Contract manufacturers managing supply chain issues

The COVID-19 situation has impacted business throughout the natural products supply chain. Retailers—both brick and mortar and online—have seen runs on products from toilet paper and canned beans to elderberry and vitamin C supplements. Foreign ingredient suppliers have been managing to staff production facilities but are running into logistical challenges to get products shipped internationally. Manufacturers are hearing from both sides and looking to fulfill demand from brand marketers while navigating inventory controls.

In discussions with several contract manufacturers, most said production has not been adversely impacted, but they’re closely watching the supply chain for active ingredients as well as everything from capsules to packaging materials. According to NAI’s CEO Mark LeDoux, sourcing certain raw materials, such as biotin and vitamin C, has been difficult, with some excipients in short supply, although he expects to see those commodities replenished easily in the next few months. Similarly, Mike Finamore, CEO of Gemini Pharmaceuticals, noted the supply market has been tightening on some foundational ingredients, but it hasn’t been a major pain point.

Instead, both LeDoux and Finamore called out concerns with transportation, given flare-ups in different countries requiring extended lockdowns as well as containers and ships out of position, and a dearth of personnel, which is likely to cause delays for ingredients coming from overseas.

Also on the minds of many industry members is potential economically motivated adulteration in the botanical supply chain, particularly around popular ingredients such as elderberry and echinacea. “The demand for many of these items is so high, that there is a real concern by responsible members of industry that adulteration may be underway with less scrupulous ‘participants,’” LeDoux commented.

Across the board, reputable manufacturers said their current GMP (good manufacturing practice) and HACCP (hazard analysis critical control point) operating procedures put them in a strong position to operate safely, albeit with additional steps. NAI’s facility is closed to all but employees and government personnel to maintain appropriate safeguards that have been put in place. Gemini doubled down on its safety protocols, hiring professional nurses to take the temperature of everyone coming into the facility every day; filling out forms daily around general contact history; and amping up cleaning schedules. And Best Formulations re-arranged production equipment, rotated shifts and updated schedules to optimize social distancing measures, while also increasing sanitation efforts and monitoring employees’ health.

In addition, all operators are taking extra steps to support their communities, with Best manufacturing and donating hand sanitizer to local first responders; Gemini donating 7,000 N95 respirator masks to “Mask a Hero” in New York; and NAI rejecting the concept of government assistance to ensure smaller entities had the opportunity to take advantage of the PPP CARES acts. At the same time, Best’s CEO Eugene Ung added he’s seen challenges in getting necessary PPE for their operation, with supplies tightened and costs increasing; however, “the safety of our employees is paramount, so we obtain PPE, no matter the cost.”

While the exit path is unclear, the future is likely to look quite different.

Gemini’s Mark Jost, senior vice president, commented, “The question we must consider is whether this sales surge will remain or die down. Particularly as unemployment rises, people may have to consider whether they can afford supplements or need to buy food.”

Similarly, LeDoux said he expects to see greater concerns around globalism as a concept and the potential for re-evaluating “Made in America” claims as consumers may be more willing to support locally made goods and services. He also predicted the government taking greater steps to become more self-sufficient in critical component production and raw material processing to the United States from overseas, to avoid putting its citizens and businesses at risk.