Asian Supply Chain Dynamics
Posted on 06 November 2019
Clayton Plant Protection. Ensuring the highest quality standards and supply consistency for generic formulations is a vital part of our customer offering today.
Clayton has a focus on quality and reliability right through the business and especially in the manufacture and marketing of its expanding generic range. This is vital in providing cost-effective, flexible solutions for growers and an alternative choice to the large multinationals.
“One of the key starting points to this quality focus is in our technical active ingredient supply sourcing from Asia, and careful management of the supply chain.” Dave O’Mahony, Managing Director, Clayton Plant Protection Ltd.
Whilst all Clayton branded generic products are formulated in the EU, mostly in the UK, the raw materials required in the manufacturing process are sourced from Asia. This is common throughout the industry with c.80% of the worlds crop protection products reliant on components sourced from China. With this in mind Clayton has recently taken further steps to improve supply chain procedures to ensure the quality and consistency in supply of technical active ingredient material sourced by the company from China and India is assured.
Most stakeholders involved in the crop protection industry will be acutely aware of the serious workplace accidents and environmental issues which have affected production manufacturing standards in China in recent years; such as incidents of waste being pumped into watercourses, widespread pollution, factory fires and explosions. Jiangsu province accounts for approximately 40% of the total Chinese output of crop protection products and has been the worst affected region. The most recent major incident in Jiangsu province was an explosion at a pesticide plant in Xiangshui, Jiangsu province on 21st March 2019 causing several fatalities. As a result of this incident the entire Chemical Park the factory was located on was shut down on 4th April 2019.
The Chinese government has now tightened environmental and health and safety regulations and instigated regular inspections of all factories, with those that do not meet the new criteria shut down. In Jiangsu province alone this clampdown is expected to lead to a reduction in the number of Chemical Parks from 50 to 20 and a reduction in the number of factories from 7000 to 2000 by 2020, a drop of c.70%. Strict criteria have been implemented relating to the location of factories with all those that present a risk to watercourses, natural areas and the expanding urban areas shut down. This is leading to widespread relocation of factories, particularly away from Jiangsu province to other parts of China and Asia. There is also a rapid consolidation taking place in the Chinese supply chain. The costs associated with factory relocation and modernisation coupled with a decrease in competition inevitably increases costs of production which is ultimately reflected in the price of raw materials purchased to manufacture pesticides.
Clayton Plant Protection is working hard to minimise any supply impact and exposure for growers, agronomists and distributors. By regularly visiting our suppliers in Asia and working with established supply chain consultants, we are successfully building strong relationships with key suppliers able to adapt to these new challenges. We are also actively sourcing tech from multiple supply sources to mitigate risk. The direct relationships we have with major Asian manufacturers are paying real dividends in our business and our ability to ensure a dynamic and reliable supply of high quality technical material for our generic formulations.