Today’s nutrition industry supply chain management approach requires a deeper dive into available resources, including optimization of process and inventory analytics through enterprise resource planning (ERP) tools, and critical data and insights gained through ongoing candid communications with client partners to properly evaluate fulfilment needs. These thorough conversations between manufacturers and clients are vital to work more collaboratively and ensure accountability among all stakeholders in meeting supply and demand objectives.
This more in-depth highly customer-focused approach helps contract manufacturers and brands gain greater visibility and understanding of what is truly needed to best support brands in meeting current product demands and to plan more strategically to better position them for future growth. Additionally, having a deeper and more detailed understanding of supply needs can provide better flexibility to adapt more quickly to evolving consumer preferences and trends when needed.
A multi-tiered supply chain management process is also important to help increase security of the overall industry’s infrastructure and mitigate risk. As we have learned, particularly over the past few years, the global supply chain has important sensitivities to unforeseen macro factors, such as the pandemic, as well as geopolitical issues, among other potential disruptive dynamics that can ultimately affect businesses and end-consumers.
Current Supply Chain Outlook and Challenges
From a macro level we are currently seeing a primarily greater stabilization of the supply chain for the nutraceutical industry and some of the previous issues of shipping delays and port congestion or packaging shortages have alleviated. However, there are certainly still challenges and many variables that can create issues for the supply chain which can eventually result in tightened inventory, delays and pricing pressures. Some issues may not cause immediate impact but need to be acknowledged to manage risk for possible future disruptions.
One example is the Panama Canal water shortage, which is disrupting many supply chains here in the U.S., as severe drought conditions in the region have lowered the lake’s water levels, leading the Panama Canal Authority (ACP) to restrict the daily number of ship transits.
Additionally, as ongoing war and geopolitical issues in Ukraine and in Israel may not be directly impacting our industry’s supply chain significantly today, we need to remain cognizant of possible future disruptions because of these factors. From our perspective as contract manufacturers, being able to navigate those uncertain waters while also improving the service level to our customers is extremely important, and finding the right balance to weather arising challenges while prioritizing the customer is crucial.
Some of the more directly felt challenges currently impacting the nutrition industry supply chain include ingredient shortages and tariff issues. Among the key ingredients where we are seeing major impact from these kinds of issues today are in whey protein isolate and pea protein.
Due to global supply and demand imbalances, particularly for whey protein isolate from China, supply has significantly tightened resulting in price increases. For brands relying on whey protein for their products, they should be evaluating ingredient availability and alternative sourcing options to reduce risk of delays and to limit pricing impact as much as possible.
Pea protein is another major ingredient supply challenge the industry is currently facing because of a recent antidumping duty investigation of pea protein imports from China. Through this investigation, the U.S. Department of Commerce preliminarily determined that certain pea protein imported from the People’s Republic of China are subject to antidumping and countervailing duties because Chinese imports are sold at less than fair value and the Chinese industry benefits from unlawful subsidies. This has led to a significant tariff for any pea protein coming out of China, causing supply and pricing concerns. Brands relying on this ingredient should be considering potential alternatives where possible from other global sources, such as Europe.
Improving Supply Chain Management Through Collaborative Customer-focused Strategies
To properly plan for continued success and growth while preparing for potential supply challenges and disruptions in today’s environment, leveraging all available data resources and increasing transparency, collaboration and clear communication between nutrition industry manufacturers and brands is more important than ever.
At Lief, for example, we’re strongly employing a highly customer-focused strategy with a greater frequency of face-to-face contact and deeper-dive discussions with our brand partners to ensure we are getting the most comprehensive information and clearest picture of their needs. This includes an important evaluation of the reliability of a customer’s forecasting by reviewing their internal data, cross-checking with our data and then discussing parameters that make sense for both parties to determine how we can better serve them as manufacturers.
Once a manufacturer has the valuable customer-focused information, they can combine that with their internal ERP analytics and data to develop an action plan together with their brand partners. This more strategic type of action planning typically involves scheduling supplier meetings to enhance operational efficiencies and identify potential risks or gaps in the supply chain that can be addressed to be able to bridge or close any gaps that might put the customer at risk of a stock-out position. Methods to address any gaps can include maintaining additional floor stock as a manufacturer or leveraging relationships with suppliers to potentially dedicate floor stock inventory on their end.
Longer Commitments
For this strategy to be successful, as taking on additional inventory risk is an investment on the manufacturer’s part, it is also important for manufacturers to then work with brand partners to establish longer-term volume commitments to ensure continued product flow for the brand and the end consumer. Once these collaborative plans are in place, this can then translate into more secure product delivery options for the customer. This includes a logistics model called on-time in-full (OTIF) delivery, which refers to a supplier’s ability to deliver product within prescribed delivery windows and at full quantities ordered.
More strategic planning can also support brand innovation and growth opportunities. As consumer preferences change and emerging trends arise for potential product development expansions or pivots, manufacturers and brands can have greater visibility to evaluate key factors and feasibility. This includes reviewing things such as ingredients and packaging materials supply and manufacturing capabilities to better determine if new product ideas are viable and scalable.
In a manufacturer and brand relationship, whether you are working to improve current day-to-day product development processes or better prepare for the risk of potential macro supply chain disruptions, balancing strong analytics and data infrastructure with consistent in-depth communications remains critical. At the end of the day, it is a shared risk and investment where growth for each party is interdependent, so stronger collaboration will lead to greater success for all. NIE
Jeohvan Montoya, with 17 years of experience within the nutraceutical industry, has had a career trajectory across various roles including, purchasing manager, senior R&D/product development manager and director of supply chain management. Presently, Jeohvan is head of procurement and planning at Lief Labs, headquartered in Valencia, CA. In this capacity, he spearheads the strategic alignment of supply chain objectives, leveraging assessment, planning, and seamless execution to drive organizational success. For inquiries or collaborations, Montoya can be reached at [email protected].
