Food Trends 2016: Shippers See Benefits and Barriers to Sourcing Local
Estimated reading time: 4 minutes
Consumer demand for local food and ingredients is growing at grocery retailers, restaurants, and food service providers across the country. As one of the National Restaurant Association’s top 20 food trends for 2016, locally sourced food has an ambiguous but growing reputation for being fresher, more organic, higher quality, and healthier to eat than food that comes from afar, with the added benefit of supporting the local economy (Food Business News). And while the exact distance “local” food travels might be anywhere from a few miles to more than 350, experts agree that consumer demand is driving more manufacturers to source local ingredients, which affects the entire supply chain.
Determining whether local sourcing makes sense for your business requires taking a closer look at the pros and cons in terms of branding, costs, and operations:
Reaping the Potential Benefits of Local Sourcing
Buying more produce, dairy, and proteins from local farmers can strengthen your company’s brand. Consumers see buying local as more environmentally friendly and sustainable, while supporting a neighborhood business pours money into the community and creates jobs—all of which reflects well on your name. According to a recent survey, consumers are also willing to pay more for locally sourced ingredients, as much as 37 percent more for food grown or produced within their own city and 25 percent more for food from the region (Anklesaria Group).
Sourcing locally can reduce your logistics spending. Eliminating intermediaries such as distribution centers and warehouses can shorten your supply chain, thus reducing costs. Also, local sourcing often involves shipping smaller quantities, which enables less expensive modes of transportation and shortens lead times.
Reducing variability can make your supply chain more reliable. Long-haul transportation issues such as port closures, severe weather delays, and other big occurrences are less of a concern when you source from nearby producers. Better visibility into the events in your area and their potential impacts on your business can also make planning easier and far more predictable.
Understanding the Potential Barriers of Going Local
Food safety can be an expensive challenge.Small, local producers may have health and safety standards in place at their facilities, but they often lack the resources to partner with you on the rigorous testing and monitoring that larger suppliers offer. Further, sourcing from multiple, smaller providers fragments the supply chain, creating quality control gaps that don’t exist when a big, vertically integrated supplier owns more than one step in the chain. Covering these gaps may require investments in technology and third-party consultants, the costs of which get passed on to your customers (Harvard Business Review).
Managing several supplier relationships can be daunting. Simply put, working with more suppliers usually means dealing with more moving parts and procurement administration.
Larger manufacturers have more experience, which reduces your risk. Sophisticated, larger suppliers have scrupulous infrastructures and processes, which they have implemented and tested over time according to the needs of a wide variety of clients. Conversely, working with a number of niche players may require investments in training, as well as time for the lessons to take hold, in order to meet your needs (Anklesaria Group).
Product shortages are more likely from smaller producers. In addition to capacity issues that small suppliers can suffer, local suppliers are vulnerable to weather issues and other conditions that create supply flow problems. Because these companies are running lean operations, it can make contingency plans difficult when alternative sources are not readily available.
Finding the right supplier can be difficult. There may be a limited number of reliable suppliers in your area, which makes sourcing a challenge. If something goes wrong and a supplier can’t deliver what you need when you need it, the consistency and availability of your product may suffer.
Making the Decision
If sourcing locally is important to your business strategy, planning is key to success:
- Commit to maintaining food quality and safety standards across your entire supply chain, which includes allocating more resources and working with transportation providers who share the priority.
- Understand the Food Safety Modernization Act (FSMA), and make sure your local supplier partners adhere to its rules.
- Invest in tracking technology to help you isolate foodborne problems before they proliferate.
- Anticipate and hire for the procurement challenges that arise from dealing with many local suppliers.
- Expect to raise prices for consumers to offset extra investments, bearing in mind that many consumers are willing to pay a premium for locally sourced food.
Executing a local sourcing strategy requires a paradigm shift in logistical thinking that makes working with the right 3PL critical. In addition to knowing the complexities of the FSMA, Capstone's highly trained teams are experts in short-haul, local, and regional deliveries. Contact us to learn more.