By Derek Singleton
Over the last couple of decades, the organic food industry has grown by leaps and bounds. According to a survey published by the Organic Trade Association, revenue in 2009 was 25 times greater than what it was in 1990. Although the industry has experienced explosive revenue growth, organic food is still only a small part of our food system. For a little perspective on how much room organic food has to grow, consider this: US consumers spend roughly $1 trillion dollars on food every year.
While the organic food market has grown, the price of organic foodstuffs remains largely out of the reach of many Americans. A recent study of food access found that a full 49 million Americans make food decisions based solely on the price of the food. With most organic foods, especially produce, remaining more expensive than conventionally produced food, many Americans aren’t even considering organic food.
The high price of organic food has many causes. One of the big things that keeps prices inflated is a lack of scale. The relatively small scale of organic foods has lead to demand outweighing available supply. But beyond that, organics cost consumers more because the food is distributed under an inefficient distribution network. Surprisingly, even as the industry has grown and we’ve moved into the digital age, most organic food distribution deals are conducted by word-of-mouth.
This leads to a lot of confusion in the food supply chain. It creates a situation where organic distributors don’t know when grocers need more produce, and grocers aren’t kept up to date on the available inventory or pricing levels of their organic distributors. As a result, distribution and purchasing activities remain inefficient and the cost of these inefficiencies is passed on to the consumer.
Making Organic Food Distribution More Efficient
There are a few strategic and technology approaches that organic distributors can take to improve the efficiency of their supply chain. These strategies are already used for purchasing conventionally produced food and are partially responsible for driving out excess costs. This is not to say, however, that organic food distribution should try to mirror conventional distribution methods. Rather, it suggests that there are lessons that can be learned from conventional farming that would reduce the cost of organic food and improve access to healthy food.
- Improve Distribution Operations
One of the biggest things holding back distributors of organic food is that they don’t deliver their food in the most efficient way possible. An intelligent use of food distribution software would help distributors choose the most efficient path to distribute which would help reduce the overhead associated with delivering organic food.
- Create Better Buyer-Supplier Communication Another thing keeping the price of organic food high is a lack of buyer-supplier communication. This can be remedied by utilizing supply chain software, which can provide updates on the available inventory of organic distributors in real-time. At the same time, the system can immediately inform distributors when a grocer’s stock levels are low.
- Coordinate Purchasing
The organic grocery market, save companies like Whole Foods, is still mostly a mom-and-pop type retail operation. These buyers don’t get very good wholesale cost savings because they’re not buying in a large enough quantity. If some of these stores banded together and aggregated their purchasing, they could lower their operational costs by an order of magnitude. This would result in decreased operational costs and lower food prices for the consumer.
These are just a few of my ideas but I’m eager to hear what others in the community think. You can check out the rest of my article at: Creating A Healthier Organic Food Distribution Network. Feel free to reach out to me at email@example.com or follow me on Twitter @ERPAdvice.