Reinventing raw material sourcing

Published: 27-Nov-2017

Partnering with a value-added supplier, not just a supplier, is a necessity

Globalisation has changed the way companies across all industries do business. In raw material sourcing, organisations are increasingly shifting towards a more strategic approach.

The legacy view of it being an administrative task assumes there is no differentiating between suppliers and that they all offer the exact same product, which results in price point being the determining factor for purchase.

Thus, a majority of companies associate procurement costs as a direct hit to their bottom line and establish a goal of minimising those costs. However, in today’s competitive business environment, the traditional approach to raw material sourcing is no longer sufficient for growth. This common model of price driven procurement neglects the significant benefits that companies receive from value-added suppliers.

A partnership between a manufacturer and value-added supplier can lead to innovation across multiple facets: practice, process and product. For instance, a “supplier” simply provides the raw material whereas a “value-added supplier” will solve challenges that may arise when an ingredient is incorporated in the overall formulation.

When done correctly, strategic sourcing can streamline operations, guarantee and improve product quality, and ultimately reduce costs for the manufacturer. High quality ingredients and solutions-based services prevent reworks and recalls, reducing poor quality costs.

Strategic sourcing is especially beneficial in our industry. The NutriScience Industry has a global footprint unlike any other; BI, alone, sources raw materials from more than 40 countries. Owing to this extensive supply chain, sourcing is the most complex function of our industry — not only because the raw materials and ingredients are geographically dispersed, but also because differing currencies, languages, local regulations, quality, seasonality, weather and much more must also be taken into consideration.

Partnering with a value-added supplier, not just a supplier, is a necessity. A value-added supplier is one that has a procurement team with in-depth product knowledge and the capability to mentor vendors, a distinguished vendor qualification programme and excellent, long-term relationships with their vendor base.

In this global supply chain, excellent, long-term relationships with collectors and farmers do not simply mean an easier work environment for the supplier, it means access to raw materials at the source, exclusive supplier agreements and priority access to high-quality crops; it encourages full co-operation with forecasting and planning, which avoids spot buying, decreases the chance of receiving adulterated product and reduces complexities in the supply chain. The partnership between a supplier and their collectors and farmers impacts the manufacturer’s success.

Reinventing raw material sourcing

At a minimum, suppliers should employ a skilled procurement team with in-depth knowledge. That team should be working closely together with Quality Assurance to audit and mentor the vendor base. Most, if not all quality related questions can be answered by evaluating the cultivation and harvesting practices, the manufacturing practices and the quality control programme at origin. BI’s quality requirements help to develop a more sophisticated supply chain since vendors have to get up to par to do business with us.

BI’s Procurement and Quality teams regularly work with vendors to improve their control of the many quality aspects BI requires, including but not limited to certifications, traceability, processing methods (drying and cutting), sampling and testing methods, lab referrals and account facilitation, pyrrolizidine alkaloids (proper growing and harvesting techniques), aflatoxin (proper harvesting, drying and storage techniques) and allergens (identify and resolve issues by reviewing farm techniques, processing, packaging and transportation).

For instance, for the few farms using wheat and barley grass cover, BI educated their farmers on gluten issues that could arise from the sowing stage of these ground covers as well as harvesting stage of the botanicals. Although wheat and barley grass themselves do not have gluten, it can lead to contamination with wheat and barley if left unattended.

The procurement and quality departments are the unsung heroes for a lot of companies in this industry. With the new regulations coming online, such as the Foreign Supplier Verification Programs, and the mainstream trend of transparency, suppliers need to add value beyond price.

The days of traditional sourcing are diminishing. If all your supplier has to compete on is price, then your supplier is weak. They should provide value add through knowledge of space, consultative resources, and professional execution and delivery. Partnerships with dependable, quality conscious suppliers are key to a manufacturer’s reputation and success.

It is very important to review and evaluate the capabilities and expertise of your supplier base. Quality products start at source, and manufacturers looking for future growth should strengthen their focus on strategic sourcing.

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