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Overcoming the Challenges of Local Sourcing. Development of Local Suppliers for International Businesses Peter Bracher – Managing Director NSF-CMi Asia Pacific February 2011. Why are we sourcing more food from developing countries?.

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overcoming the challenges of local sourcing

Overcoming the Challenges of Local Sourcing

Development of Local Suppliers for International Businesses

Peter Bracher – Managing Director NSF-CMi Asia Pacific

February 2011

why are we sourcing more food from developing countries
Why 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


the business opportunity
The 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


the challenges for the branded retailers
The 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 ……


hierarchy of business needs
Hierarchy of Business Needs

Investment in safety and ethics becomes essential only when the investment in the brand justifies the costs

Brand equity tipping point


Food Safety

Brand Image

Failed SME Path





the challenges for local suppliers
The 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!


relative standards
Relative Standards

Food Safety Standards by Country






Middle East



Our auditors have found suppliers with comparable standards to UK and US in all countries within Asia - but the range and the average varies


summary of supplier audit finding in developing markets
Summary of Supplier Audit Finding in Developing Markets

Top 5 issues found during food safety audits of suppliers in Asia:1. 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


some solutions to the top problems
Some 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 CCP’s 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 …..


some comments from buyers and suppliers
Some 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

gfsi food safety certification schemes
GFSI Food Safety Certification Schemes

New GFSI Global Markets Standards for entry-level


international food safety certification
International 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



growth of gfsi certification in asia
Growth of GFSI Certification in Asia ….

Example of BRC Certification numbers; 1,170 to 1,438 from ‘09 to ‘10

supplier development roadmap
Supplier Development Roadmap

GFSI Certification


Global Markets Standard

Stage 2


Global Market Standard

Stage 1

Gap Analysis Audit & Action Plan

Supplier Development Workshop

Training Programmes

Customer’s Sales




Programme Costs