Building the supply chain

Managing an international supply chain is no easy task.

Frontier Natural Products in Norway, for example, works to develop a relationship with their overseas suppliers and their communities.

The member-owned cooperative, founded in 1976, established its Well Earth supplier program based on its commitment to ethical and sustainable sources.

'As one of the largest buyers of organic herbs, spices, botanicals and essential oils, we make an impact on the communities where we purchase supplies,' said Tony Bedard, Frontier CEO. 'We create an ethical and mutually beneficial business relationship that also allows for improving the growing community's social conditions and environment.'

Bedard cited a community improvement project for a Well Earth partner in Madagascar.

'Our Aura Cacia brand gives back 1 percent of organic essential oil sales to support farmers and their communities,' he said. 'One of the first projects for the Aura Cacia fund was building a preschool near the village of Ambohimena, Madagascar, for the children of families who pick organic ylang ylang flowers.'

The nearest school to Ambohimena is in neighboring Ambanja, which is more than seven miles away and the children would have to walk hours to get there. Bedard said the new school is within sight of the trees where their mothers pick the yellow flowers whose oils are used in aromatherapy.

The two-room schoolhouse has a classroom for 2- and 3-year-olds and another for 4- and 5-year-olds. The school has 50 children enrolled and can accommodate 60 students.

In addition to helping build needed infrastructure in supplier communities, Bedard said Frontier also is involved with building business.

'We bought a pepper grinder in India,' he said. 'The grinder cost about $42,000, but it paid for itself within two years because they can grind what we want and sell the remainder in their community.

'They can take that grinder and use it for all their business. It was a huge lift for the community and it saved us money.'

Frontier also has installed metal-detection equipment in Guatemala where it purchases organic cardamom directly from a cooperative of farmers, to seek out impurities. It is working with the co-op to expand a community dental clinic in the region this fall.

'In return for our investments, we get loyalty, a quality product and service,' Bedard said.

Sometimes Frontier is able to take out the middleman.

'We tell them that we can put 20 percent more in their pocket if we can get them to the point where they grow, process and send the product to us directly,' Bedard said. 'We leave that money in the communities.'

Frontier buys product from growers and suppliers in more than 50 countries around the world. Barry Thomas, associate professor of management science at the University of Iowa's Tippie College of Business, said the cooperative's approach to building supply-chain sustainability involves enlightened self interest,

'Certainly they are giving back to communities, but at the same time underlying that for Frontier as well as larger companies is the fact that they need a reliable source of high-quality product,' Thomas said. 'Building schools and creating an ability to get water has sort of a humanitarian feel to it, but it also means you have a healthy community that hopefully can continue to be productive and provide a source of high quality, and in some cases, unique product.'

Frontier's approach to building supply chain sustainability is similar to the experience of Heinz, which has plants in Cedar Rapids and Muscatine.

Heinz found the soil in China's Xinjiang region had been devastated by decades of poor soil management, according to a 2013 APICS study of supply chain sustainability. The company began a program introducing farmers to sustainable practices like efficient use of fertilizers and pesticides, better irrigation, and more appropriate machinery.

Heinz said the program yielded a 58 percent improvement in the region's farm yields and a revitalized agricultural community.

Expansion projects

Frontier has three expansion projects in the works. The Iowa Economic Development Board on July 17 approved a $41,250 forgivable loan and a five-year loan for the same amount at no interest for an $8.7 million project at the company's main facility in Norway.

Frontier plans to increase capacity by adding a new bottling line and renovate 8,000 square feet of its food and flavorings facility. The project also will allow Frontier to keep up with new food safety and sanitation regulations.

Frontier will finance the remainder of the project cost with a five-year, $16,500 loan at zero percent interest from Benton County and $8.6 million of its own money.

Frontier is planning a $4.4 million addition to its Urbana production and warehousing facility that will house a 150-by-150-foot heated and cooled space for warehousing bulk oils and related consumable items. The project also will include an additional bottling line for essential oils and the purchase of a forklift.

In Belle Plaine, Frontier plans to spend $2.8 million to buy a 10,070-square-foot building that formerly housed an auto parts manufacturing plant. The facility will serve as a warehouse and distribution center for the company's Simply Organic and Aura Cacia brands.

Frontier employs about 400, and Bedard expects the cooperative to add another 100 over the next fiscal year that started on July 1, He said the cooperative sent more than $7 million of profits back to its members this year and many donate the money to the cooperative's foundation.

'We have the luxury as a co-op to have a membership and ownership base that thinks about the long term,' Bedard said. 'We put a couple of state-of-the-art steam pasteurization units in North Liberty. They cost $1 million apiece.

'Not everyone can do that, but we are fortunate to have a business that's growing.'