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A roadmap for navigating the global sourcing landscape
From the rustic, handwritten menus at trendy farm-to-table eateries to that now-classic “Portlandia” sketch about locally raised chicken, mindful ingredient sourcing is an au courant concept. But to those of us in the supplements industry, knowing where our inputs come from and what they go throughen route to our doors is neither a bourgeois affectation nor the stuff of comedic spoof. It’s fundamental to product safety and quality-and, by extension, to our brands’ and our industry’s reputations.
More often than not these days, those ingredients are coming from farther afield, adding links to the supply chain and complexity to the process of navigating it with any proficiency or insight. So as we cast our sourcing nets across a broader swath of the globe, the bycatch is bound to include some hassle and perhaps even controversy. But reversing course and hauling the supply lines back home is not an option. That puts the onus on supplement marketers to work closely with savvy suppliers who understand today’s global sourcing landscape and have the tools to navigate it smoothly.
Sign of the Times
Talk to any supplement insider and it quickly becomes clear: global ingredient sourcing is a fait accompli in this industry. And that, says Tom Kiningham, dietary supplement program technical manager, NSF International (Ann Arbor, MI), is merely another sign of our increasingly competitive times.
“Marketers and manufacturers of dietary supplements are constantly seeking an economic, technological, or product breakthrough that will give them an edge in a crowded international marketplace,” he says. “In this type of competitive environment, it’s important for brand owners to leverage any advantage to their cause.” Shopping abroad, so to speak, is one such advantage. “Global sourcing,” he says, “can give the marketer an edge on controlling costs and gaining access to a wider variety of dietary ingredients and cutting-edge nutritional products.”
It can also awaken R&D departments to formulation possibilities they may not have heretofore considered. As Steve Siegel, vice president, Ecuadorian Rainforest LLC (Belleville, NJ), points out, “Foreign ingredients give North American companies the chance to innovate,” letting them “be creative with their products instead of using only what’s available domestically.” For example, he suggests, manufacturers who work with American ginseng might consider exploring maca, an Andean root with like appeal. “It gives the product a fresh, exotic look while providing similar benefits.”
And global climate change notwithstanding, some ingredients just aren’t available here-at least for the short term. Siegel’s company specializes in items native to South America. Many of them, he explains, grow only under conditions that are difficult to find north of the 25th parallel. If manufacturers stuck solely to these shores, he alludes, those inputs would remain beyond reach-and so, too, would their benefits.
Hitting the Trifecta
But setting aside the doors it opens for formulation creativity, foreign sourcing offers more bottom-line benefits that come down to three main factors, says Jim Schultz, CEO and founder, Green Wave Ingredients (GWI; La Mirada, CA): availability, consistency, and quality. Increasingly, foreign suppliers are hitting the trifecta.
His company imports most of its ingredients-vitamins, amino acids, herbal extracts, and more-from overseas, and finds that markets abroad possess the resources and capacity to serve his operation. “China has become the largest ingredient manufacturer in the world,” he says, “which has not always been the case. Back 20–30 years ago, vitamins used to be produced mainly in Western countries, and amino acids mainly in Japan. Today, most companies have switched to China, not only because of cost-efficiency, but because of the wealth in natural resources and improvements in quality.”
Schultz’s team also looks to places like India, Vietnam, and Korea-as well as here at home-to maintain the diverse portfolio it needs to keep up with a changing supplement marketplace. “India is doing well for niacin, niacinamide, glucosamine, herbals, and also mineral citrate because they don’t have any antidumping issues,” he says, while Vietnam stands out for glucosamine and citric acid. And Korea, he notes, “is strong in fermentation-grade amino acids.”
Jamie Spell, managing director, Nutraceuticals International (Paramus, NJ), points to Indonesia, Malaysia, Thailand, and neighbors as rising-star suppliers with the potential to compete against China in the future. Until then, she says, whether scouting ayurvedic herbs from India, medicinal plants from Peru, or produce from Europe and China, “we’re always bringing new ingredients to market from diverse parts of the world.”
Bullish brokers like Spell are unabashedly excited about scouring the globe for ingredients they’re proud to share with their clients.
But ultimately, how important is transparency in tracing an ingredient’s origin, anyway? “Knowing where our ingredients come from, how they’re manufactured, and their quality is of utmost importance,” she says.
Spell adds that it’s important to customers, too. Particularly with FDA’s rollout of current good manufacturing practices (GMPs), supplement manufacturers and marketers “must know where the material is coming from and who the manufacturer is” to secure compliance. “With consumers being more educated, it’s our job to make sure our customers are getting the best quality from a stable supply chain,” she says.
Weak Links in the Chain
But the longer the supply chain grows, the creakier it can sometimes get. As Kiningham points out, “International sourcing is not always the best choice, even if domestic supplies are more limited or expensive up front.”
For one, global sourcing can be fraught with inefficiencies and interminable lead times. “There’s always the very real possibility of delays at the port of entry caused by regulatory agencies,” he notes-a Kafkaesque scenario in which “essential raw materials can be a few minutes away and not released for shipment for weeks.” And even when distributors step in to hold supplies of key imported materials, “it sometimes happens that when a shipment arrives there are several manufacturers’ lots in the truck,” increasing delays, expenses, and frustration “as each lot must be tested separately and released.”
While cost advantages may have largely driven sourcing overseas in the first place, the vagaries of global markets sometimes complicate the economic picture. “Even if pricing and transportation are considered and planned for,” Kiningham points out, “there is always the chance for unusual circumstances to drive up costs and affect the eventual sales of a company’s product.” Anything from unfavorable exchange rates and rising oil prices to what he describes as “unpredictable and intrusive governmental activities” can tip the balance sheets in the wrong direction.
Then there are matters of quality and safety. While it’s true that foreign suppliers are traversing the learning curve as their presence in the supply chain grows, lot-to-lot variability can still plague the quality of production batches, and recent episodes of economic adulterations-Kiningham cites the detection of melamine and cyanuric acid in some foreign-sourced ingredients, as well as an incident in which enzymes from India showed contamination with the antibiotic chloramphenicol-“illustrate the risk of lower standards in some parts of the world that may have an impact on products manufactured in the United States.” Even stopping short of outright adulteration, old-fashioned cultural and language barriers “can hinder accurate descriptions of what the manufacturer actually needs,” Kiningham says, “which can adversely affect the performance quality of the goods.” Specifications like density, particle size, and color variations can make or break a product, and yet they’re vulnerable to getting lost-literally-in translation.
Instrumental to international sourcing’s survival-and to strengthening global supply chains going forward-is the setting of ground rules that all parties understand and can abide by. As Kiningham says, “The global supply chain will be most efficient and provide the highest-quality ingredients when internationally recognized standards of safety and quality are fully implemented.”
He points to programs offered through his own organization, NSF International, as well as those of groups like Codex Alimentarius, British Retail Consortium (BRC), and the International Organization for Standardization (ISO) as laying a level playing field on which all members of the supply chain can find their footing. “Use of modern compendia for testing requirements should be adopted where appropriate,” he adds, “such as the United States Pharmacopoeia and methods contained in AOAC and other similar publications.”
Gabriel Giancaspro, PhD, vice president, foods, dietary supplements, and herbal medicines, US Pharmacopeial Convention (USP; Rockville, MD), says that in this era of international commerce, “there is a very important tool to define quality, and that is the public standard.” Suppliers around the world look to USP monographs to determine specifications of identity, strength, quality, and purity for supplement ingredients. And that, he says “is the most important input that we make.”
Also important is that those standards not advantage one party over another. As Giancaspro points out, “When a manufacturer or a supplier sets its own standards, there are always differences in interpretation or understanding. But those differences can be solved if you look to a third, neutral party to set those standards.” As a disinterested referee, his organization ensures that everyone plays by the same book.
Such fairness and clarity have practical implications, notes John B. Atwater, USP director of verification programs. “Standards are critical because they form the basis of contractual agreements,” he says. “So whether or not I’m the buyer or the seller, we know exactly what’s expected of each other.”
Atwater also emphasizes the importance of verification in enforcing standards. “If the testing procedures behind these standards are verified,” he says, “they can produce accurate and reproducible results, whether I’m performing the test or someone else is.” USP’s library of gold-standard physical samples allows parties to compare commercial products against highly purified chemical reference materials. As Atwater stresses, “The accuracy of any result is only as good as the standards you compare it to. So it’s important to have both elements: validated test methods along with well-characterized reference materials suitable for use in the application at hand.”
Practices Make Perfect
Such advice can pay off in efforts to comply with current GMPs-efforts that, judging by the number of enforcement actions, haven’t always cleared the bar. “If you look at the nearly 500 or so FDA warning letters for GMP failures,” Kiningham says, “a majority cite companies for failing to properly qualify suppliers and conduct appropriate testing.”
If only those firms had put into practice the proper standards and verification procedures, Atwater contends, the citations may never have occurred. “And the sad thing is that USP makes those specifications available,” he adds. “FDA GMPs require that dietary supplement manufacturers qualify their suppliers; well, what better way than to have a neutral third party verify the quality of ingredients? Again, they give everyone an equal playing ground.”
GWI’s Schulz has experienced the value that standards, verification, and constant collaboration can bring. “We have 20 local employees in China managing the supplier-qualification relationship,” he says, “and our upper management meets with the factory on a regular basis to enhance communication and trust, so all the factories we deal with are trustworthy.” In addition, the company conducts manufacturer audits to ensure that on-the-ground production practices meet its quality standards and, “more importantly, those of our U.S. customers and government regulators.”
It’s in part thanks to this back-and-forth that China, as well as other foreign-sourcing upstarts, continues to make “great leaps forward” in quality, safety, and professionalism. Schultz himself has participated in the education and support of Chinese manufacturer-partners, having spent more than 30 years in the ingredients business and visited China some 60-plus times. “The quality of the products from China continues to improve dramatically, and with the right manufacturer can be as good as with any manufacturer in the world,” he says.
Bob Green, chairman, Novel Ingredient Services (West Caldwell, NJ), gives China similar credit. With close to 15 years’ presence in China, he and his colleagues have seen the quality and consistency of the country’s raw materials improve “drastically” over that time. “Initially, China lacked the experience and knowledge the natural-products industry requires,” Green says. “Our approach has been to work in partnership” with suppliers there, “transferring our knowledge, experience, technology, and quality controls.”
That’s led to standards on par with those in the United States, Green says. And yet one can still achieve “a tremendous cost savings with ingredients from China,” he continues. “Labor and raw materials are still cheaper in Asia, especially when you’re dealing with indigenous botanicals.” And the cost savings apply even when buying from Chinese companies that adhere to U.S. GMPs and practice Western quality-control standards, he says-“especially when you’ve built long-range, consistent partnerships, as we have.”
The trick, experts say, is maintaining a hands-on relationship with in-country suppliers. “There is a need for constant communication among customers, distributors, and overseas factories so that the three parties can reach a compromise agreement,” Schultz says. “Overseas suppliers need to understand the U.S. market and receive an education about U.S. standards, especially regarding specs and quality. Continuous communication keeps the manufacturer involved and motivates them to work with their U.S. partners. The stronger the relationships, the more secure the supply for the United States.”
And that’s no trifling matter, because foreign-sourced ingredients will continue to complement our own homegrown options. As Spell says, “The United States simply doesn’t have the capability, climate, and other factors to produce many ingredients that are commonly used in many of the top supplements in the market. For this reason alone, foreign sourcing will not go away.”
Sidebar: Four Elements of Successful Overseas Sourcing
Securing safe, top-quality ingredients from the four corners of the earth is no walk in the park. But the following four tips from Tom Kiningham, dietary supplement program technical manager, NSF International (Ann Arbor, MI), can form the basis of a checklist to make the task less daunting. As Kiningham says, “Foreign suppliers, from manufacturers to shippers to middlemen, have a stake in making sure that supply chains are kept current. Ensuring that raw materials make it halfway around the world with acceptable quality is critical to this global system.”
Photo © iStockphoto.com/BrianAJackson