By Scott Steinford, Managing Partner, Trust Transparency Center12.20.18
Transparency has become a reality, not an aspiration, in today’s marketplace. Understandably, customers and consumers in the dietary supplement industry have learned to expect more from companies, and are becoming progressively more demanding.
Ingredient manufacturers are becoming the cultural pivot point for change, and supply chains have been the focus of improvement. Expectations about transparency are eclipsing the rate of change though, as demand for more information increases. While companies seek openness from their supply chain, what they ultimately want is the trust of their consumers. To that end, we present here the paradigm of trust transparency—the intersection point of trust and transparency—which is a proactive and top-of-mind strategic approach to creating a process and value system that aligns organizations and their internal and external partners to develop tangible, quantifiable ROI.
There are many obstacles to overcoming perceived deficiencies in supply chain transparency including:
Inertia & Status Quo
Today’s supply chain is still opaque, but slowly moving toward more transparency and clarity. It’s easy to maintain information privately that hasn’t traditionally been shared. Historically, we’ve been taught that we don’t get in trouble for what we don’t say. Today though, what is not said can be as damaging as what is. Consumers and society are shifting attitudes to require a responsible dialogue of truthful representation at an increasing level of accuracy. It is essential to recognize the shift in expectation and understand the need for both good and bad information to be shared.
Culture
Our supply chains traverse a variety of cultures that offer varying levels of transparency. To excuse misinformation or incomplete information as a product of culture, or translation of words or ideas, is not acceptable in today’s market. It’s our responsibility to educate about the importance of transparency and not enable, excuse, or accommodate a culture that is not open to disclosure. Rather, we should make it a point to reward transparency initiatives.
Technology/Geography
The supply chain in which we operate encompasses the entire globe. Twenty years ago, dietary supplement ingredients originated predominately from Europe or North America, where traceability and verification were made easier because of geography and language. The transformation of supply from China made both communication and verification more difficult.
Transparency has also been challenged at a time that coincides with increasing requirements from regulations such as cGMPs and the Food Safety Modernization Act, brands, and consumers. The ability to truly inspect the entire supply chain is virtually impossible due to the expanse of geography the sourcing encompasses.
It’s necessary to communicate more closely with primary ingredient manufacturers, even when middle-level distributors are required. Technology is evolving, providing benefits like improved testing, and detection levels. The ability to create bioidentical synthetic ingredients means companies need to be aware of and hyper vigilant about the differences in identity of sourced ingredients.
Blockchain technology is fast becoming a partner to transparency, as it serves to map an ingredient’s path to market more completely. Through cooperative, integrated, and technologically enhanced efforts, we are increasingly prepared to obtain a clearer understanding and verification of the partners we depend upon.
Competitive Environment
It’s often natural to attempt to hide or misrepresent information in an effort to gain a competitive advantage. For example, retailers may look the other way when label claims are exaggerated or misrepresented. Over 14,000 dietary supplement brands exist on Amazon. While the next closest e-commerce platform offers far fewer, the number of brands remains over 3,000. Trust Transparency Center continues to work with its ingredient associations to police the product categories we represent.
In a series of investigations, we tested and analyzed over 150 brands to evaluate assay against label claim in single-ingredient products. In some analyses, we tested for the presence of a synthetic ingredient when a natural ingredient was claimed. Approximately 50% of the predominately e-commerce brands failed to meet label claim.
We also found that brands were mostly cooperative when the failed analysis was presented to them. Almost all the brands tested had used contract manufacturers to manufacture the product. Most of the failed brands admitted to relying on the contract manufacturer’s Certificate of Authenticity to demonstrate the accuracy of the product.
Here are a couple of excerpts from responses:
Some brands were found to have no active ingredient in their products and have since removed the offering from the market without comment. One company offered both a 200 mg and 400 mg product with both assaying at 200 mg. The 400-mg product was removed from the market.
The brands benefited first and most from this transparency exercise, but it helped all aspects of the supply chain. The ultimate benefactor of trust transparency is the consumer, but that benefit cascades throughout the supply chain.
The Bottom Line
Louis Brandeis, U.S. Supreme Court Justice, famously observed: “Sunshine is the best disinfectant.” Bringing greater transparency to our supply chain is not only a positive practice, but it is also prudent. Proactive transparency is the key to enlisting the trust necessary to provide lasting consumer loyalty. Trust transparency is two-way communication, but one side must initiate the dialogue and continue the conversation.
The process to achieve trust transparency in the supply chain is found by proactively creating relation-based sourcing and to not rely on the status quo. Communications must be strengthened by honest dialogue. Partnerships reflecting the value of trust transparency must develop in place of relationships based on pricing or convenience. Ingredient manufacturers and distributors must embrace a new paradigm of information-sharing and support the ever-increasing demand for knowledge and information required by all segments of the industry, including the consumer.
Scott Steinford is a certified M&A expert with proven executive-level success. From starting companies to facilitating their acquisition, he has an extensive and award-winning track record encompassing the pharmaceutical and nutrition industries. Trust Transparency Center was trademarked in 2007 and has been the cornerstone for industry coaching and strategic counseling.
Ingredient manufacturers are becoming the cultural pivot point for change, and supply chains have been the focus of improvement. Expectations about transparency are eclipsing the rate of change though, as demand for more information increases. While companies seek openness from their supply chain, what they ultimately want is the trust of their consumers. To that end, we present here the paradigm of trust transparency—the intersection point of trust and transparency—which is a proactive and top-of-mind strategic approach to creating a process and value system that aligns organizations and their internal and external partners to develop tangible, quantifiable ROI.
There are many obstacles to overcoming perceived deficiencies in supply chain transparency including:
- Inertia & Status Quo
- Culture
- Competitive Environment
- Technology/Geography
Inertia & Status Quo
Today’s supply chain is still opaque, but slowly moving toward more transparency and clarity. It’s easy to maintain information privately that hasn’t traditionally been shared. Historically, we’ve been taught that we don’t get in trouble for what we don’t say. Today though, what is not said can be as damaging as what is. Consumers and society are shifting attitudes to require a responsible dialogue of truthful representation at an increasing level of accuracy. It is essential to recognize the shift in expectation and understand the need for both good and bad information to be shared.
Culture
Our supply chains traverse a variety of cultures that offer varying levels of transparency. To excuse misinformation or incomplete information as a product of culture, or translation of words or ideas, is not acceptable in today’s market. It’s our responsibility to educate about the importance of transparency and not enable, excuse, or accommodate a culture that is not open to disclosure. Rather, we should make it a point to reward transparency initiatives.
Technology/Geography
The supply chain in which we operate encompasses the entire globe. Twenty years ago, dietary supplement ingredients originated predominately from Europe or North America, where traceability and verification were made easier because of geography and language. The transformation of supply from China made both communication and verification more difficult.
Transparency has also been challenged at a time that coincides with increasing requirements from regulations such as cGMPs and the Food Safety Modernization Act, brands, and consumers. The ability to truly inspect the entire supply chain is virtually impossible due to the expanse of geography the sourcing encompasses.
It’s necessary to communicate more closely with primary ingredient manufacturers, even when middle-level distributors are required. Technology is evolving, providing benefits like improved testing, and detection levels. The ability to create bioidentical synthetic ingredients means companies need to be aware of and hyper vigilant about the differences in identity of sourced ingredients.
Blockchain technology is fast becoming a partner to transparency, as it serves to map an ingredient’s path to market more completely. Through cooperative, integrated, and technologically enhanced efforts, we are increasingly prepared to obtain a clearer understanding and verification of the partners we depend upon.
Competitive Environment
It’s often natural to attempt to hide or misrepresent information in an effort to gain a competitive advantage. For example, retailers may look the other way when label claims are exaggerated or misrepresented. Over 14,000 dietary supplement brands exist on Amazon. While the next closest e-commerce platform offers far fewer, the number of brands remains over 3,000. Trust Transparency Center continues to work with its ingredient associations to police the product categories we represent.
In a series of investigations, we tested and analyzed over 150 brands to evaluate assay against label claim in single-ingredient products. In some analyses, we tested for the presence of a synthetic ingredient when a natural ingredient was claimed. Approximately 50% of the predominately e-commerce brands failed to meet label claim.
We also found that brands were mostly cooperative when the failed analysis was presented to them. Almost all the brands tested had used contract manufacturers to manufacture the product. Most of the failed brands admitted to relying on the contract manufacturer’s Certificate of Authenticity to demonstrate the accuracy of the product.
Here are a couple of excerpts from responses:
- “My plan for correction is to improve the concentration of astaxanthin in this product. Although a slight inconvenience and loss of product and labels, I’m pleased you have brought this to my attention and will be pleased to have a better product going forward.”
- “I first want to apologize for this situation and take full responsibility for it. The product has been removed from inventory and will be destroyed. It came from a now closed Miami distributor: XXXX. This incident will not occur again.”
Some brands were found to have no active ingredient in their products and have since removed the offering from the market without comment. One company offered both a 200 mg and 400 mg product with both assaying at 200 mg. The 400-mg product was removed from the market.
The brands benefited first and most from this transparency exercise, but it helped all aspects of the supply chain. The ultimate benefactor of trust transparency is the consumer, but that benefit cascades throughout the supply chain.
The Bottom Line
Louis Brandeis, U.S. Supreme Court Justice, famously observed: “Sunshine is the best disinfectant.” Bringing greater transparency to our supply chain is not only a positive practice, but it is also prudent. Proactive transparency is the key to enlisting the trust necessary to provide lasting consumer loyalty. Trust transparency is two-way communication, but one side must initiate the dialogue and continue the conversation.
The process to achieve trust transparency in the supply chain is found by proactively creating relation-based sourcing and to not rely on the status quo. Communications must be strengthened by honest dialogue. Partnerships reflecting the value of trust transparency must develop in place of relationships based on pricing or convenience. Ingredient manufacturers and distributors must embrace a new paradigm of information-sharing and support the ever-increasing demand for knowledge and information required by all segments of the industry, including the consumer.
Scott Steinford is a certified M&A expert with proven executive-level success. From starting companies to facilitating their acquisition, he has an extensive and award-winning track record encompassing the pharmaceutical and nutrition industries. Trust Transparency Center was trademarked in 2007 and has been the cornerstone for industry coaching and strategic counseling.
