One of the biggest challenges in animal nutrition and feed value chains is ensuring businesses develop robust supply chains that can withstand external pressures. Weak points in our supply chains are the first to be affected during times of stress, which was evident at the start of the COVID-19 pandemic in early 2020. It was clear for the world to see that the consolidation of production in China meant that when this area was impacted by the pandemic, there were issues in terms of supply.
But what should an industry do when a lot of its production is invested in a particular region, to try to mitigate the risks involved? To talk about the challenges the geographic consolidation of supply chains can cause, we spoke to Veerle Hautekiet, Global Marketing Director at Huvepharma to gain her views on this issues, the challenges around it and what she thinks businesses in the sector should be doing to tackle this.
To begin this discussion, Feedinfo raised the question of how this geographic consolidation of animal nutrition products by the industry initially came about.
"Various economic, political, and logistic factors dictate where production is based," Veerle Hautekiet explained. "Asia is a key player in global logistics and a key driver is cost. Production is less expensive in Asia compared to other parts of the world so many pharmaceutical and nutrition companies rely on third party production facilities in Asia rather than investing in their own plants. However, it is clear that due to these decisions, the global COVID-19 pandemic and other supply chain disruptions such as the blocking of the Suez Canal, have highlighted the risks of depending on one region for product distribution."
It is evident that this structure, while economically beneficial in business-as-usual circumstances, can cause problems for the market in certain situations. We asked Dr Hautekiet to share more about what problems she felt we have encountered by relying on certain markets for large parts of the global feed additives production.
"The COVID-19 pandemic has highlighted the fragility of some supply chains. Where some have not been changed by the lockdown challenges, others have buckled or snapped under the increased pressure. Relying on one supply source can be risky. Without flexibility, any disruption in the chain means that supply is cut, and customer orders are not fulfilled," she told us.
"Additionally, outsourcing production to another company means less or no control over production and quality. Production is outside of the management chain so certain compromises will have to be made."
The question many stakeholders in the industry are asking themselves is how do we create more robust supply chains that can withstand market volatility while also ensuring costs are not too high. For Dr Hautekiet this is a challenge the industry has to consider carefully:
"There will always be a balance between local production and centralised production for optimal economic performance. In each case, production must be reliable, sustainable, and profitable to continue. Flexibility and adaptability are vital for survival. As Darwin says, the most adaptable to change will win. As we have seen with the recent disruptions to supply chains all over the world, having one robust chain is not a clever strategy. Spreading risk, continually innovating and implementing the latest technologies to best meet customer requirements are all important. We know this can only be achieved when production is a core part of the business."
Sustainability is a key focus for our entire sector and globally we are all being encouraged to purchase products locally to reduce our environmental footprints. "It is important we focus on building local supply chains when considering sustainability," Dr Hautekiet added. "Transporting feed additives is a costly business. The products are bulky, and typically need to be transported over long distances which increases their carbon footprint. Local production and shorter supply chains reduce this impact and given the pressures on the food and agriculture sector, should be something all businesses are focusing on."
Dr Hautekiet was able to share what Huvepharma has implemented to try to minimise the risk to their supply chains. "For us, it is so important we have complete control over our production process from fermenter to farm. We have taken steps to structure our business in a way where we are not geographically consolidated to avoid supply chain challenges. Huvepharma has three manufacturing sites and two blending sites in Europe, plus another five manufacturing and formulation sites in the USA, which gives us ultimate flexibility to optimise our supply chains, guaranteeing supply to our worldwide network of customers."
"We are constantly looking for ways to improve product supply to our customers. The Huvematic is a unique machine that produces liquid enzymes to specific concentration requirements on-demand and on-site. Precise quantities of concentrated enzyme powder are used to create the required quantities of liquid enzyme product as and when it is required. This reduces transportation costs for high volume liquids, frees up space in warehouses and ensures the highest product quality for the customer. These investments are very important to ensure we can provide local products to our customers around the world, while keeping costs down."
For businesses looking for feed additives suppliers, ensuring a consistent, sustainable supply or products is vital. For Dr Hautekiet this structure and additional investments Huvepharma has made is worth it. "There are many factors to examine before making a purchase of feed additives, but supply chain security should be carefully considered, especially after seeing the impact of the COVID-19 pandemic and reduced output due to the presently escalating energy and raw material costs. Consistency of supply and reliability in your feed additive supplier are invaluable in the feed industry so choosing a supplier with multiple production sites will help. A mix of global and local supply sources will shorten delivery times and reduce the carbon footprint of each delivery."
"My advice to feed producers is to look for companies with their own production facilities who have complete control over product quality. In-house production means more security of supply, and more agility when it comes to meeting the changing needs of the market."