Regional Food Hubs Face a Growing Need for Technology

by

ERP Analyst, Software Advice

The locavores are swarming and the popularity of local food is increasing across the nation. The number of farmer's markets has more than tripled since the USDA started tracking these numbers in 1994 – increasing from 1,755 to 6,132. In 2010, direct sales from farmers to consumers increased to over $1.2 billion. And consumers aren't the only ones with a rising demand for local food. More and more, organizations such as supermarkets, restaurants, schools and others are sourcing food locally.

To meet this burgeoning demand, local food distributors must scale up their operations from direct sales of small quantities to wholesale transactions. The problem, according to Michelle Miller of UW Madison's Center for Integrated Agricultural Systems, is that “a lot of the mid-scale distributors, the logistics people who used to consolidate produce, have gone out of business.”

Local distribution networks, termed “food hubs,” are trying to fill that void. Food hubs are like farmers’ markets and distributors rolled into one. They surfaced to provide local farmers with the infrastructure to store, process, distribute, and market local food to consumers and institutions. The current demand for local food positions food hubs to expand their role in food distribution. However, they lack the necessary technology to manage operations on a larger scale.

Managing Through Low-Tech Means
Most food hubs are decidedly behind the curve technologically. Transactions are usually coordinated through a combination of phone, email, and fax. Everything from scheduling pickups and drop-offs to planning routes is handled in this manner. Managing transactions like this may be feasible for the moment, but it won’t work as food hubs expand. To effectively manage relationships with more customers and farmers, they’ll need more advanced technology. This will range from Internet databases for managing customers relationships to distribution software to manage logistics.

Luckily, technology solutions for food hubs are surfacing. Three promising ones are match-making services, Internet-based buying clubs, and distribution management systems. None of these technologies are exactly new – but their adaptation to food hubs is. Each product provides food hubs with a way to get their local produce out to the general market more efficiently.

Matchmaking Programs
Food hubs have helped farmers overcome the marketing obstacle by using online match-making programs that link producers to buyers. These match-making programs are interactive communities that function a lot like Match.com for local food. Local food lovers can log on and find their perfect peach in just a few clicks. There are two general types of match-making services: those that link buyers to local food, and those that add a distributor to the mix.

An example of the first type is a pilot program called Food Hub, released by the non-profit Ecotrust. This program provides a forum for buyers and sellers to interact. Buyers seeking local food can find nearby sellers, but its up to them to complete the transaction and pick up the food. This leaves an empty middle in the supply chain, forcing buyers and sellers to coordinate the logistics.

Making the match is critical but bringing the food to the buyer is also very important. The platform FarmsReach helps address some of the logistical issues related to local food distribution. Their matchmaking tool links buyers, sellers, and distributors. The link to a distributor helps small and mid-size farmers address the challenge of delivering their produce.

Internet-based buying clubs
For food hubs that want to distribute the produce themselves, an Internet-based buying club is a good option. This has been a popular method of aggregating buyers and sellers since the early 2000’s. Buying clubs work by farmers pooling together their crops and delivering a single order of goods to multiple customers. Buying clubs are a logical method of delivery for food hubs as it allows them fulfill many orders with a single drop. These Internet-based buying clubs simultaneously help food hubs connect with customers and simplify distribution operations.

One of the most impressive examples of a food hub using this distribution method is the Oklahoma Food Co-Op. It has over 3,000 members, and processes more than 700 orders a month. Every month, the co-op's 200 producers meet to fill orders from the buying club and criscross the state to deliver to the more than 50 drop-off locations. The buying club helps the Oklahoma Food Co-Op aggregate produce and cut down on the number of drops that need to be made – but it does nothing to help manage inventory and plan distribution routes.

Distribution Management Systems
To manage inventory and plan distribution routes, food hubs need something that is more powerful than a matchmaking program or an Internet buying club. According to the USDA, developing a solution for efficiently planning routes is one of the most critical pieces to scaling up food hubs. This is a missing piece in the effort to enable local food to reach more buyers in the community.

Distribution software can help food hubs pull together the advantages afforded to them by matchmaking programs and Internet-based buying clubs. The main benefit is the ability to track delivery trucks and plan delivery routes. Tracking delivery trucks and planning routes will help food hubs deliver produce along the most efficient routes and keep feel usage down. These benefits will be critical to avoiding waste in distribution operations.

Putting It All Together
There is one major obstacle holding food hubs back from adopting distribution software: cost. Traditional food distribution software can cost tens of thousands of dollars, which is more than food hubs can pay. Even the most profitable food hubs don’t have such large budgets.

However, Software as a Service (SaaS) options are beginning to offer affordable options to food distributors. These solutions provide software via the Internet and offer friendly subscription-based pricing that food hubs can afford. The lower up-front costs of the SaaS model holds promise for food hubs that need to get a better handle on their logistics.

If food hubs can combine the customer-facing applications of Internet based buying clubs and matchmaking services with distribution software, they will be equipped to expand their operations.

A special thanks to Sam Earle of Local Food Systems for providing his insights on this article. Thumbnail image created by UnitedSoybeanBoard.

 
  • http://www.foodroutes.org Bob Bernhardy

    Derek:
    Thank you for sharing your paper. Automated food services is something we need in the Northern Tier of Pennsylvaia. Thanks for the linkes to software that helps develop better communications between buyer and seller.
    Great information.
    Bob

  • http://www.localfoodmarketplace.com Amy McCann

    Thank you for laying out the challenges of local food hubs so eloquently. We run our own “food hub” called Eugene Local Foods in Eugene, OR and license that technology to about 20 (and counting) other local food hub groups. As you point out, SaaS is an important component of keeping it affordable!

  • http://foodnetworksoftware.org Bob Haugen

    You and your readers might want to check out http://foodnetworksoftware.org/

    It is free open-source software for local food networks (could be hubs, could lack their own facilities). Used by several local food networks, including a couple you have been emailing.

  • http://www.americanfeast.com/home.php Jeff Deasy

    Thank you for a well written and informative piece.

  • http://www.eatlocal.org/ Darren Stott

    Great article and timely for us in Vancouver, BC. We are looking at building a Food Hub and as you say if we can utilise modern technology we can be as efficient as the large networks at getting the food out to customers.

  • http://www.lfs.ag Sam Earle

    Very informative and thoughtful article – looking forward to updates as the sector matures! Congrats Derek.

  • http://knowyourfarms.com Wesley Shi

    Great article and there are some really useful software links listed. I have created a food hub in Charlotte, NC and have used smallfarmcentral.com so far. The oklahoma food coop software is a good idea but consumes too much time to tweak it enough to get it to a functional state. Localdirt.com was another site I have been testing with mixed results.

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