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Freight Delays Adding to Ongoing Supply Chain Disruptions

Supply Chain Supply Chain

Looking at the state of the supply chain for the nutritional supplement industry as we head into year-end, ongoing disruptions resulting from the COVID-19 pandemic, such as labor and packaging material shortages, continue as demand for supplies and raw materials stays strong.

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Adding to these disruptions is a significant increase in freight issues, including shipping container shortages, and competition for securing ocean freight vessels for international shipping, as well as difficulties booking trucks here in the U.S. for supplier deliveries. These issues are all resulting in price hikes for shipping from places like China, and further contributing to supply transportation delays.

According to a recent China Market Update report from Shanghai Freemen, a manufacturer and worldwide distributor of ingredients for the nutraceutical, food and cosmetics industries, “shipping container rates have spiked by four to seven times since the onset of the pandemic, and are likely to remain elevated beyond the Lunar New Year in 2022 as the global demand for goods continues to outpace available capacity.”

On the inventory front, the ability to obtain certain bottles, jars and lids to meet brand products specifications remains a challenge, while newer inventory risks are emerging for capsules and collagen.

In order to manage these continued supply chain disruptions, comprehensive planning systems, frequent communication and collaboration, as well as maintaining proper technology and staffing resources to execute these strategies are more important than ever.

Tackling Freight and Transportation Issues

One of the important tools that manufacturers can consider implementing to help tackle the mounting freight challenges in the current environment is to implement an in-house transportation management system (TMS). A TMS offers digital, cloud-based technology solutions to help businesses better plan, execute and optimize shipping processes and logistics. Among the key TMS providers in the market, include companies such as BlueGrace Logistics and Echo Global Logistics.

TMS’s are more typically utilized by suppliers. However, given the heightened freight and transportation issues occurring, manufacturers and other businesses, which may have traditionally relied on these tools from their external partners, can think about adding an internal TMS to help mitigate supply chain risks and manage costs.

By implementing an internal TMS at their company, contract manufacturers can gain greater visibility and more direct control over their own shipping logistics. This increased visibility includes enabling their business to have access to valuable resources, such as the choice of multiple freight options, as well as carrier performance tracking and auditing, among other transportation logistics management tools.

At a time when the industry and our supply chain networks are facing critical transportation challenges, maximizing all available resources and leaving no stone unturned to help manage and improve processes is vital.

Managing Inventory Risk and Quality Control

Packaging materials, such as bottles, jars and lids continue to present hurdles for manufacturers and brands in the current environment. Some of the more recent inventory constraints that have started to increase also includes supply of capsules and a risk to collagen availability, as demand has been soaring for the hot collagen products market. Adding to these issues is that certain forms of collagen gelatin powders are also used as materials to make capsules.

Whether for packaging goods or raw materials and ingredients like collagen, strategies that we have found at Lief Labs to be most effective in managing inventory continues to be utilizing detailed forecasting tools to mitigate inventory risk. Looking at historical usage allows us to better forecast and plan as far ahead as the next 12 months to predict product needs for our clients. Once we have established the quantities needed, we rely on our strong network and supplier relationships to get commitments and blanket orders from our partners to cover those forecasted amounts, and Lief commits to hard orders for those at-risk inventory items. Just-in-time has shifted to just-in-case to try to reserve as much inventory as possible to meet client needs.

As the supply chain issues from the pandemic linger, this process has become even more difficult, as manufacturers and suppliers need to negotiate how they can collaboratively absorb and offset the extra costs of holding inventory. Suppliers who may have been more willing in the past to hold off on delivery for extended periods, have had to adjust to charging stocking fees or advising their customers that they may need to sell the inventory, if the customer is not willing to receive their goods within a certain timeframe.

As supply and demand issues occur in any industry, managing quality and control, also must remain vigilant, particularly as it has become necessary to cast a wider net to broaden supply networks in the U.S. and internationally. Effective quality management relies on collaborative efforts up and down the supply chain and across organizations. Quality and control are always a priority at Lief, and when facing supply chain challenges, we also continue to re-emphasize quality control and increase staff and resources to better support quality tasks where needed.

Growth and Learning Opportunities for the Industry Supply Chain

As challenging as the environment continues to be for the nutrition industry supply chain, for companies who look at this difficult time as a learning opportunity, the industry can benefit and make necessary improvements to build more resilient processes for the future. This is not just important for the growth of our industry, but it is a social responsibility as we strive to deliver the best possible products to consumers as they become more health conscious and interested in improving their well-being.

In order to leverage these learning opportunities, it is also important to take the time to actively document the important lessons as they are occurring. At Lief, we hold frequent roundtables to share these learnings across the organization and continue to add important lessons into a list management plan. We believe these plans can serve as a valuable guide to assist us in better handling any unforeseen supply chain issues we may encounter down the road. NIE

Jeohvan Montoya, with more than 13 years of industry specific experience, has held several key positions within nutraceuticals, such as costing specialist, purchasing manager and senior R&D/product development manager. Currently, Montoya is the director of supply chain management at Lief Labs in California where he is responsible for realizing the strategic objectives for the supply chain function through assessment, clear planning and effective execution. He can be reached at jeo@lieforganics.com.