Finding the Right Teammate for the International Supply Game

With the growth of the dietary supplement and functional food and beverage markets, it’s not surprising that the raw materials and ingredient market saw an incredible 11 percent increase in 2012 and is expecting another 11 percent increase for 2013, placing the value of the market at $13.8 billion. Those data come courtesy of Nutrition Business Journal.

This growing sector has a global footprint unlike any other. My company BI Nutraceuticals, sources from more than 45 countries. Due to this extensive supply chain, sourcing is the most complex function in our industry, not only because the raw materials and ingredients are geographically dispersed, but also because differing currency, language, local regulations, quality, seasonality, weather, and more must be considered when sourcing.

To begin with, the inherent nature of the raw materials and the methods by which they are harvested places this industry at a disadvantage from the start. The two methods of harvesting – cultivating and wildcrafting – each pose distinct challenges.

For wildcrafted material, especially for a crop that is difficult to collect, the population of collectors may fluctuate year to year due to lack of financial interest or employment elsewhere.  Currently, an alarming concern in the wildcraft landscape is the aging and decreasing population of the collector base. It is predicted this problem will only increase as the older generations retire and the younger generations seek employment in other industries that offer an easier source of income.

For cultivated material, issues include low cuts to maximize yield, heavy metals/herbicides/pesticides, and irrigation. The methods by which botanicals are harvested will not change anytime soon, if at all. In order to receive consistent high quality material, adaptation is necessary at the middle and top of the supply chain. It will not come from the bottom.

Although this industry’s supply chain forms a complex chain of custody and offers many challenges, it also offers many opportunities. Adaptation at the middle and top of the supply chain can optimize raw material costs, encourage innovation at the start, and most importantly gain consumer trust for manufacturers. This can be achieved by partnering with a supplier with superior sourcing skills. By that, I mean a procurement team with in-depth product knowledge and the capability to mentor vendors, a distinguished vendor qualification program, and excellent, long-term relationships with their vendor base.

In this global supply chain, an excellent, long term relationship with a vendor does not simply mean an easier work environment for the supplier; it means access to raw materials at the source, exclusive supplier agreements and priority for high-quality crop, and full cooperation with forecasting and planning, which prevents spot buying, decreases the chance of receiving adulterated product and reduces complexities in the supply chain. A supplier’s partnership with their vendor drives the manufacturer’s success in this industry’s supply chain.