Nutraceutical Manufacturing and COVID—The Ultimate Disruptor
Nutraceutical Manufacturing
The term and theory “disruptive innovation” was coined by Clayton Christensen in the book, The Innovator’s Dilema,1 published just as digital technology was beginning to have a seismic impact. It provides a compelling explanation for why disrupters may blindside and overwhelm even the best-managed companies; these teachings have been employed by world renowned leaders such as Steve Jobs to gain competitive advantage in the marketplace… but today, two years after the onset of one of our lifetimes’ most significant inflection points, industries such as manufacturing (especially in nutritional nutraceutical market) are innovating in the face of disruption. They are innovating in the face of COVID.
As businesses big and small throughout the world are feeling the effects of COVID-19, leaders are juggling a multitude of interconnected challenges—ensuring the safety of their staff and customers, addressing and overcoming labor issues, i.e. The Great Resignation, solving supply chain/raw material challenges, and battling logistic issues. This is just on the manufacturing side and just one piece of the big picture, but in many ways it’s the backbone of the industry.
Furthermore, businesses are expressing vastly differing perspectives on how long COVID-related interruptions will last, what the “new normal” is, what tomorrow’s workplace will look like, long term implications of current supply and demand shifts, and ramifications for business practices in the face of challenges. How these varying perspectives are managed and addressed might be the difference between innovation and adaptability or result in reactive management.
Safety in the Workplace During COVID
Occupational health and safety are a vital part of any business; studies show that companies that invest in workplace safety perform better, have lower turnover, and help workers do their jobs more successfully.3 COVID-19, has forced employers to implement new business processes and solve current structures that are inadequate, in order to restrict the spread of the virus while maintaining a supportive, productive and fair work environment. For many companies it’s more than just PPE or plexiglass; it’s also outdated policies and procedures that COVID helped to advance through the system and have implemented.
COVID-19 has shifted perceptions regarding not only worker safety, but also health, well-being and work/life balance and has accelerated efforts to solve these issues.
COVID has also brought to light traditional workplace difficulties, such as childcare, sick leave, commute expenses and disability, as well as basic safety concerns.4
While managers and staff may feel a sense of pressure to get their offices back to normal as quickly as possible, in many cases the old normal is no longer an option and the true test of adaptability to the new world lies in how companies handle the “new normal” world and address the new way of working.
Labor Challenges During COVID
Just a few weeks into the crisis, enormous layoffs and closures had already occurred,5 but layoffs would soon be met by the cultural shift we now know as “The Great Resignation.” As American workers quit their jobs at a near-record pace, employers were left contending to retain and obtain employees—bonuses, raises, promotions and ability to work from home.
The labor mismatch in the United States has also pushed private-sector wages to increase at more than double the long-term pre-COVID-19 growth rates, yet positions remain unfilled (exhibit). On the other hand, a study has found that 46 percent of employed U.S. adults are either actively looking for or considering a new job search.6
According to a joint poll of manufacturers, distributors, retailers, 3PLs and other industrial organizations conducted by West Monroe and Supply Chain Dive’s studioID, 62 percent of manufacturers and distributors cited finding qualified workers as a challenge, and the fact remains that a talent shortage has been spreading across U.S. factories and warehouses for some time. It existed before COVID-19 and will continue to present a challenge to business executives in the post-COVID era.7
Ultimately, it’s the employer responses that are having a direct impact on employees. Those who say their organizations have responded particularly well are four times more likely to be engaged and six times more likely to report a positive state of well-being.8 COVID was (and still is) an opportunity for businesses to provide support or relief for their employees and/or communities.
Supply and Demand Shifts During COVID
While many industries suffered insurmountable financial loss at the hands of COVID, nutraceutical and supplement usage increased at more than 61 percent,9 with skyrocketing demands across various sectors of the manufacturing health industry. This sudden increase in demand quickly resulted in delays, shortages and price increases.
Manufacturers are facing unpredictability, incomplete information, various unknowns and the need to respond swiftly; adaptive leadership is imperative to manage current and anticipate future needs while demonstrating accountability through transparency in the decision-making process.
To maintain employee safety while preventing downtime due to equipment failure and maintenance, considerations must be made in response to the increasing capacity and production schedule. Working with dependable and flexible machinery suppliers who can provide service, support and excellent communication is also critical for successful manufacturing. In manufacturing especially, it truly is a group effort and communication is key.
Raw Material & Supply Chain Shortages During COVID
Sky high consumer demand, labor shortages, shipping delays and price increases were just the beginning; manufacturers soon realized that it was the decisions they made pre-pandemic that would set them apart from the competition. Companies with emergency contingency plans, ample inventory, local suppliers and U.S.-based operations found themselves in advantageous positions to handle the demand increase and maintain a steady pace, while others were scrambling to fulfill orders, maintain supply and answer future demand.
But even the well prepared are not immune to the effects of the worldwide shortages; problems continue to arise with little solutions to our growing demand. Consumers are seeing prices increase dramatically while lead times are growing considerably.
Material shortages in this supply chain can be disastrous, with not just delivery delays for important commodities and medications, but also price inflation and a greater need to speed up manufacturing. Supplier scouting has gained momentum because of this dynamic and manufactures are vetting and qualifying new suppliers to ensure that manufacturing deadlines are met.
Additionally, according to statistics from Mintec Global Packaging Index, there is a serious shortage in packaging materials, such as plastics, paper and metals, which has driven packaging costs up by more than 50 percent since the start of the epidemic, which too will lead to further delays.
Increased labor costs throughout the supply chain will continue to fuel rising prices, forcing manufacturers to evaluate and innovate to maintain market share and profit.
Logistics/Supply Chain Challenges During COVID
It is no exaggeration to say that every part of the logistics process has experienced massive disruptions. Demand for most items plummeted in the first half of 2020 as economies throughout the world went into lockdown, ocean carrier sailings were canceled, manufacturing capacity was reduced and people were displaced. However, beginning in the summer of 2020, imports into the United States increased dramatically. Online shops were inundated with new orders from customers. By late 2020, real cracks in the supply chain started to emerge. From a logistics perspective, restarting the manufacturing machine after the lockdown turned out to be quite difficult. The complex system that moves raw materials and finished products around the globe requires predictability and precision, but both had been lost.
The shipping routes, ports, trucking lines, air/railways and even warehouses are all experiencing unsurmountable challenges. As a result, crucial industrial components are suffering—labor shortages, limited supply, backlogged orders, deliveries are delayed, increased bottlenecks and rising transportation costs and consumer price.
Additional delays in the supply of critical inputs could result in a manufacturing slowdown and would result in lost profits for everyone involved.10
Given the current condition, relief is not imminent for the global supply chain, but after two years of disruption it’s become evident that communication and transparency are the most crucial aspect of logistics during this time.
Crisis to Recovery in Manufacturing
As organizations move from crisis response toward recovery, operational resilience and excellence will stand the test of time. Companies that are leveraging COVID as the wave into innovation1 may as they say, “rise to the top” and emerge stronger from the crisis. As the nutritional market doubles and even triples, competitors are emerging from every corner; they’re offering customers innovation combined with transparency, ease of communication, sustainable solutions and flexibility.
Existing businesses need to consider that what may be “innovation” for them may just be a market entry strategy for a new competitor; innovation in the nutritional market is proving to be a necessity … and not an option. NIE
References:
1 Christensen, C. M. (1997). The Innovator’s Dilemma: When new technologies cause great firms to fail. Harvard Business School Press.
2 www.hsph.harvard.edu/ecpe/how-covid-19-changed-worker-safety-and-health/.
3 www.hsph.harvard.edu/ecpe/how-covid-19-changed-worker-safety-and-health/.
4 www.hsph.harvard.edu/ecpe/how-covid-19-changed-worker-safety-and-health/.
5 www.mckinsey.com/business-functions/risk-and-resilience/our-insights/covid-19-implications-for-business?.
6 www.pwc.com/us/en/library/covid-19/manufacturing-operations-strategy-coronavirus.html.
7 www.supplychaindive.com/spons/learning-to-live-with-the-manufacturing-and-distribution-labor-shortage/608196/.
8 www.mckinsey.com/business-functions/people-and-organizational-performance/our-insights/covid-19-and-the-employee-experience-how-leaders-can-seize-the-moment.
9 https://niemagazine.com/tailor-made-dietary-supplements/.
10 www.forbes.com/sites/garthfriesen/2021/09/03/no-end-in-sight-for-the-covid-led-global-supply-chain-disruption/?sh=1bfbf223491f.
Evelyn Reinson is the Head of International Marketing at ACG, responsible for global marketing strategies of the company’s product range of capsules, films & foils, engineering, and inspection worldwide. For more information, visit www.acg-world.com.
