Supplier relationships in the time of COVID-19

April 29, 2020

Dietary supplement manufacturers who have strong relationships with their raw material suppliers are much better positioned to withstand supply shocks resulting from the pandemic-and to gain the ability to change course quickly as needed.

Dietary supplement companies in many countries remain operational as essential services during the COVID-19 pandemic. In fact, dietary supplements overall are in more demand than ever, with market data showing skyrocketing sales. Amidst this positive news, however, the supplement supply chain is definitely experiencing negative impacts of national lockdowns and logistical bottlenecks.

Nutritional Outlook hosted a webcast on April 16th asking industry experts about what supply chain challenges we are seeing during this difficult time around the world. In terms of solutions, the webcast panelists reminded us of this truism: Dietary supplement manufacturers who have strong relationships with their raw material suppliers are much better positioned to withstand supply shocks resulting from the pandemic-and to gain the ability to change course quickly as needed.

Webcast panelist Michael McGuffin, president of the American Herbal Products Association (AHPA; Silver Spring, MD), said: “My view is that there’s not likely to be a long-term shortage for most ingredients for companies that maintain excellent relationships with their suppliers.”

McGuffin said that some herbs, such as immune health-supporting herbs like Echinacea, elderberry, and honeysuckle may become limited in supply due to increased demand, at least until next year’s harvest replenishes the supply. However, he said, good supplier relationships will help companies navigate these challenges. “I think the corrections will be fairly immediate for companies that are the kind of business where they understand that their relationship with their supplier is a partnership,” McGuffin said. For instance, he said, in cases where disruptions are due to transportation issues and not necessarily because raw materials aren’t available, suppliers can help their clients overcome these obstacles. By contrast, McGuffin said, companies that do not have such established relationships, or who are used to buying ingredients “on the spot market and who hound their suppliers for another dime here or a dollar there” are “going to have a harder time long-term.”

Larger firms, of course, have the luxury of longstanding, established supplier relationships. Take NOW Health Group. NOW CEO Jim Emme, who was also an April 16 webcast panelist, said: “We have seen some slowdowns with materials coming in from overseas, different parts of Asia or South America. That said, we’ve got to applaud our vendors for doing Herculean efforts to keep products flowing in.”

Companies like NOW also understand that eventually, suppliers may have to raise prices as supply shifts, said Emme. “We have seen pricing go up on some botanicals and crop items. Many of our agreements are locked in with long-term contracts, so because of that, our vendors have been able to honor those, and it’s worked out successfully,” he said. “But we know full well that eventually, things are going to go up before the demand subsides.”

There’s another very good reason to prioritize a trustworthy supplier relationship at this time: to avoid being vulnerable to increased economic ingredient adulteration that the market is almost certain to see as ingredient shortages occur.

Webcast panelist Elan Sudberg, CEO of Alkemist Labs (Garden Grove, CA), said: “History has showed us that when demand increases, so does adulteration…We will see more adulteration happening,” he said, ranging from “the usual suspects” to things “as common as flow agents and fillers that are going to probably increasingly be used to cut and dilute material.”

Panelist Shaheen Majeed, worldwide president of Sabinsa, said: “Manufacturers absolutely need to prepare for the economic adulteration that always happens either with strained supply or increased demand. Today, unfortunately, we have both. So, adulteration is inevitable. Now, if manufacturers are working with new suppliers they have not vetted, they must seriously ramp up their testing programs right away. I would encourage they ramp up their testing program regardless. It’s just the nature of the beast right now, and we need as an industry to be very cautious.”

Communication between suppliers and purchasers is also key during this time, said Majeed. “Things are changing so quickly, and no one living has gone through anything like this before, on this scale, so there’s a lot we cannot predict. There is going to be disruption and uncertainty, but focusing in with your partners will help minimize some of those doubts. Transparent communication will help everyone manage things better. So, have those frequent communications with your supplier reps to discuss forecasting, and keep them apprised as things change and evolve. It’s the best way for you to keep your material coming in.” And if you need to change a product formulation due to supply issues? “We understand that, and we’re going to need to have those conversations-to have them sooner than later,” he added.

Securing responsible suppliers, and vigorously testing ingredients, has never been more important than it is now. It’s the new normal, as some might say. “The best control you can have over supply is excellent and consistent relationships with suppliers,” said McGuffin.

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