How do you measure the cost-benefit analysis of raw material diversification?

One of the most overlooked aspects of diversification is regulatory changes. These should not be a surprise. You need to do a risk assessment of every raw material to see which ones may have future challenges.

In a petfood industry career of over 40 years I have worked on diversification of petfood raw materials on both sides, with petfood manufacturers and ingredient suppliers. It might sound obvious but take time to reflect, “How well do you work with your suppliers?” If you can develop a mutually beneficial relationship where trust allows more of an “open book” approach to sharing knowledge then your raw material process can be easier and both parties get to a “Win-Win” position.

To diversify raw materials in an industry, you need to research alternatives, evaluate suppliers, conduct tests, manage risks, invest in infrastructure, implement gradually, and continuously monitor performance, always seeking improvements.

In the wet petfood industry, some strategic, functional raw materials are also used in human food. A major benefit of diversification is helping petfood manufacturers ride out supply constraints or price spikes due to demand from the human food industry. This might help keep your production lines running or enable you to identify new more cost effective raw material suppliers or ingredients. However, this is not without risk and challenges exist but ask yourself if you don't diversify will my production lines keep running?

I agree with potentially exposing the business to more variability. Although single sourcing does cause disruptions in business, especially after the pandemic, unless it is a commodity material it is difficult to find materials with the same or very similar specifications.

In a petfood industry career of over 40 years I have worked on diversification of petfood raw materials on both sides, with end-users and suppliers and both face challenges. One of the biggest challenges is a lack of resources (time, skilled people and facilities) and we see this picture on both sides. This exposes us to the challenge of building trust enabling a new supplier or ingredient to be brought on stream and understandably an end-user might be reluctant to make a change. There are strategies to help overcome this challenge and an “Open book” approach to data / knowledge sharing is a beneficial part of getting to a “Win-Win” position. Whilst this can be a challenge, ask the right questions!

Everyone is stretched for resources, and raw material diversification whilst beneficial is challenging. Unless the many barriers are overcome end-users can understandably be reluctant to implement change. For food and petfood raw materials, food fraud is another potential barrier. In a petfood industry career of over 40 years, I have observed the worst effects of food fraud and supported development of new risk mitigation strategies in the sector. Take time out to reflect “Are you making best effective use of internal and external risk mitigation resources to mitigate against food fraud and protect my business and customers?” If not, then your business and customers can be at risk.