Building Resiliency into Supply Chains through Alternate Raw Material Sourcing

First, A Few Words about Novel Ingredients

Unique, sometimes patented ingredients may provide a significant competitive advantage in the market, but it’s important to weigh the possibilities of using ingredients that have no alternate source early in the product development process.  Understanding the manufacturer’s supply chain and its inherent level of resiliency up front allows you to determine if you are willing to accept the associated risks. Some niche natural ingredients may also have greater variability in quality due to changes in climate and growing season.  Again, while these ingredients provide a level of differentiation for your products, they may limit the ability to find suitable alternative sources.

Raw Material Quality

The first step in evaluating an alternative source for ingredients is a comparison of specifications and composition. It is important to keep in mind that even though the INCI name of an ingredient may be the same, there may be differences in synthesis or manufacture which lead to difference in traces of compounds that can affect your final formulation. More specifically, whether plant, animal, petrochemical or biotech, the origin of source materials and intermediates can result in differences in properties and trace contaminants. The presence of processing aids or preservatives that may not appear in the final INCI name are other items should also be investigated. Differences in the physical parameters of some ingredients needs to be compared, for example, the particle size range of powder fillers in color cosmetics can have significant impact on skin feel and appearance on the skin. These sources of potential differences from current ingredient supply should also be communicated early on to partners in regulatory and safety groups, so they can assess the impact on claims and compliance with regulations in every region in which the product(s) are sold including safety assessments required as part of the Product Information File to sell cosmetics products in the European Union.

A minimum of three lots of material should be evaluated to understand the variability of specified parameters and the manufacturers capabilities. It may be tempting to take the data from the certificate of analysis at face value, but test each parameter that you have determined is essential to the function of the ingredient in your finished formula to confirm accuracy of the data reported. Occasionally, selection of conforming lots or changes to specifications can be negotiated but this may also impose limits on supply. 

It is imperative to test the ingredients in your formulations to assess the impacts on factors like pH, viscosity, odor, appearance, and packaging compatibility. In-use performance and stability testing are also necessary. While these steps can add weeks and months to timelines, they are essential for exposing issues before a product gets into the market where failures become more costly and can damage a brand’s reputation.  Additionally, batches with alternate ingredients should be scaled-up to production. Changes due to alternate source of ingredients may become more apparent as accuracy of weighing on larger scales is reduced. If an ingredient is used in many finished goods, there may be some rationalization of which formulas should be tested by assessing the percentage of the ingredient and its importance to performance, stability, efficacy and claims. 

Costs, Lead Time, Manufacturing Location and Warehousing

Frankly, these factors may all be the exact reasons you’re looking into finding alternate sources for raw materials to begin with. All of these factors should be addressed when evaluating the supplier of any ingredient. The cost of an ingredient can be simplified to raw material costs and conversion costs. Raw materials include all of the major chemicals and intermediates used in the manufacturing process; conversion costs are associated with labor, equipment, depreciation, packaging, etc. It is important to keep in mind that the raw material supplier needs to turn a profit in order to produce and maintain production of quality ingredients, in selecting the lowest cost you may be sacrificing quality or customer service. Order quantity can also influence cost significantly.  But if a supplier’s ingredient meets your requirements, it may be necessary to compromise or be faced with being unable to produce finished goods.

Lead times reflect manufacturing and transportation constraints. It is important to get an understanding of the supplier’s inventory management and warehousing capabilities as well as your own to looks for ways to these effects of these constraints where possible. Country of origin and manufacturing location of an ingredient is something you will also want to take a look at. If your ingredient is, for an example, a botanical that is only grown in one small area of the world, a natural disaster could have potentially devastating impacts on quality or severely limit transportation of the ingredient. Other factors of business like just in time or lean manufacturing may help keep costs down but can create levels of unpreparedness that exacerbates supply issues. 

Regulatory Compliance and Certifications

Along with specifications a supplier should provide a complete technical dossier which includes contains production methods any necessary safety and regulatory information. Verify that each supplier for an ingredient is compliant with any necessary regulations for each region that the finished goods are marketed in. For example, synthetic organic pigments used in cosmetics manufactured or sold into the United States need to be certified by the US Food and Drug Administration (FDA). Each batch of pigments is issued a unique certification number that should appear on the suppliers certificate of analysis and the FDA publishes a list of companies requesting certifications so that you can confirm they have been following proper processes. 

If you are claiming any third-party certifications like ECOCERT or Leaping Bunny’s cruelty-free designation, you will need to verify that all new suppliers also meet the requirements of these organizations or you can consider the business impact of altering these designations which may include changes to labeling or advertising. 

Supplier Communication and Responsiveness

It is more important than ever to communicate regularly with your suppliers about pricing, availability, and lead times. Quick turnaround of requests for regulatory and safety information is also important as missing documentation can lead to bottlenecks in timelines or prevent a material from being evaluated altogether.  Additionally, working with a supplier whose mission and goals also aligns with your brand values is something that should not be overlooked in the process; today consumers are taking a much deeper look into the supply chains behind the products they buy in hopes of spending their money wisely with companies that align with their core values in areas like sustainability and social impact. 

Ideally, evaluating multiple suppliers for raw materials is part of the product development process. While it creates more work and often adds to product development time lines, taking a thorough approach to assessing alternative suppliers of ingredients can help mitigate unforeseen disruptions in supply chain.

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