2010 was a challenging year for the non-GMO lecithin markets, where demand far outstripped supply, mainly due to the reduced availability of the non-GMO lecithin from Brazil. Consequently, this shortfall in supply has not only attracted more players from emerging countries such as India to the market, but has also opened up the market to new opportunistic producers.
Cooperation with the new suppliers in India has created challenges for both the supplier as well as the buyer, for example, in relation to traceability, cotton GMO contamination, food safety in general, and supply chain management.
RF Solutions was set up to counter these challenges when introducing the Ruchithin soy lecithin from the company Ruchi Soya Industries Ltd. into the European market. Ruchi Soya industries Ltd is fully aware of the risks and uncertainties associated with sourcing from India and therefore decided to incorporate the sales and marketing experience and technical expertise of RF Solutions in order to enhance its international image. This successful partnership with RF Solutions has enabled Ruchi to triple its market presence in Europe within 1 year.
Traders and a large number of small-scale soya crushing plants scattered around India quickly realized that they could achieve higher revenues by exporting their lecithin products, instead of just concentrating on selling to the less demanding domestic market. Consequently, they developed an unstructured business model that was solely based on satisfying the rising international market demand, and did not focus on the traceability of origin and the consistent quality of the products.
Many players and traders offer(ed) significantly discounted prices in order to open the international market and attract customers. However, sourcing from India (where the cultivation of GM Soya is prohibited by law) does not necessarily guarantee that all risks to the buyer will be eliminated, or that the product will not be contaminated (GM cotton, NPT II). Moreover, when you consider that lecithin is less than 1% of the soya bean, and the large number of small-scale plants that exist in India for crushing both GM Cotton and non-GMO Soya, the potential for contaminating products from different sources is a real concern. Hence, without the right economies of scale, it is virtually impossible to retrieve and audit all of the different product sources. This increases the risks to the end user, and at the same time, the scattered production gives no guarantee that international food standards will be structurally met.
Ruchi Soya Industries Limited, the leading Indian agricultural conglomerate, operates 12 dedicated soya crushing plants throughout India, and also guarantees that contamination cannot take place. The RF Solutions quality assurance team in Europe supervises & cooperates closely with the quality assurance teams in the production facilities in order to ensure that adequate procedures are in place to enhance operational efficiency, and establish a permanently reliable supply chain. RF Solutions also has a process development team that pro-actively enhances the processes in the plants and supply chain.
The logistical support provided by many suppliers in India is limited, since the soya facilities are spread across the entire country, and lack adequate transportation and infrastructure. Moreover, the traders and crushers lack exporting expertise and this often results in the delivery of the product being delayed.
To overcome supply chain and quality assurance issues, RF Solutions set up a local team to supervise all aspects and ensure that the customers receive optimal service. In Rotterdam, RF Solutions has established an ISO-certified storage facility that prevents any hiccups in the supply chain. In addition, quality control further reduces the risks and guarantees the quality of the product supplied to the end user.
When selling lecithin, Indian traders and crushers try to anticipate future production, so that they can take full advantage of the premium paid on the international market. This can result in supply being postponed until further notice or even stopped, especially during the part of the season when the crushing margins for meal and oil are negative, i.e. when market demand is at its lowest and when these traders and crushers have less potential to earn maximum profit. However, European customers need to be supplied with a constant volume and quality of lecithin throughout the year. RF Solutions therefore sources lecithin from various regions worldwide, e.g. from Brazil and India that have crop seasons at different times of the year. Consequently, customers (who previously quickly became disillusioned with these practices) can now rely on a safe back-up supply option. By implementing this supply strategy, RF Solutions provides added value to its customers by removing the risk factor from the supply chain when supplying high-quality, certified products to its customers.
According to Harro de Groot, the CEO at RF Solutions: “The ability to guarantee full transparency and traceability gives us the edge over our competitors. As a market-driven company, RF Solutions focuses on stability of reliable supply, thus enabling us to achieve significantly shorter lead times.
We have an excellent working relationship with our Indian & Brazilian partners in terms of transparency, even acting as a consultant when representing our customers in their operations, so that necessary improvements can be quickly implemented. This enables our partners to focus on what they do best, i.e. origination of raw materials and producing in accordance with the agreed specifications.
Whilst lecithin will continue to be a core product for the foreseeable future, we are further diversifying our product portfolio so that it optimally meets our customers’ future requirements, helping our customers to reduce complexity in their supply chain. This also has the knock-on effect of decreasing overall costs. One of our proven capabilities is to increase efficiency, and simultaneously reduce overall costs.
Moreover, the successful implementation of our business model coupled with our ability to understand the market needs and our flexibility to adapt to changing market circumstances, have enabled us to achieve outstanding results in terms of supply chain management, quality control and overall reliability, thus ensuring that our end users receive high-quality products on time and at the right price.”
Herman Vansteeger, the Business Development Manager at RF Solutions explains this concept in a nutshell: “Our ISO 22000-certified quality control system gives us full control at every stage of the entire supply chain, thus enabling us to guarantee optimal quality and to also quickly detect any shortcomings. We do this by merging the best practices of the western world with the local resources in order to attain the highest possible level of skills and competence, and at the same time, further enhance our unique knowledge of the local market.”
By implementing this business model, RF Solutions not only manages the risks of sourcing food ingredients from emerging countries for its customers, but also provides a strategic platform that enables a company like Ruchi Soya Industries Limited to successfully penetrate the European food Ingredient business.