KANSAS CITY — In North America, bakery products including bread, pastries, dessert mixes, frozen baked goods and cakes sales reached $65.2 billion and $65.9 billion in 2018 and 2019, respectively, according to Euromonitor International. In 2018, production of these required sourcing of 14.9 million tons of ingredients. Likewise, Zion Market Research reported that global demand for baking ingredients market was valued at more than $11.8 billion in 2015 and is expected to reach above $15.7 billion in 2021.

For a variety of reasons, many companies are reconsidering whether they should be buying products from international sources. In terms of the baking industry — besides the main advantage of cost-savings — there are other reasons to globally source, including consumer demand, global competition, global attitudes of the company and proximity to raw materials that may be unavailable domestically.

A typical food supply chain is made up of six stages: sourcing of raw materials, production, processing and packaging, storage, wholesale distribution, and retail redistribution to consumers, according to Jad Asaad, marketing manager, Horeca Trade LLC. An international supply chain, however, differs from local or domestic sourcing. Global sourcing, as defined by Masaaki Kotabe, professor at Temple University, Institution of Global Management Studies, is managing R&D, manufacturing and marketing on a global basis as well as identifying which production units will serve which markets and how components will be supplied for production. This enables a company to leverage its own advantages and the competitive edge of different countries.

Keith Harris, PhD, associate professor of Agricultural Economics, Kansas State University, shared how this played out when he was the director of corporate purchasing for a multinational food company in the United States.

“With globalization, capital, information and transportation moved farther and faster and enabled the purchasing department to extend its supplier network, reduce the total cost, source alternatives and substitutes, particularly for spices and ingredients,” he explained. “Th e food industry recognized the expanded capabilities of international purchasing and, as a result, motivated a diff erent set of purchasing criteria related to meeting demand from consumers conscious of environmental conservation, sustainability, labor rights and genetic engineering practices.”

According to C. Mark Worthey, corporate director, procurement and supply chain, Lallemand, Inc., international trade can support North American baking supply chains.

“The addition of new supply sources for bakers provides greater supply chain security by expanding the supply base and provides increased flexibility for sourcing as international trends and economic cycles may be different than domestic markets,” he said.

A worldly perspective

Today’s globalized food system consists of highly interconnected social, technical, financial, economic and environmental subsystems, and a shock to the system can lead to political and social ripple effects. The most recent example of this is the coronavirus (COVID-19) pandemic.

“Although harvests have been successful and food reserves are available, global food supply chain interruptions led to food shortages in some places because of lockdown measures,” said Franziska Gaupp, PhD, research scholar, International Institute for Applied Systems Analysis.

While global pandemics are rare events, diversifying ingredient sources can help insulate against these types of interruptions.

“For our part, we’ve always worked to maintain a geographically diverse set of supply sources from which to draw,” said Belinda Roberts, global vice president of procurement, Corbion. “We certainly look more deeply at sourcing in some regions, but we also recognize that diverse sourcing is an important, long-term effort that requires an understanding of the raw materials involved, the risks associated with each source and an effective sourcing management strategy. This isn’t a new approach for us, and it’s something that has served us well, particularly now, as the coronavirus has made it more challenging for manufacturers to maintain a secure supply chain.”

Corbion does this by ensuring that it is sourcing from different regions. If Corbion is sourcing from only one country, it relies on other ways to secure that supply as well.

“If we are sourcing solely from a particular country, we try to mitigate risk with in-country stocks or work with a broker that stores product for us within the United States,” explained Janel Keep, senior quality manager, Corbion.

Beyond a global crisis, international ingredient sourcing has also been shaped in recent history by changes in international trade.

“Additional tariffs on imported ingredients have really forced the industry to evaluate internationally sourced ingredients and the costs and benefits of continuing to rely on them,” said Jack Satterstrom, North America procurement manager, Kemin Food Technologies. “The uncertainty surrounding trade talks has made it challenging to determine whether to transition from an established partner, either domestically or internationally.”

Mr. Satterstrom compared a smoothly running supply chain to a reliable car. A person takes the car for granted as long as it starts easily, but if the engine won’t start, it’s obvious how important it is to everyday life. The uncertainty in international markets and the pandemic have exposed the global supply chain’s weak points that need to be addressed.

“The need to maintain multi-regional secondary sources for critical ingredients has been amplified by the COVID-19 pandemic as entire countries have been shut down for periods of time,” Mr. Satterstrom added.

Prudent practices

Deciding to source ingredients internationally should be considered from all angles. Bakers should start by mapping their current supply chain, Mr. Worthey suggested.

“A baker may find that several of their existing supply sources are already originated outside North America even though the selling agent is domestic,” he said.

With a mapped supply chain, bakers can see where their ingredients are coming from and identify opportunities for greater international sourcing or even more transparency. As they look at international suppliers, companies need to keep in mind trust, traceability and transparency.

Dr. Harris expressed the importance of cross-functional teams before and after transactions.

“For instance, the purchasing, product development, marketing and food safety departments worked to qualify suppliers,” he explained, referencing his time as director of corporate purchasing. “Then a different cross-function group made up of purchasing quality assurance, transportation and finance oversaw the expost day-to-day activities of international purchasing. Building supply relationship based on shared goals and relying on interorganizational communication between counterparts helped reduce cycle times and strains working capital that are often associated with international purchasing.”

That relationship, however, is built on trust and shared goals, so bakers need to do their homework when considering a new international vendor. This can come in the form of requesting documentation and certification, performing site audits, and understanding the total cost of ingredients.

“Develop strong relationships to grow international vendors into trusted partners,” Mr. Satterstrom advised. “Visit their sites, invite them to your own, and engage with them outside of a work environment to help build relationships that prove to be immeasurably important when supply issues or changes in demand arise.”

Bakers in the United States also need this transparency for the Food Safety Modernization Act (FSMA). These regulations require bakeries to document everything, and the supply chain is no exception.

“It’s so important to know everything you can about each of your sources in order to fully understand any risks in the supply chain,” Ms. Roberts said. “Doing that requires accurate details from suppliers in order to be in compliance with FSMA, but also when something like a pandemic occurs, you have the necessary data to make informed risk-related decisions and quickly identify impacted ingredients.”

Having this information enabled Corbion to identify which regions and suppliers were experiencing closures and, therefore, which ingredients might be affected.

“This allowed us to effectively stay ahead of supply issues as the virus began to spread more broadly,” Ms. Keep explained.

Traceability tools

One of the most important protections for the supply chain is traceability. This allows bakers to track ingredients from source to product and address any issues of food safety or food fraud along the way.

“Tools such as supply-chain mapping and vulnerability mapping are available to help predict and mitigate food fraud issues,” noted Allie Sequera-Denyko, manager of quality assurance, AIB International. “Supply chain mapping helps us visualize the ingredient flow from start to usage. Once we know the flow, we can use data to determine potential food fraud risks and necessary mitigation measures.”

Vulnerability assessments and the Foreign Supplier Verification Program (FSVP) can help bakers assess and monitor risk factors such as commodity country of origin, auctions and benchmark price.

“Use of such food fraud resources can provide a larger view of traceability and also an accurate product tale for consumers,” Ms. Sequera-Denyko said.

Corbion uses traceability tools to stay informed about every step in the manufacturing process to mitigate supply risks and provide assurance to customers. The Roundtable on Sustainable Palm Oil (RSPO) certification program, for example, has been beneficial to this process.

“One example of where this information has been really helpful for us is in the production of the RSPO Mass Balance palm oil we use in many of our products,” Ms. Keep said. “Because of the specific farming and manufacturing methods required for a product to be RSPO-certified, by using traceability information, we’re able to get insight that goes all the way back to the plantation level.”

Traceability can also provide bakers labeling opportunities. Through this labelling, consumers can see where the ingredients are sourced from.

“Labels like Mass Balance palm oil or Non-GMO Project verified are both examples of this,” Ms. Keep explained. “Some consumers look for claims like these to help them identify products and brands that hold the same values as they do in terms of sustainability.”

Keeping all the implications in mind, North American bakers can gain added value from a broader, more diverse supply chain. Time will show how much of international sourcing will be replaced by local sourcing. However, the North American baking industry has an advantage as the center of the world’s bread basket.