Raw Materials Sourcing in China

Why is there a growing trend in the U.S. vitamin industry to purchase raw materials in China?

A changing world market has led manufacturers to source raw materials globally in an attempt to control costs. In 1995, only 18% of raw materials were sourced out of China. In 2005, 47% of all raw materials originated from China. China’s costs are 30–40% less than other countries and raw materials are readily available in volume.

What are some of the sourcing problems in China?

Raw materials may pass through many hands (different manufacturing sites, brokers, distributors, etc.), which makes it more difficult to verify the reliability of the source. Add to that the language and travel barriers, and it’s not surprising that there are issues with an estimated 30–40% of raw material from China entering the United States. For example, a U.S. product manufacturer of chondroitin sulfate recently tested and approved raw material preshipment samples from China, yet when the lot was received, $250,000 of it was found to have variable quality and was not useable.

What must Chinese raw material suppliers do to meet U.S. needs?

Chinese companies must first meet U.S. current good manufacturing practices (CGMPs) for the manufacturing of vitamin raw materials. Testing by the Chinese company must be with current FDA-recognized compendial test methods found in the USP or AOAC.

How can a U.S. company guarantee quality with China-sourced material?

U.S. consulting companies are now providing in-country QC/QA services including auditing plants to U.S. GMP requirements and random unannounced raw material sampling at the plants. Sampled raw materials are tested in-country by the consulting firm using compendial USP and AOAC methods.

How can a company set up an auditing function in China?

The first step would be to hire a Chinese national with a technical degree who is knowledgeable in or could be trained in GMP regulations. The ideal situation would be to have the Chinese auditor mentored by an experienced auditor whom he/she could shadow during American company audits. The auditor should also be empowered to ask probing questions in order to locate and check noncompliance in manufacturing and in the testing laboratories.

What are the key components of setting up a testing program in China?

Establishing a partnership with a qualified laboratory is key. The laboratory should have proven expertise in testing and evaluating raw materials and finished products. It is also important that the laboratory understand the U.S. market completely. This includes DSHEA, USP to retailer and manufacturer standards, and FDA and their proposed GMPs. It is equally important for the laboratory to have finished product and manufacturing knowledge.

Is there a need for second- and third-party certification?

Yes. Second- and third-party certifications are more independent by definition and lack the inherent conflict of interest of an internal audit. Beyond this, a third-party certification is more in depth and of sufficient duration to certify that a company, in this case a Chinese company, can consistently manufacture a quality product.

What are the big challenges for U.S. retailers and manufacturers?

Nearly every supplement sold in the United States is undergoing major reformulation to utilize the cost savings of China-sourced raw materials. The major challenge for both retailers and manufacturers is balancing the risk of product quality and safety with out-of-stock positions.

Specifically, the challenges for supplement manufacturers include:

• Reformulating all products with China-sourced raw materials

• Conducting stability studies for the reformulated products

• Evaluating the possibility of reducing expiry dates to two years

• Qualifying all new suppliers in China

• Handling culture, language, and distance barriers

• Addressing the lack of uniform quality standards in China

• Dealing with suppliers who have little or no GMP experience

• Adapting “just-in-time” procurement strategies with the reality that 30–40% of presently sourced materials do not pass current standards

Only the manufacturers that source effectively in China will survive. Ultimately, they will be able to provide a safe, efficacious product for the consumer at the best price.

Retailers also need to be aware of the dynamics in the current market and realize it is ultimately their responsibility to provide safe and effective supplements for their consumers. The risk for store-brand vitamins will be particularly high until all of the reformulation is complete.

Eugene Damon is senior vice president and Robert Rolle is senior consultant and auditor at Shuster Laboratories Inc. (Canton, MA). Shuster Laboratories, an STR company, is an independent provider of quality assurance testing, preshipment inspections, facility auditing, product development, and consulting services. Shuster offers the nutritional supplement industry in-country auditing and raw materials testing services at its wholly owned laboratories in Shanghai and Shenzhen, China and Hong Kong. For more information, visit www.shusterlabs.com.