Title: Development of Local Suppliers for International Businesses
1Overcoming the Challenges of Local Sourcing
- Development of Local Suppliers for International
Businesses - Peter Bracher Managing Director NSF-CMi Asia
Pacific - February 2011
2Why are we sourcing more food from developing
countries?
- International retailers and branded restaurants
moving into developing countries to provide
growth - Lower cost sourcing opportunities
- Human population growth 6.5 9 billion by 2050
- Food sourcing will increasingly move to less
developed countries and smaller suppliers
2
3The Business Opportunity ..
- Rapid growth of retail brands international
brands and investment combined with local
knowledge from the regional franchisee results in
fast growth - KFC from one restaurant in Kuwait to 450 in 74
cities throughout the Gulf and Middle East - The franchisee - American Group - has over 1000
restaurants in 15 countries - Starbucks 300 restaurants in 8 countries in
the region - Alshaya 50 retail brands and over 20 million
customers - Costa Coffee 11 growth and the fastest growing
Coffee shop chain - Tesco 5 Y on Y growth
- Local suppliers into the rapidly expanding
- hypermarkets businesses can experience
- 1000 growth in the
- early years
3
4The Challenges for the Branded Retailers .
- Under-developed logistics, import controls, short
life products, local taste preferences and
regional legal requirements drive a need for
local sourcing - But
- Difficulty in finding local suppliers who can
meet the required food safety standards - Local suppliers may lack the capacity to supply
major retailers - New entrant businesses do not have the buyer
power they experience in their home markets - Local suppliers will have less investment in
their brands than the international retailers
4
5Hierarchy of Business Needs
- Investment in safety and ethics becomes essential
only when the investment in the brand justifies
the costs
Brand equity tipping point
Ethics
Food Safety
Brand Image
Failed SME Path
Growth
Profit
Survival
5
6The Challenges for local suppliers.
- Supplying an international brand requires more
investment and a higher risk than supplying the
local retail marketplace - The balance of power shifts to the retailer from
the supplier - Higher standards of design, construction, hygiene
and documentation requires more investment - Documentation and systems are critical
- Payment terms can be a challenge!
6
7Relative Standards
- Food Safety Standards by Country
U.K
Thailand
U.S.A
Standards
UAE
Middle East
China
India
Our auditors have found suppliers with comparable
standards to UK and US in all countries within
Asia - but the range and the average varies
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8Peanut Butter Supplier South Asia
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9Drinks company South Asia
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10Street food SE Asia
11Manufacturing .
12Summary of Supplier Audit Finding in Developing
Markets
- Top 5 issues found during food safety audits of
suppliers in Asia1. Traceability and recall
systems2. Understanding of hazard analysis3.
Pest control and proofing4. Water treatment
system maintenance5. Staff hygiene facilities - Lack of effective traceability will limit
effective action when something goes wrong, lack
of HACCP systems will hamper effective management
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13Some solutions to the top problems .
- Smaller suppliers in developing markets should
try to keep their systems simple and practical - Traceability choose a large batch size day of
production rather than each shift rather - HACCP divide your products into groups that
have similar characteristics and make sure the
CCPs are really critical to keep the system
practical - Pest control concentrate on keeping them out
rather than killing them once they are in - Working towards a recognized international food
safety certification system will help you to
manage all of these issues effectively ..
13
14Some comments from buyers and suppliers .
GFSI is the right direction for food safety in
the international supply chain However, I feel
there is vast room for improvement in rapidly
developing markets like China and the Middle East
We do not buy ingredients out of China and are
hesitant from most of Asia
Most concerned about food safety in China, India,
Middle East
It most likely will come down to an independent
third party audit that can be trusted to ensure
quality and food safety from these foreign markets
We are in the process of implementing SQF and the
requirements are difficult due to the size of our
operation and our vendor options
Intensive "paperwork" requirements pull company
resources off of the production floor and into
the office
15GFSI Food Safety Certification Schemes
New GFSI Global Markets Standards for entry-level
15
16International Food Safety Certification
- BRC Strong in UK, Asia and US practical,
comprehensive, comparatively simpler
documentation - SQF Strong in US and Australia, good for
agricultural and primary suppliers, practical and
comprehensive - FSSC 22000 new so limited use so far, but good
for businesses that already have ISO quality
systems. - IFS very comprehensive but complex
documentation and limited availability due to
auditor qualification process - Dutch HACCP process based and practical but
limited take up may be replaced by FSSC 22000
in the future - ISO 22000 - Not a GFSI standard. Only covers
processes but a good entry level standard to lead
onto full GFSI
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17Growth of GFSI Certification in Asia .
Example of BRC Certification numbers 1,170 to
1,438 from 09 to 10
18Supplier Development Roadmap
GFSI Certification
GFSI Global Markets Standard Stage 2
GFSI Global Market Standard Stage 1
Gap Analysis Audit Action Plan
Supplier Development Workshop
Training Programmes
Customers Sales
HACCP Certification
Benefits
Programme Costs
18
19Thank you .