Consumers are increasingly concerned about the health and safety of their food. They want insight into where their products are coming from, how they were made and information about the nutrition and quality of the ingredients. All companies in the food supply chain need to work together to implement transparent sourcing practices and communicate information on product integrity and safety across the entire supply chain down to end-users.
Food Manufacturing recently had the opportunity to correspond with Mickey North Rizza of BravoSolution on the topic of food transparency.
Q. How can food manufacturers, suppliers and retailers shape their sourcing strategies to accommodate the trend toward food transparency?
A. Diversifying the supply base is the first thing companies should do. This will give teams a safety net and a better chance of finding alternative supplies in the event a current supplier can’t meet transparency expectations or a contract is violated and voided. Conducting regular, proactive supplier reviews and audits to ensure your supply partners are meeting transparency standards is also critical. When you have insight into a supplier’s manufacturing processes, you can anticipate where issues might occur and discuss these potential problems with suppliers before they take hold, and map out a mitigation strategy together.
Transparency is a two-way street. Suppliers need to be willing to comply with the transparency standards you set, and you need to be willing to work with them to achieve your goals. When done successfully, the approach is beneficial for both parties – suppliers gain deeper visibility into their own supply base, and brands are better equipped to increase customer loyalty.
Q. What costs and challenges do these companies encounter when revamping their sourcing strategies to meet demand for transparency in the supply chain?
A. Meeting the demand for food transparency is not easy. One of the biggest challenges is re-evaluating existing suppliers to make sure they can meet the new transparency standards outlined for them, and if they can’t, finding new vendors. Once teams have a trusted supply base, finding a process that works for both parties for tracking and measuring pre-determined key performance indicators is also a challenge. Working in tandem and staying on the same page is incredibly important, but this requires diligence and commitment from both parties.
From a cost perspective, sourcing non-GMO, antibiotic- and preservative-free ingredients is often more expensive. When considering a more transparent approach, it’s important to consider how this extra cost will be covered. Finding other areas in the business where you can cut costs will be important to avoid a significant hike in your cost structure.
Q. What can food manufacturers and suppliers do to demonstrate and clearly communicate their transparency efforts?
A. At the outset of the relationship, make sure transparency goals and expectations are clearly defined and written within your contract. This will keep both parties accountable and will give you a better chance of success. Once that’s set, identify, track and report on key metrics you’ve identified together. Having a vision for transparency is great, but it means nothing if you don’t outline what it’s going to take to get there and communicate your progress along the way. Having this plan of action in place and reviewing the process on a regular basis will set your team and suppliers up for success and allow you to clearly communicate your progress not only to your supply base, strategic partners and stakeholders, but also to interested consumers.
In addition, create clear paths to help your smaller and localized suppliers meet your transparency requirements. Chipotle recently introduced its Local Grower Support Initiative which committed $10 million to help small local suppliers meet their new food safety protocols. The program focuses on three areas: training, financial support and developing new partnerships with local suppliers. For many small, local suppliers in rural communities it is difficult to comply with new heightened standards. The cost of training and additional testing may prevent these sources from meeting the new criteria, but with Chipotle’s help, the suppliers can meet the new standards. Chipotle recognizes these suppliers are their partners and they must help them become compliant.
Q. How can food manufacturers, suppliers and retailers reduce risks involved with changing consumer preferences and demands?
A. The reality is that consumer preferences and demands are highly volatile and fluctuate depending on a variety of external factors. It’s important for food manufacturers, suppliers and retailers to stay on top of market trends and consumer tastes in order to better anticipate new market pressures and driving forces that might cause a shift in your sourcing strategy.
Keeping a pulse on the food industry as well as global news will help your team forecast demand, illuminate potential risks that need to be addressed now, and give you time to create a plan of action for how to move forward.
Q. The trend toward food transparency is steadily growing. How do you see this concept taking shape over the next couple years? What should food retailers, manufacturers and suppliers be doing now to prepare?
A. The push for wholesome, healthy ingredients is not expected to slow down anytime soon. As more companies realize the importance of transparent sourcing and its impact on brand loyalty and trust, I anticipate that more organizations will make the pledge for transparency and bring products to market that have this “seal of approval.”
This momentum will continue throughout the next couple of years and will force companies to take a deeper look at their sourcing strategies and rethink the way they bring their products to market. Retail companies, manufacturers and suppliers need to start looking at their supplier relationships now, identify areas for improvement and start to put a plan of action in place so they’re ready for when transparency becomes an industry-wide standard.
Mickey North Rizza is vice president of strategic services at BravoSolution. She is one of the top supply chain experts in the industry, a former analyst at both AMR and Gartner, and a member of the Institute for Supply Management. She leverages her practitioner heritage and deep domain knowledge to accelerate sourcing and procurement performance.