As we emerge from COVID, what is the state of the supply chain, and what actions should we take as we move forward? That was the key focus of a talk at the American Herbal Products Association (AHPA) 9th Annual Botanical Congress. “Maintaining a Sustainable Supply Chain” took a deep dive into the outlook for the botanical market, focusing on the farm through to the manufacturers.
Outlining key challenges, Ettore Milano, Indena Purchasing Director, said, “The situation created by the COVID-19 pandemic has been and is a big challenge for all companies, and in particular for those who have a complex supply chain with a global extension.” Milano pointed to delivery delays and stock shortages due to partial or total stop of transportations, business closures, and the suspension of agricultural and collection activities.
“It’s evident,” he added, “that for some products—on top of the list, the immunoboosters—the pandemic has revamped the interest that was not there for years, causing a long period of shortage for many companies.” That can lead to dramatic increases in price, he said, and the scenario is worsened by possible adulteration, or by blending the materials with different species, which happens when supply chains are affected by external events.
Using wild Echinacea angustifolia root as a case study, Milano explained that there has been an increase in cost for the final extract in the range of 25%—normally, he said, it is hard for the end users to accept a price increase of 10%. There has been a shortage of the final extract available, and the need to explain all of this to some customers who complained that they could find Angustifolia extracts for much cheaper…but, Milano stressed, those most likely were not the correct species.
Complicating matters: an over production of cultivated materials in the next year, which could lead to a crash in the supply chain a few years down the road. And don’t forget, Milano advised, that most botanical ingredients are considered commodities within the market, and therefore it would not be strategic for companies to redesign their supply chain. “The investment done to revise the supply chain could not be sustainable,” he cautioned, and return on investment would be unpredictable.
A better move, according to Indena: focus on relationships with partners, and avoid being overly price-oriented. “Stock management and strong relationships with the suppliers are probably the best ways to minimize the risk connected to such adverse events.”
Milano discussed the BCP Project. “The pandemic has forced many companies to adopt a Business Continuity Plan, which, through an impact analysis, highlights the processes that must be constantly monitored to maintain the business.” He added that the implementation of a BCP measures the resilience capacity of each company against adverse events that may occur. Indena has started to adopt the implementation of this.
Retailer Supply Problems…and Opportunities
Head to www.WholeFoodsMagazine.com for expanded coverage to help retailers solve supply challenges, including:
Streamlining Replenishment & Operations
Retailers can save time and better serve their customers by eliminating the use of phone calls, fax machines, and clipboards for their reordering and making use of advanced technology. In The Natural View: Wholesale Buying, Simplified!, Vori CEO & Co-Founder Brandon Hill discusses the capabilities of the multi-vendor ordering solution provider for the global food supply chain to help retailers communicate with vendors to make wholesale buying easier, reducing reordering time by 80%.
Smart Supplement Handling
“A frequently under-appreciated fact about dietary supplements is the importance of proper care and handling of through all stages of the supply chain—ingredient procurement to manufacturing to storage, to distribution and yes, you guessed it—sale,” says Scott Steinford, Founder, Trust Transparency Center, in his latest Tracking Transparency column. Go here for this web exclusive content looking at how with increased awareness and transparency we can improve product offerings and confidence.
Bringing the talk to the farm, Danielle Kruse, West Farm Site Leader & Manager, Trout Lake Farm, LLC, also emphasized the importance of proper long-term planning (the more we can plan, the more sustainable we’ll be, she stressed), long-term relationship building and investment in the workers, and education. “Not only do we need to educate our customers on our challenges and costs of producing these higher quality, consistent supply of botanicals, but we really need that to continue through the supply chain, and ultimately educate the consumer on what goes into producing botanicals, so they’re willing to pay more as well.”
Ed Fletcher, President & CEO of Native Botanicals, supplier of both cultivated and wildcrafted botanicals, said we won’t fully understand the whole impact COVID has had worldwide for a few years. “We’ve been talking, some of my colleagues in the industry and particularly on the wildcrafting side here in the U.S., we don’t think it’s going to really manifest itself until 2023 and we see the roll down effect of all the wildcrafting issues.”
Cooperation throughout the supply chain is essential, he urged. “To me this is really just the basis of having a sustainable supply chain, not just in COVD, but any time: Cooperation between each link in the supply chain. Transparency, really. When an issue arises, collaborate to solve it. There’s always going to be issues…work those out with your supplier and your buyer…what this does in and of itself is build resiliency into the supply chain. When you’ve already worked through an issue, and you understand how to fix that issue, whatever it may be, that’s going to build resilience, and it’s going to build appreciation up and down the links in the supply chain.” For more from Fletcher, tune in to The Natural View: Herb Wildcrafting & Sustainability. He discusses the challenges wildcrafters face, pressing sustainability issues, and what industry members are doing to help safeguard the supply chain, including the actions suppliers, brands, retailers, and consumers can take to make a positive difference.
Fletcher’s final message for the industry: “Reward your suppliers. Appreciate them, respect them, reward them equitably.” WF