The Natural Law of Energy Conservation
It’s not rocket science!

The laws of physics suggest that a body remains at rest remains until acted upon by external forces. The same laws also say that energy is conserved although its form might change. And, for every action, there is an equal and opposite reaction.

I propose that the same is true in the business world, and when faced with external force, change results, change in state, change in energy, change in priority.

Ok, so where am I going with this?

Having just returned from Nutritionals 2002 in Anaheim, I’m struck by the forces at work to power and change the dietary supplements industry. There are developments associated with Codex (Codex Alimentarius) involving both WHO (World Health Organization ) and WTC (World Trade Council), as well as most of the nations of the world. There is the FDA with “pending” GMP’s for supplements and if they ever get the resources to enforce their programs, pressure to be applied to industry. There is FTC monitoring advertising and fraud, investigations regarding both safety and efficacy, there are negative media pressures, consumer confidence issues; all in all, a vast array of forces lined up to apply pressure to the industry.

I am amazed that people think they can duck their heads, wait for the storm to pass and pick up where they left off in a few months or even a year or two. It just doesn’t work that way. Two years from now this industry will be vastly different, and change is always tough.

What do you focus on first and how do you best position a company for success in the near future let alone with staying power for five years. And just trying to stay current, familiar with the latest announcement or recall is tough. And there are few guidelines in place, few rules to follow, at least to ensure business success. While there is no perfect crystal ball, there are a few concepts that have become quite apparent.

1) We operate in a global environment, acted upon by global forces.

• Codex is an international effort and each country has one vote and a chance to influence, not control the global environment. Trade will be affected.
• Recent kava events that quickly moved from Germany, around Europe and into
• North America prove that global forces and communication are at work.
• Competition for some time has been a global issue.

2) The regulatory environment is changing.

• Consumer pressure and negative media coverage is being felt.
• There is a higher priority assigned and there is alignment of industry groups who recognize that certification and standards are inevitable. (NNFA, NSF, AOAC, USP)
• Yet again, FDA has committed to GMP’s later this year.
• In Canada, a new regulatory framework has been proposed for natural health products, with positioning somewhere between food and drugs, and what Health Canada hopes will be a model for other countries.
• Product liability is an increasing concern and cost.

3) Only the strong and strategic survive.

• Often, any solid rational action is better than inaction and placing one’s head in the sand waiting for the storm to blow over. Companies that aggressively position themselves in weak markets remain successful through strong ones. Companies that reduce marketing and development cut the lifelines to future success.
• Intelligence and information is out there. Resources in fact are overwhelming. (That, unfortunately is a problem in itself.) Information management strategies, especially to gather relevant regulatory/political information is imperative.
• In other industries we are seeing proliferation of strategic and tactical alliances to face similar issues and marshal larger resources. With the exception of trade associations and organizations, there has been a lack of this type of activity in this industry. There have been JV’s and mergers, but on more of an operational or project level.

And

4) It will become more, not less complicated to do business in the future.

• Understanding and anticipating the changes resulting from Codex, GMP’s, trading blocks, technology and other factors is overwhelming, and resource intensive. How will the organization cope with this volume and make the right decisions---when the decisions need to be made?

The pace of business is changing (transactions, communications) yet the pace of business development is not. The result is increased pressure on suppliers with a slower return on investment. This drives efficiency without compromising service and quality. It also means the cost of doing business is really going up. How will small and mid-size companies face increasing costs of compliance and rising expectations--And all this in the face of flat sales. Is there a real trade-off where there is an increase in productivity and profitability to offset these costs? And at what point is it?

The alarmists would say that the cost of recall, lawsuit or failed batch is more expensive than any costs incurred to support quality. This is all very easy to rationalize—after the fact. But what do you do now, what steps do you take? (And with no clear idea what the GMP’s for supplements will look like or what the CODEX Commission will decide.)

Resources, guidance and information are available, including the Codex and FDA websites. There are industry experts, many of whom were speakers at Nutritionals 2002 this week. And there are other information sources as well, including the 1997 ANPR issued by FDA, the recently published proposed guidelines in Canada, industry support people who are successful only because they know that their expertise is required to navigate these times. And there are trade associations supporting and guiding their membership.

In the meantime, there are small steps that can be taken by all affected organizations. This includes managing risk, prioritizing and tightening quality control, writing batch records and SOP’s, examining training and education programs for staff, and monitoring the news and developments in critical areas that will affect us all. These steps should be taken immediately, since they establish a baseline for prudent business management, as well as being absolute requirements in the next few years.

So, while there are a lot of forces at work, beginning now to establish your own momentum means you’re better able to cope with whatever is thrown at you.

Just remember, it takes more energy to start a body from complete rest—so get moving now.

Moving or at rest? Share your thoughts in the NPIcenter Discussion Forum

Len Monheit,
President & CEO
NPIcenter

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