredient used across multiple batches and products that contains an unknown allergen, like peanut residual in cumin.
Supply chain investigation and testing associated with identifying a cross-contaminated ingredient is complicated, costly and time consuming. Again, the supplier can be rendered bankrupt leaving them unable to provide financial reimbursement to client manufacturers.
“Until companies recognize the true magnitude of the financial risk and account for each of three components of a contamination, they can’t effectively protect their balance sheet. Businesses can end up buying too little or no coverage at all, and before they know it, their business is gone.”
— Robert Nevin, vice president at Lexington Insurance, an AIG company
Loss of Market
While the manufacturer is focused on recall and cleanup, the world of commerce continues without them. Customers shift to new suppliers or brands, often resulting in permanent damage to the manufacturer’s market share.
For manufacturers providing private label products to large retailers or grocers, the loss of a single client can be catastrophic.
“Often the customer will deem continuing the relationship as too risky and will switch to another supplier, or redistribute the business to existing suppliers” said Alexandru. “The manufacturer simply cannot find a replacement client; after all, there are a limited number of national retailers.”
On the consumer front, buyers may decide to switch brands based on the negative publicity or simply shift allegiance to another product. Given the competitiveness of the food business, it’s very difficult and costly to get consumers to come back.
“It’s a sad fact that by the time a manufacturer completes a recall, cleans up the plant and gets the product back on the shelf, some people may be hesitant to buy it.” said Nevin.
A complicating factor not always planned for by small and mid-sized companies, is publicity.
The recent incident surrounding a serious ice cream contamination forced both regulatory agencies and the manufacturer to be aggressive in remedial actions. The details of this incident and other contamination events were swiftly and highly publicized. This can be as damaging as the contamination itself and may exacerbate any or all of the three elements discussed above.
Estimating the Financial Risk May Save Your Company
“In our experience, most companies retain product contamination losses within their own balance sheet.” Nevin said. “But in reality, they rarely do a thorough evaluation of the financial risk and sometimes the company simply cannot absorb the financial consequences of a contamination. Potential for loss is much greater when factoring in all three components of a contamination event.”
This brief video provides a concise overview of the three elements of the product contamination event and the NOVI tool and benefits:
“Until companies recognize the true magnitude of the financial risk and account for each of three components of a contamination, they can’t effectively protect their balance sheet,” he said. “Businesses can end up buying too little or no coverage at all, and before they know it, their business is gone.”
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Lexington Insurance. The editorial staff of Risk & Insurance had no role in its preparation.