03: Creating Your Product
Ingredient Sourcing
As you scale your operations it’s crucial to secure reliable and scalable ingredients. This chapter will guide you through the essentials of sourcing commercial ingredients, ensuring food safety through third-party audits, and collecting Certificates of Analysis (COAs) from your vendors.
When I started product development for TeaSquares I ended up going to Whole Foods and used products off the shelf to formulate our snacks. This was a helpful first step in getting started, but I realized pretty soon that I needed to source commercially available products. Why? Every ingredient functions differently depending on it’s source and provider. An organic coconut oil from one vendor can have very different traits from another vendor.
Source Commercial Ingredients
When transitioning from small-scale production to commercial-scale operations, you’ll quickly realize that ingredients available in small quantities aren’t always accessible in the large volumes required for mass production. Here’s how to navigate this challenge:
Identify Your Needs: Start by identifying the key ingredients you’ll need for your product at a commercial scale. This involves understanding the quantity, quality, and specific characteristics required for consistency in your product.
Research Vendors: Investigate potential vendors who can supply these ingredients reliably as your production scales. Look for suppliers with a proven track record in your industry. Trade shows, industry conferences, and online supplier directories are excellent resources for finding reputable vendors.
Scalability: Ensure that the vendors you choose can scale with you. It’s not just about meeting your immediate needs but also about supporting your growth. Ask potential suppliers about their capacity to handle increased demand and any potential bottlenecks they foresee.
Sample Testing: Request samples from potential suppliers and conduct thorough testing to ensure the ingredients meet your quality standards. This step is crucial to avoid surprises when you scale up production.
Types of Suppliers
Farmer / Producer: Directly sourcing from farmers or producers can ensure you get the freshest ingredients and may provide cost benefits. However, it requires managing multiple relationships and ensuring each producer meets your quality and safety standards. Buying directly from a farmer may limit your options in terms of variety and quantity.
Wholesaler: Buying from a wholesaler offers more options and flexibility in terms of ingredient variety. Wholesalers can provide competitive pricing and flexible delivery options. However, purchasing from a wholesaler may require a minimum order quantity and might not offer the same level of transparency and traceability as purchasing directly from a farmer.
Distributor: Distributors manage the logistics of getting ingredients from multiple sources to your manufacturing facility. They often provide value-added services like bulk purchasing, inventory management, and delivery coordination, making them ideal for large-scale operations. While purchasing from a distributor may involve higher costs, it allows for economies of scale and access to a wide range of products that may not be available through other channels.
Many suppliers specialize in certain types of ingredients, such as oils, flours, or nut products. This specialization can mean better pricing and expertise but might require working with multiple suppliers to cover all your ingredient needs. Limiting the number of suppliers can reduce complexity and shipping costs.
Food Safety
Food safety is non-negotiable. Ensuring your suppliers adhere to high food safety standards is critical to maintaining your product’s integrity and consumer trust. Here’s how to ensure your vendors meet these standards:
Good Manufacturing Practices (GMP): Ensure that your suppliers follow GMP, which are guidelines that provide a system of processes, procedures, and documentation to ensure that products are consistently produced and controlled according to quality standards. GMP covers all aspects of production, from raw materials to finished products.
Third-Party Audits: Require your suppliers to have current third-party food safety audits. These audits verify that the supplier’s processes meet internationally recognized standards for food safety. Common audits include SQF (Safe Quality Food), BRC (British Retail Consortium), and FSSC 22000 (Food Safety System Certification).
Audit Reports: Request and review the most recent audit reports from your suppliers. These reports provide insights into the supplier’s food safety practices and any areas that may need improvement.
Collecting Certificates of Analysis (COAs)
COAs are critical documents that certify the quality and safety of the ingredients you purchase. Here’s why they matter and how to manage them:
What is a COA?: A Certificate of Analysis is a document issued by the supplier that confirms the product meets its required specifications. It typically includes results from various tests, including microbiological and chemical analyses.
Importance of COAs: COAs ensure that each batch of ingredients has been tested for contaminants like bacteria, pesticides, and heavy metals. They provide a layer of assurance that the ingredients meet safety and quality standards before they are used in your production process.
Managing COAs: Establish a system for collecting and storing COAs for all your ingredients. This could be a digital database where you can easily track and access these documents. Ensure that COAs are reviewed regularly and matched against incoming ingredient shipments.
Vendor Requirements: Make it a standard practice to require COAs from all your vendors for each batch of ingredients. This requirement should be clearly stated in your vendor agreements.
Key Supplier Considerations
Multiple Vendors
Having at least three vendors who can provide each ingredient can help ensure a steady supply of ingredients. This can help prevent any potential disruptions to production in the event that one vendor runs out of stock or raises prices. For example, if you are sourcing flour, having multiple vendors can help ensure that you have access to flour even if one of your suppliers experiences a shortage or raises their prices.
Location
Sourcing ingredients from suppliers as close to your manufacturer as possible can save on freight costs. Freight can be one of the most expensive line items on your ingredient order, and purchasing ingredients close to your manufacturer can dramatically reduce costs. For example, if you are sourcing products for your products, sourcing from local farmers or suppliers in the same region can help reduce shipping costs.
Running TeaSquares, we needed to source almonds and pumpkin seeds. I found a great supplier in Washington state with good pricing per unit on each of these. The problem was that our manufacturing was in Chicago, IL, so once we added in freight, it increased our product cost by 30%. After reviewing, I found a supplier in Chicago with better per unit pricing, that also had free delivery, greatly reducing our costs.
Price
When choosing vendors, it’s important to consider the price of the ingredients. Look for competitive pricing, but be wary of vendors who offer significantly lower prices than their competitors, as this could be a sign of lower quality ingredients or unreliable supply. For example, if you are sourcing vanilla beans, you may want to compare the prices of different suppliers to ensure that you are getting a fair price without sacrificing quality.
Also be sure to note quantity breaks. How does pricing decrease as you increase the quantity you order? Note freight costs there as well, because as unit price decreases, freight cost can increase when you move from parcel shipping to LTL shipping.
Quality Assurance
Ensuring that your vendors have robust quality assurance processes is essential to ensure that the ingredients meet your specifications and requirements. This can include testing the ingredients for quality, consistency, and purity. For example, if you are sourcing spices, you may want to ensure that your supplier tests their spices for contaminants like pesticides or heavy metals.
Contract Terms
Reviewing the contract terms with each vendor carefully can help prevent any potential issues in the future. This can include factors such as pricing, delivery schedules, minimum order quantities, and payment terms. For example, if you are sourcing sugar, review the minimum order quantities required by each supplier so that you can meet your production needs without over-ordering.