Building a Corporate Culture of Quality

This disparity between companies committed to high quality and those, often fly-by-night companies apathetic about quality, is one of the biggest problems in extending the idea of a culture of quality throughout the natural products industry. Industry insiders continuously lament the lack of a level playing field, especially in dietary supplements.

For instance, ingredient companies have growers and other raw material sources on one side, and manufacturers on the other side. If a manufacturer buying ingredients is primarily price-focused, the higher quality, higher priced supplier will lose out to lower priced, often lower quality suppliers. On the other hand, if the ingredient supplier receives poor-quality raw materials from a grower, rejecting the material merely sends the shipment to another company willing to accept that material at a low cost.

“Stuff we reject never goes back to the grower,” Pontiakos said. “Not once have I seen it shipped back to original field; it finds a new home in the industry.”

Shao reiterated there can be no culture of quality in the industry if price is the only focus. “It leads to a lack of willingness to invest heavily upfront in research and development and quality assurance,” he said, noting much of this hesitation toward investing in quality is driven by business reasons such as lack of intellectual property protection, increasingly commoditized ingredients and narrow profit margins. “The natural products industry is a system set up to compete more on price than on quality.”

Pontiakos added part of the challenge in the industry, as a whole, is the procurement base is really purchase price variance-driven. He explained the procurement side of the industry hasn’t achieved the level of sophistication yet where, in the market, companies know the actual cost of a vendor. “You could price out Echinacea purpurea, and it’ll be within in X dollars per kilo from a ton of vendors, but the more important questions are: is it in spec, did it arrive on time, and was it rejected after it arrived? We know a rejection costs $1,600 just in paperwork alone. So when a vendor delivers material and it’s rejected, not only do I rate that supplier negatively for the paperwork charge, but I also have to look at how the rejection affected my throughput and production. What did it do to efficiency? What customer did I annoy by not being able to deliver my product on time? And then, what did this delay do to my customer’s business?”

Quality companies in the middle of the supply chain often find themselves working overtime to bring their partners up to speed on quality. Within a company, management has control over the quality culture, but when it comes to vendors, growers, cooperatives, wildcrafters and all manner of raw material providers, the knowledge and resources for high-quality processes might be lacking. Major companies in the natural products industry have found themselves visiting such partners more often. They educate these sources and communicate to them the level of quality, including specifications and other requirements, necessary to forge and continue a business relationship. In this way, the high-quality ingredient suppliers and manufacturers can bring up the quality culture on that end of the supply chain. Up to this point, these quality middlemen have done this voluntarily and for the good of their company and the industry. Soon, this could become something of a barrier of entry into natural products, specifically dietary supplements.

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