New food distribution model is good for business & consumers

Food products begin to decay the moment they are harvested or slaughtered, so in order to maximise their commercial value, shelf life must be extended by optimising transport and storage infrastructure.

Local & Regional Hubs

Today’s customers demand strict food standards. The world is a global village in which news spreads faster than ever across the internet, which means cases of food poisoning cannot go unreported such as a few years ago. Public awareness puts the focus firmly on the storage and transport of food products.

A new distribution model has emerged which is differnet to the conventional one in which a distributor’s main role was an intermediary for market access. This new model is being driven by consumer demand for locally sourced products, which in fact represents both an opportunity and barrier for the future of our food system.

Local and regional food hubs have become the new solution to supply consumers with fresh local products.

Food hubs essentially work in connecting large and small producers with nearby markets.

As shown in the figure below, this new distribution model has collection centres which aggregate, process, package and distribute food products to markets in close proximity.

Critical Link

Distribution is not only a critical link in the supply chain, but also the primary feature of how food hubs operate.

Large or small, distributors employ a set of common practices – planning routes based on an analysis of the cost per run, finding partners to ensure trucks are fully loaded, and managing existing routes efficiently as a first priority.

The horse meat crisis 2013 was a trigger for a growing concerted effort by industry to simplify supply chains where possible

As distributors scale up their fleet and warehouse capacity, agreements with suppliers and buyers adhere to more formal standards, while investments in technology and physical infrastructure play bigger roles in streamlining operations.

Figure 1: Fragmented traditional distribution model versus newly proposed coordinated distribution model with collection center (CC) to customers

Source: Bosona and Gebresenbet, 2011

Increased Globalisation

Cold chain logistics offering end-to-end refrigerated storage and transportation solutions for temperature-sensitive consumables are critical to the success of food businesses. However, modern challenges facing the food industry regarding distribution surpasses the traditional problems of handling perishable goods. The increased globalization giving local markets access to all types of seasonal and unseasonal products, as well as the strict compliance standards has turned the foodchain into a complex system.

There is a growing awareness of the importance and complexity of assurance in food supply networks. The horse meat crisis in 2013 was a trigger for a growing concerted effort by industry to simplify supply chains where possible.

Undoubtedly, purchasing new trucks, adding warehouse space or moving to a better location will reduce operational costs. However, developing a core competency in logistics or transportation management must be viewed as a first step in developing know how to schedule runs and track orders, build upon established routes, and monitor the cost per run.

Conclusion

Reducing the cost of transportation and logistics is an important parameter but seems to be less significant than maintaining the right mix of high quality products at sufficient volumes.

Logistics related improvement such as creating a shared distribution center to serve multiple food hubs in large cities are possible. The logistics services in local systems are fragmented and inefficient, compromising competence of local food producers. Introducing and implementing logistics related coordination and integration in the local food systems greatly improves the sustainability of local food systems.

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