A Digitally Decentralized Food Supply Chain

Traditionally, small and local farms and food producers have been shut out of the “big food” supply chain because working with those producers requires knowing how to tap into that network, working with volume and consistency constraints, and transporting “less than truckload” amounts. Sourcing local is high touch and hard; digital tools can make it less so.

The current supply chain is built to accommodate processed foods with long shelf lives, perishables that can withstand a lot of handling, and bulk shipments corresponding to steady consumer demand. Smaller, less standardized and super fresh products that can’t hold up during long travel have been shut out of this system for a long time, to the consumer’s detriment.

By Nick Saltmarsh (flickr.com) [CC BY 2.0] via Wikimedia Commons

Arnold Waldstein, a market strategist and advisor who works at the intersection of technology and consumer behavior, wrote a great post about how Whole Foods became the market leader by bucking this system, functioning as a “platform for artisanal local food innovation” through its network of foragers and providing “local flavor” where the offerings were different city to city and state to state. But now that community marketing aspect is being dismantled. And in fact, Whole Foods’ local-first supply chain seemed to be in trouble even before the Amazon deal.

Is this a failure of the decentralized model? The economies of scale and resulting lower prices of a centralized supply chain certainly can’t be argued with, especially because food is such a low margin industry. However, if developing food technology solutions figure out how to connect to each other and work in tandem, we don’t have to sacrifice those benefits to give an equal footing to local and regional growers and artisans.

  • Consider the fast-growing Ag Tech sector that has been steadily accruing massive amounts of data on what is being grown where, when, and for how much, thanks to their platforms that help farmers plan and manage their production.
  • Consider the “Uber for local food” concept that I wrote about for Food+Tech Connect a few years ago. Then revise it to be more of an “Uber Pool for food” idea that can efficiently aggregate smaller orders and delivery drops to fill up a truck profitably.
  • Consider sophisticated predictive analytics on the consumer side that can predict demand for a wide variety of products with varying characteristics on a granular level.
  • Then finally consider traceability solutions that can keep track of products at the case level as they physically move through the system.

In a connected, high tech supply chain incorporating all those elements, a retailer (whether it’s a national supermarket chain, an e-commerce grocer, or a corner bodega) can ping a database of growers, including both small local producers and large commodity suppliers, and see all options that match its requirements. Delivery would be managed for such a small order by finding a truck with extra room that can pick up from a warehouse or hub nearby the chosen producer(s) and can drop off at the grocer’s central distribution center or direct to an individual store. Efficiency is increased, middlemen that act as gatekeepers to relationships are bypassed, and small and local producers gain an entry point to fill whatever orders (or pieces of orders) they’re capable of filling. Even though their prices might still be higher than the commodity suppliers who do have economies of scale at the production level, local producers will have lower transportation costs and, thanks to traceability capabilities, their products will retain their unique story and marketing value.

When you combine and connect these systems so they all work together, it can be just as efficient to buy a product from multiple small growers in the same state as it is to buy from one large mega-farm across the globe.

Note: as a technology company, Amazon is obviously well situated to build this digitally decentralized supply chain for itself, if it hasn’t started already. But given the way it is systematically de-emphasizing brands (watch this fascinating talk by Scott Galloway for more on this), I would be surprised if its version will incorporate the small, local products, companies and communities that used to be championed within Whole Foods.