Three Ways to Enhance the Logistics Operations of the Organic Food Industry

by Derek Singleton on 2011-09-09

Our food supply is more of the most important supply chains that functions in the world's economy. As it stands right now, most of the available food supply comes from food that is produced through agribusiness rather than organic food. And most consumers still prefer to purchase conventionally produced food for one reason - it's cheaper. Much of the reason that organic food remains more expensive today is because it suffers from a lack of scale and an inefficient use of supply chain technology.

The organic food industry is growing and starting to become more mainstream in our society. As evidence of this, a recent report indicated that the organic food industry grew revenue by 25 times from 1990 to 2009. This growth is impressive but it helps to remember that is all relative growth. Conventionally produced food still owns the lion’s share of the food market and

So, what can be done while the organic food industry tries to scale up production? I see three key things that need to happy in order to create a more efficient network and change the way organic food is bought, sold and distributed. Adopting some technological and strategic improvements to the food supply chain will result in more efficient food delivery, greater access and cheaper organic food.

1. 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. Sellers often cart their own produce to market without consideration of the best route to take or the most efficient drop-off points. 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.

2. Create Better Buyer-Supplier Communication - Another thing keeping the price of organic food high is a lack of buyer-supplier communication. What basically happens as a result of this lack of communication is an inefficient game of cat and mouse. Buyers and sellers alike are left guessing when the best time to broker the next deal is. This can be remedied by utilizing procurement 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 is at low stock levels.

3. 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 decrease operational costs and the cost to 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 by visiting the Software Advice blog at: Creating A Healthier Organic Food Distribution Network.

Derek Singleton is an ERP Market Analyst. He reports on the distribution and supply chain management issues for Software Advice. He can be reached at derek@softwareadvice.com or followed on Twitter @ERPAdvice.