By Stephen DeAngelis, as featured on Forbes Technology Council
In January of this year, the FDA revoked its authorization for the use of FD&C Red No. 3, giving companies until early 2027 to phase out use of the product in foods in favor of alternative food colorings. This was not unexpected or even unprecedented: States like California, Pennsylvania and Illinois had already banned or were in the process of banning the use of the dye, prompting many businesses to begin pivoting away from its use. And while the value of Red No. 3 itself may be up for debate, one thing is increasingly clear: To succeed in the modern economic and regulatory landscape, businesses need to be agile.
Challenges like supply chain uncertainty and shifting regulatory and compliance priorities can significantly impact a business’s ability to serve its customers, and the ability to pivot is critical. The prospect of product bans, economic uncertainty and even climate-related risk adjustments has highlighted the importance of product formulation and portfolio optimization capabilities.
As these challenges make their impact felt, businesses need to be able to nimbly update their product formulation and examine their offerings within the context of a broader portfolio. Those who can adapt will find themselves with a leg up on their competitors—while those who can’t risk being left behind.
Resiliency In The Spotlight
First, it’s important to understand the wide range of constraints and variables that can impact supply lines and product formulation for today’s businesses. Regulatory changes are a prime example: While the FDA’s red dye ban is currently making headlines, businesses are continually adjusting their products to comply with new laws and guidelines.
Products like asbestos insulation and lead paint were famously banned due to their negative impact on health, but smaller adjustments happen all the time. In fact, the FDA has already banned more than a dozen synthetic dyes over the years, along with other unsafe additives in food, cosmetics, manufacturing and other industries.
Environmental restrictions can also impact what materials are available to businesses. Remember the hole in the ozone layer? In the 1990s and early 2000s, countries around the world joined forces to ban the chlorofluorocarbons (CFCs) damaging the ozone layer, disrupting more than a few businesses that had come to rely on them. More recently, bans on things like Styrofoam packaging and single-use plastics have forced restaurants and retailers to change the way they serve their customers.
Of course, economic uncertainty can also drive significant disruption. The Covid-19 pandemic and the resulting inflation-driven system perturbations underscored the importance of maintaining flexibility amid supply line disruptions. The most successful businesses during that time were those with the ability to source materials from multiple vendors or shift their product formulations according to changing circumstances.
The pandemic may be over, but inflation is not gone, and as a result, these problems haven’t gone away. Geopolitical instability continues to mount around the world, and the possibility of a global trade war looms heavily over the market. The FDA’s red dye ban is garnering attention right now, but it’s just a small example of a larger challenge—one that underscores the need for resilience and agility.
Leveraging Analytics To Maximize Flexibility
The data backs this up. A 2024 Accenture study found that companies in the top quarter of its resiliency maturity scale captured 3.6% greater revenue than industry peers in the bottom quarter, highlighting the need for—and value of—flexibility amid an uncertain economic environment.
Businesses in areas like consumer packaged goods (CPG) were among those that saw the greatest benefit, with off-the-shelf contingency plans and adaptable response frameworks allowing them to dramatically reduce reaction times to new developments, minimizing the risk that unforeseen events could pose to their operations, market share and ultimately their bottom line.
Perhaps most importantly, this flexibility gave them the opportunity to turn market disruptions to their own advantage, moving into areas ceded by those less able to roll with the figurative punches. This is something we are seeing more and more: Businesses with a highly mature ability to engage in supply chain modeling and portfolio optimization can adjust to changing market conditions in a way that outpaces the competition.
By leveraging advanced analytics and automated, AI-powered decision-making systems, businesses can conduct predictive, scenario-based modeling relative to the likelihood of certain events—allowing them to make plans to optimize, restructure and rebalance their portfolios in accordance with potential disruptions, moving the business forward while competitors are still attempting to find their feet.
This requires advanced modeling capabilities that can factor in a wide range of constraints to accurately simulate real market conditions. By incorporating factors like supply sourcing, pricing and trade promotion strategies, businesses can incentivize customers to shift away from impacted items in favor of alternate products—or identify ways to pivot their own product formulations away from certain ingredients or materials.
The FDA’s red dye ban exemplifies this: While the ban will disrupt the availability of a key artificial coloring, businesses can use scenario-based modeling to identify and evaluate alternative (usually natural) color sources based on cost, availability and other factors. This enables them to proactively reformulate products, test consumer response and adjust production timelines to enable a seamless transition and avoid the supply chain disruptions that damage reputations and erode consumer trust.
Prioritizing Real-Time Modeling Capabilities
The FDA’s ban on Red Dye No. 3 is the latest example of a challenge businesses are forced to grapple with every day. Whether your business uses red dye or not doesn’t matter—sooner or later, your supply chain will be threatened by the changing economic landscape, political instability, extreme weather, new regulations or any one of a thousand other possible disruptions.
To be successful in the face of these challenges requires flexibility, and to be flexible, modern businesses need the ability to engage in advanced modeling that represents real-time market conditions. Those who prioritize these capabilities will find themselves well-positioned to adjust to anything the market can throw at them.
