Avoiding gaps

COSSMA: Which raw materials were more difficult to obtain due to the coronavirus pandemic and what was the reason for this?

Julie Carnes: Over the past two years, very few personal care ingredients have been spared from the supply chain and logistics problems the coronavirus pandemic has spurred. There isn’t one culprit, but rather a combination of factors that have wreaked havoc on supply chains including: the significant decrease in consumer demand at the beginning of the pandemic followed by an un-forecasted and significant surge in demand, feedstock and intermediate shortages, Covid-lockdowns impacting production capacity, congestion at ports around the globe, labour shortages, vessel and carrier availability and other obstacles. 

Early in the pandemic, goods coming from China and markets impacted 
by lockdown were universally affected, though many customers were shut down during the worst times or shifted focus to making hand sanitiser. Alcohol and thickeners were on tight supply, while demand sharply increased.

While the pandemic itself posed issues with international trade overall, it was the demand recovery period of 2022 which posed the most significant and widespread issues. During the early 2020 phase of the pandemic, the overall beauty and personal care market experienced a significant slowdown and uncertainty, especially in sun care and colour cosmetics.

When demand resurfaced following vaccine availability and the reopening of economies, consumer demand quickly rebounded and shocked a supply chain that was low on inventory. This ‘bullwhip’, in economic terms, impacted materials across the board and strained global capacity, necessitating playing catch-up even up to now.

What stockpiling options are possible and could help here?

Intuitively stockpiling may seem like a viable option and indeed we have seen many manufacturers buy extra materials to hedge future unavailability. This type of buying makes the overall market tighter in the short term and creates amplified lead times and capacity for an already strained supply chain. In a time where working capital is tight for many manufacturers and capacity is limited for many producers, the most consistently successful strategy is to stick to historical forecasts and production schedules through sales control.

We manage inventory for customers in this way to ensure they receive a fair share of what is available, based on their purchase history, to help ensure security of supply in a tight market.

The restrictions have also brought about a huge push in terms of innovative developments. What alternative manufacturing or supply options have emerged during this time?

What the supply upsets have shown is the ability of personal care formulators to work within the matrix of materials on the label to optimise performance based on available materials. For shorter-term situations with one material being short, the rest of the formulation will need to “stretch” to keep the same overall feel and performance. For longer-term innovation, we’re seeing movement toward options that are more locally sourced or have readily available, sustainable feedstocks that can scale globally.

What opportunity can green chemistry offer here?

Many new green technologies offer reliable alternatives to some of the global feedstock issues. Inolex, for example, has a line focused on high-performing natural materials that come from palm-free sources. Biosynthetic Technologies offers innovative emollients from readily available castor oil, which has a negative carbon footprint. Being sustainable from an ingredient standpoint needs to come with material availability.

What other disruptions or negative impacts can there be on the supply chain?

The pandemic was not the only issue to shock supply chains during 2020 – 2021. The southern U.S. experienced unprecedented weather events, from a great freeze to repeated hurricanes. This shut down much of capacity for a major portion of the U.S. petrochemical infrastructure.

Trade regulations have also impacted materials, specifically palm oil, with the U.S. embargo of Indonesian exporters because of forced labour conditions. These have significantly impacted palm oil imports in the U.S., which forms the chemical backbone of many personal care products.

The volatility of China’s energy infrastructure policy and associated shutdowns in manufacturing has further disrupted global supplies of many chemicals throughout 2021. Ongoing global instability has also had a significant impact on the cost of energy and availability of key feedstocks, further complicating the supply chain.

How can these be prevented?

While supply chain issues cannot be fully prevented in the case of natural disasters, global instability or market capacity, formulators can choose ingredients based on overall availability of supply and supply chain reliability. Lead times for raw materials need to be built-in to the timelines for R&D, scale-up, and manufacturing.

What do you think of blockchain technologies for the supply chain?

Blockchain technology is a great tool for tracing and tracking ownership and origin, and it would be a great fit for the chemical industry if/when it could be universally implemented.  

We will probably have to live with pandemics and (inter)national conflicts in the future. How can both manufacturers and users of raw materials best prepare for these situations?

The best advice is always having a back-up plan from the start and to understand the supply chain during the innovation process. Many innovative materials have more complicated supply chains versus basic materials (e.g., sunflower oil vs. a polymer with several precursor materials).

Understanding the value in the formulation for the key ingredients and understanding the risks in the supply chain can help in planning of additional lead time considerations, inventory levels and sourcing choices for the most important, innovative materials and alternate sources for your commodity-type ingredients.