Reflecting

Every once in a while, something you read stops you in your tracks and makes you reflect and really think. Does this happen to you?

A long time customer, Idaho’s Bounty Cooperative, recently wrote a letter to their stakeholders that illustrates so much of what our movement is wrestling with as we try to take steps toward long term financial sustainability. I found the letter very refreshing to read, as it very honestly communicates the need to continually evolve and the sometimes painful, unpopular decisions required to grow and become profitable.

Undoubtedly, the conversations and decisions that preceded the letter were very difficult for staff, board, and producers. Big changes are often unpleasant in the short term. Adjusting your business model and streamlining supply are hard decisions when you know your customers and producers personally. Finding the right mix of having a diversity of sales channels while not spreading your resources too thin is a very difficult balance to find in local food. Although I certainly wish that Idaho’s Bounty (and others facing similar situations) weren’t forced to make these decisions, I find it incredibly hopeful that the conversations and decisions are happening. By moving beyond the exciting, charged startup phase of local food, we can find success.

We consider it a huge honor to support our customers on their journey from startup to mature business. As LFM has evolved the last 7+ years, we have continually shifted more of our resources to providing technology that helps our customers cultivate and maintain long term, profitable relationships with their customers and producers. Since releasing our brand new shopping interface with loads of new features this spring, we have turned our energy to improving the order process, invoices, payment collection, and cash flow. We’ve had several minor releases over the summer and look for another, more substantial one in the next couple of weeks.

Want to learn more? Contact us to setup a web meeting!

Customer Profile: Central Mass Locavore

Central Mass 1

Photo Courtesy Central Mass Locavore

If you ask Jacki Hildreth about the genesis of her thriving business, she made the obvious analogy to a common kitchen staple. “It’s like peeling back the layers of an onion”. Jacki’s lifelong love of local food began working in her parent’s backyard garden and enjoying the bounty. In the early days of her relationship with her husband Tim, they often dreamt of one day owning their own food truck. Her husband’s two-time battle with cancer, now fully in remission, required that they put the best possible food on their family’s table. Their pursuit of healthy local food had them traveling all across Massachusetts just to pick up the best CSA box they could find. They also got plenty of encouragement from her brother in law, fresh off a once in a lifetime experience playing hockey in Switzerland, whom suggested they adopt some of the food practices he saw across Europe.

20150929_152855

Photo Courtesy Laura Theis-Local Food Marketplace

All of these “ingredients” combined to push Jacki and Tim towards planning and opening Central Mass Locavore; a local food home delivery service based in Westminster, Mass. They focus as much as possible on organic, local products, but also include some made with non-certified, sustainable methods. Keeping true to her roots, the storefront prominently features a weekly CSA style box, full of local, seasonal items. After speaking with a local developer who quoted them a hefty price tag to set up a shopping page, Jacki and Tim worked with our team at Local Food Marketplace to get their website and market up and running and have been working with us ever since. After beginning with nothing more than weekly boxes, they have since expanded to offer a la carte items such as eggs, prepared foods, cheeses, and meats. They offer home delivery to nearly all of their customers for the added personal touch.

When Jacki and Tim decided to jump into this venture Jacki explains that it was a “little like the blind leading the blind”. They had little to no business experience and her knowledge was based on her online research. She quickly found that between her busy family life, her career as a nurse, and the new business there wasn’t enough hours in the day to make everything happen. “Trying to get everything done in time and learning that you can’t fit 10 pounds of potatoes in a 5-pound bag was one of our first revelations”. Their biggest hurdles were finding out and working through the legal paperwork and as with most small startups, capital. There were the usual setbacks, and sometimes it felt like two steps forward and then one step back. Jacki is self admittedly the risk taker in her family, and while sometimes that can be cause for alarm, she says that in this instance it was a great thing that helped them take the leap of faith. If she could pass along one piece of advice for a home business she recommends checking zoning requirements.

After operating for a few months, the team was feeling as though they were getting busier and busier, but not working smoothly. They had already run into the small bumps in the road that any new business working with small local producers encounters. “Tim would get to the farm to pick up product only to find that it wasn’t available. This gave me sometimes a 1-2 hour window to find a replacement. We quickly learned which producers would be our core suppliers that could be counted on and who were the farmers flying by the seat of their pants.” They quickly learned that local agriculture is constantly shifting, and thinking on your feet to find supply solutions is a critical part of their operation. “Nobody is dying” quickly became a mantra that their team embraced. Even their packing team of retired Corrections Officers were learning on the fly. “These guys knew what a carrot and potato was, but everything else was complete guesswork for them. You should have seen the situation with the Broccoli Romanesco.”

Central Mass 2

Photo Courtesy Central Mass Locavore

Jacki and Tim took time to re-evaluate what they were doing and at that time realized that they needed to not only add and expand their business, but use their time wiser. “You aren’t going to get more hours in the day, so you need to work smarter, not harder”. They took time to evaluate the parts of the business that were taking up a disproportionate amount of time and restructure the weeks workflow to fit them better. “We had a few customers in the beginning who were really excited, but because of our limitations, we were delivering their orders as late as 9pm. Those customers left and haven’t come back.” They reorganized their work week, added some new modules to their LFM set up, and asked for and received a lot of support from family and friends. Jacki is quick to point out that without this needed support she would have a hard time doing what they do. Today Central Mass Locavore is as busy as they have ever been and they are gearing up for a wild holiday season.

“Local Food Marketplace has been an invaluable tool for our business. We literally could not do what we do without it.” Jacki is quick to point out that LFM is not only a technology that helps her business operate, but acts as a mentor for her to ask questions and bounce ideas off of. “Working with LFM is a whole package, not just software. It is straightforward and easy to use, the personal support is there for me when I need it, no matter how small an issue is to them, they understand that it may be a big deal to us and offer help accordingly.” Jacki found the technology by looking at one of her flagship producers, Caroline Pam at the Kitchen Garden Farm, and loved how clean it looked and its ease of use from the customer side. “The price point is there, the support and tools are there, and the customer service can’t be beat.”

Jacki and Tim hope to continue to grow and add more delivery areas. They have explored wholesale sales, however it isn’t a priority right now as Jacki reiterates that their main mission is to “Bring healthy food to the people” and home delivery is where their heart is. They plan to add on to their work space over the next few months roughly doubling their storage and adding a walk in cooler. If all goes as planned, they hope to someday open a storefront and add the kitchen that they dreamt about when they were cooking together on their first few dates.

We asked Jacki for any advice she might offer to anyone who is currently planning or starting their own food business. At first she said “Remember, even when you have your doubts, keep going. Don’t give up” and then she remembered a phrase often uttered by superiors in her days as a nurse. “If you do the right thing by the customer, you can never be wrong”.

Announcing LFM’s Free Whitepaper: Avoiding Sales Around the Hub

White Paper-Selling Around the Hub

As the season winds down, are you reviewing how this year has gone for your hub and where improvements can be made? Did you experience trouble this season with a producer circumventing your hub and making sales around it? We hear on almost a daily basis the struggle that hubs face in maintaining a working relationship with their producers and avoiding the dreaded, “Sale around the hub”.

Our marketing team of Amy McCann and Ryan Crum have researched, analyzed, and written this report using input from the many hubs we work with across North America as well as their personal experience. We look at why producers may sell around the hub, what food hubs can do to avoid it, and key aspects of a producer agreement.

LFM's Guide to Avoiding Sales Around the Hub

For more information on how LFM can help your hub make the most of your sales, and grow them, contact us!

What food hubs can learn from farmers markets

If you are a local food geek like me, you probably read the LA Times article,  Has the Farmers Market Movement Peaked?, or the NPR piece, Are Farmers Market Sales Peaking? That Might Be Good For FarmersBoth of these pieces suggest that the rapid expansion of farmers markets has bubbled and sales at farmers markets are declining.

This begs the questions – what does this trend mean for the local food movement as a whole? And, what does this mean for food hubs?

Farmers markets sales trends and the local food movement

Many farmers markets across the country have experienced a noticeable decline in attendance and sales, yet more people than ever want local food .  Is this decline an indication that the local food movement “jumped the shark” or is there something else contributing to the decline? I assert, as have others, that the trend speaks more to the emergence of other models to make local food MORE available, accessible, and convenient to the more people.

Local food is indeed, growing up. Farmers markets will always have a place in the local food community. However, I’ve talked with many farmers, and while they enjoy working a market periodically, the labor and cost of attending them each and every week can be prohibitive.  Farmers markets offer a unique marketing experience that is difficult to duplicate, but they take producers away from what they are good at – farming. Thus, producers are exploring ways to grow and sustain profitable businesses.

While farmers markets have seen a leveling off of sales, intermediaries, such as food hubs and similar collaborative efforts, are growing in leaps and bounds. Local food is going mainstream!  From 2007 until 2012 the number of food hubs in the US has nearly tripled, and continues to grow today.

These trends suggest that food hubs have gained growth by taking sales from farmers markets, which is likely true to some extent, but food hub sales volume is largely being driven by grocers, co-ops, schools, and institutions.  The ability for these businesses to order from multiple producers, get one delivery, and a single invoice is making a difference in the operational effectiveness for producers and buyers alike. Food hubs have the staff, transportation, facilities and overall infrastructure to increase efficiency without increased cost.

 

So, what can food hubs learn from recent farmers market trends?

The growth that farmers markets saw over the last decade shares some characteristics with the tech bubble of the late 1990’s and early 2000’s (minus the billions of venture capital funding, of course!). There was unbridled growth; every city, town, and even some individual neighborhoods started their own market.   Not long ago, the USDA was issuing press releases about the dramatic growth of farmers markets.  So, what happened and how can food hubs avoid the same fate?

  •  Much of the growth was based on a “build it and they will come” strategy, without regard to a financially sustainable business model, or available supply.  Many markets were planned without consulting producers and were used as a way to gain foot traffic to nearby businesses.

Lesson learned:  Ensure that a food hub will fill a critical market demand and that it meets the needs of customers, producers, and other key stakeholders.  Many food hubs create feasibility studies and business plans to better understand and quantify the risks, competition, and required infrastructure to support long term growth.

  • Some markets (new and long standing) struggled to find enough producers to fill their stands.  In many cases, this is directly related to a lack of customers shopping at the market.  But some successful, long standing markets essentially outstripped their supply.

Lesson learned:  The emphasis on planning, particularly production planning, cannot be overstated when starting and operating a hub. Almost all food hubs suffer from a lack of supply and thus, maximizing the use and increasing supply is paramount.  Food hubs should not only be planning for the upcoming year at hand, but for the future. What kind of support or training do your producers require to reach future goals?

  • Farmers markets rely heavily on a fairly homogeneous core group of customers. While that group has diversified slowly over time, the over saturation of markets cannibalized each other without identifying and serving different customer segments.

Lesson learned:  Successful food hubs should look to diversify their sales channels. For example, a hub that relies heavily on restaurants, particularly high-end restaurants, risk their sales with economic downturns.  Similarly, a hub that focuses only on schools and other institutions are exposed to political and regulatory shifts. Diversification of your customer base can keep things steady with the evolving market and regulatory environment.

What this means for the future?

Taking a hard look at long term financial stability and prosperity is especially vital given the influx of funding and resources that have recently become available to food hubs and aggregators through USDA’s Local Food Promotion Program and other sources.   With this funding, food hubs have the opportunity to make tremendous gains for local food – but they can only do so if they are around to reach their mission.

 

 

Production Planning with an Expert: Getting Started with Production Planning

While specifying the requirements of our newly released Production Planning module, we talked to many food hubs that aren’t ready to plan all of their products, but want to implement best practices to position themselves for more rigorous planning in the future.  Our research led us to Mary Oldham, Regional Coordinator for Value Chain Cluster Initiative (VC2), a program of the Natural Capital Investment Fund that provides hands on business support to strengthen local farm and food businesses in West Virginia.

We interviewed Mary about common planning challenges and best practices for newly formed food hubs or those working with small or inexperienced producers.   Below is Part 1 summarizing what should be in place before planning and ways hubs can help less experienced producers transition to planning production.  Part 2 covering common problems and lessons learned will be published in the coming weeks.

Mary will also be joining us for our January 22 webinar, “Getting Started with Production Planning” where she will present on best practices and be available for questions.  Register here, space is limited!  If you are interested in a detailed demonstration of the module, sign up for one of our weekly webinars or contact us to arrange an individual web meeting!

mary production planning lewisburgAbout Mary Oldham

Mary has served as a Regional Coordinator for VC2 since 2013.  Through her role with VC2, Mary co-authored Production Planning for Aggregators with Savanna Lyons, and provides training and support to start-up and emerging food hubs and their producers.

Mary has a Masters Degree in Agricultural and Resource Economics from West Virginia University. She also runs a CSA farm with her husband.  Prior to her role at VC2, Mary worked with small agricultural cooperatives and agricultural development projects in Honduras as a Peace Corps volunteer, through USAID, and various non-profits. 

Getting Ready to Plan

For new and emerging hubs, here’s a quick list of what should be in place before production planning.

Distribution and pricing model

Before formulating a viable plan, a food hub must determine its distribution model and cost structure.  Most food hubs conduct a pilot season to test their assumptions and ensure the model can scale.  Hubs in the pilot season should limit their production planning to a couple key producers and customers that are aware the hub is in pilot stage.  After the pilot season, the hub can make adjustments to the model to achieve greater producer and customer buy-in.  This will also help the hub confidently expand their production planning efforts to a wider group of customers and producers.

Manager/coordinator that has the trust of customers and producers

This role is perhaps the most critical for a hub’s ultimate success, particularly for hubs that are working with larger buyers.  Inevitably, actual sales will not go as planned, but communication and transparency between the hub, producers, and customers will maintain relationships and provide opportunities for future improvement.  To successfully execute a production plan, the coordinator/manager must be in regular contact with customers and producers, updating them on anticipated changes to the plan, and also putting back-up plans in place when necessary.

Detailed buyer demand data

Many hubs are formed based on feasibility studies or analysis that combines macro data and buyer surveys.  This type of demand estimate should not be used to plan production, however.  Hubs should base their plan on the hub’s actual sales to customers or through detailed conversations with the customers about their needs.  A hub must be careful to not take a customer’s anticipated demand at face value particularly if the hub has had limited experience selling to the customer.  Customers often mistakenly overestimate demand because of their enthusiasm or lack of knowledge of their true volume needs.  Overestimating demand, particularly for specialty products that are difficult to find alternative buyers for, can create producer distrust.  Hubs can avoid overestimating demand by asking customers to provide volume and prices for actual purchases of the same product in the previous 12 months and assumptions behind their demand forecast.  The hub can then assess the relative risk in planning production for that customer.

Producer buy-in

Specifically, the hub should have a couple larger, more experienced producers that are bought in and see the big picture.  These producers help bring other producers on board through their example.  They often lend their production experience to the group and shorten the learning curve for other producers.  In addition, they help mitigate risk in working with less experienced producers because the hub can often fill in supply from them when the less experienced producers can’t meet their expected supply.

Good individual farm planning and record keeping practices

The food hub’s production plan is highly dependent on each farm following through on its commitments.  Before working with a producer to plan production, the hub should evaluate the farm’s planning and record keeping practices.  How do they plan and schedule succession plantings?  How much of each product have they grown in each year?  What varieties?  How closely have their plans matched actual production?

Producer Training & Assistance

The mission of some food hubs, such as Alba Organics, is to help farms gain experience and training so that they will be successful when fully operating on their own.  Even if a hub isn’t acting as a farm incubator, the hub can assemble resources that will help producers provide a more predictable supply.

Farm planning and record keeping

Many small farms are transitioning market gardeners or perhaps run small CSAs where their supply is highly variable and unpredictable. Before these producers begin planning, they should assess their needs and time constraints.  If the farmers are also working outside jobs, they may need to plant crops that don’t require succession planting, such as winter squash.  Before creating a plan, producers will need information on yields and days to maturity for the crops they plan to grow. Popular resources include Johnny’s Seed Catalog and Johnny’s website.

When creating a plan for the first time, many producers benefit from working with a worksheet by hand before using technology to automate calculations.  Technologies for automating a producer’s production plan include a spreadsheet based system by Brookfield Farms, developed and supported by the farmers, and AgSquared, a cloud based planning and record keeping technology.

Post harvest handling & grading

Producers accustomed to growing on a small scale for consumers are often unaware of good post harvest handling practices, cleanliness, grading, and standard pack sizes.  Many food hubs offer Wholesale Success Training to their producers so they are better prepared to meet the hubs needs in quality, safety, and consistency.  Depending on the type of customers being served, food hubs may also consider requiring GAP training, which is offered by USDA.  A number of hubs are currently piloting Group GAP certification.

Resources for troubleshooting problems

Producers that begin to grow specific products on a larger scale than they ever have will often experience problems with disease, pests, quality, or growth.  Local extension agents and more experienced producers are a great resource for helping producers overcome challenges.

For more expert planning advice please check out our blog posts (Part 1 and Part 2) featuring expert Johnice Cross, former production coordinator for a producer co-op.  We hosted a webinar featuring Johnice on production planning on November 13.  If you missed it, you can find a link to the recording on our Resources page.  

Best Practices with an Expert: Production Planning for Food Hubs, Part 2

In anticipation of releasing a fully integrated Production Planning module this fall, LFM is featuring expert planning advice from food hub managers and others working in local food systems.

For this installment, we interviewed Johnice Cross about her experience forecasting production and sales for local food.  Below is Part 2 of a summary of our conversation on the mechanics of planning.  Part 1 on why planning is important and what needs to be in place to begin planning is here.

Johnice will also be joining us for our November 13 webinar, “Production Planning for Success” where she will present on best practices and be available for questions.  Register here, space is limited!

johniceAbout Johnice Cross

From 2007 – 2012, she served as the Coordinator of GROWN Locally, a producer cooperative in Northeast Iowa.   As Coordinator, Johnice managed all aspects of running the cooperative, including production planning.  During her tenure, GROWN Locally became the first cooperative to become a qualified vendor for Sodexo.  She is a food safety coach for the USDA GAP certification program.

Johnice has a degree in Finance from the University of Arkansas in Fayetteville.  Prior to her work with GROWN Locally, she owned an IBM Midrange Computer Consulting Company where she specialized in financial analysis and planning for manufacturing and distribution companies.  She is currently consulting in the local food world of NW Arkansas.

Getting Started

Plan everything or just specific products?

This a question most food hubs wonder about, and there isn’t a single right answer.  Certainly, the food hub must take into account the amount of time and capacity available for planning and determine the best approach for their hub for that season.

One advantage of planning all (or most) food hub products, although more time consuming upfront, is that it results in a sales plan and cash flow projection for the food hub and its producers.  Planning all sales also gives the food hub a head start when dealing with new customers.  If the food hub knows what volumes producers are growing and how much is already reserved, the hub knows what products they can sell more of and thus how to more efficiently use their sales and marketing efforts.  This approach will also make the degree of over or under supply of each product more visible, and thus, actionable.

If planning all products a food hub sells is overwhelming or seems unnecessary, planning just those that drive sales or are in short supply still adds significant value to the food hub.  Through planning, the food hub can be more strategic in the sales of products that are in limited supply and recruit producers to fill in gaps.

Putting the plan together

Depending on the type of entity and level of producer engagement, putting the plan together will vary slightly.  Regardless of the entity type, the production coordinator will meet with customers and producers, typically individually, to simultaneously review the previous year and determine volumes for the next year.  Based on these meetings, the production coordinator determines how to best utilize available supply.  In deciding what producers to plan for which products, the production coordinator takes into account many different factors, including:

Producer experience growing the product
-Has the producer grown the product before in similar quantities for similar types of customers?
-Have their results been predictable in volume and quality?

Customer requirements
-How flexible is the customer on product consistency and quality?
-Will the product be used for value added products or sold as harvested?
-How flexible is the customer with pricing?

Food hub requirements
-What are the “costs” of working with each producer and customer? For example, are they easy to work with?  Are they responsive?
-How does each producer and customer fit into the long term strategic goals for the food hub?  Will working with the customer provide experience that can be leveraged to work with other similar customers?

Mainly, the production coordinator is maximizing the available supply while managing risk to ensure the food hub has a reasonable chance of meeting commitments to customers and producers.

In producer co-ops, producers often meet as a group to review results from the previous year, discuss varieties and available acreage for each crop.  The co-op’s bylaws typically dictate how a co-op establishes producer priority and assignment of products.  Based on the producer meetings, the coordinator establishes a primary producer for each product and sets pricing.  Producers then use this plan to purchase seed and finalize their rotational plan.

How long does all of this take? 

Typically, individual buyer or producer meetings take about 1.5 to 2 hours each, plus preparation and follow-up.  For some buyers (small or those not interested in forecasting), the coordinator can assume demand, typically based on sales from the year before.  Often in producer co-ops, individual producer meetings can be eliminated in favor of several producer group meetings.

Between producer and customer meetings, Johnice estimates that she spent about 3-4 person weeks creating and finalizing a production plan.  Obviously, this can vary tremendously by the size of the food hub, number of producers and customers, number of products planned, and the food hub’s experience in planning.

Managing the plan

Producers provide weekly updates on availability throughout the year, relying on their plan to guide volume and pricingProducers should be responsible for notifying the coordinator of crop failures or other circumstances that prevent them from meeting their commitments.  The coordinator should also regularly check on how well producers and customers are meeting their commitments, and keep detailed notes on failures and successes.  These notes are vital in doing a proper review at the end of the year.

In some producer co-ops, primary growers are responsible for mentoring secondary growers to increase their quality and yields.  Secondary growers can call on primary growers to help troubleshoot problems.  This system greatly accelerates the learning process of newer growers and allows the co-op to grow more quickly and serve more customers.

An important aspect of taking on less experienced growers is finding a market for seconds.  Inevitably, the first or second time a producer grows a new crop or grows it at scale, product quality issues crop up.  Food hubs can help producers take risks on growing new products if they can help find customers for “seconds”.

What would make planning easier or more effective?

Besides having more product (almost all products were short on supply), a planning database that is integrated with orders to communicate and track plans greatly enhances a food hub’s ability to learn from and improve future sales plans.  Here are specific areas Johnice cited:

– An easy way to communicate the plan to producers & customers.

– A quick comparison of plan vs actual sales so issues can be spotted earlier.

– A way to easily track missed opportunities to inform production in future years.

How LFM addresses planning

When we began specifying the planning module, we noticed that many food hub production plans were stand alone spreadsheets and went nearly untouched during the sales season.   Of course, the planning process itself provides great value to the food hub, but a food hub can realize much more value by using and updating the plan on a regular basis.

While LFM’s database driven planning module helps production coordinators develop a production plan and spot excess supply and demand in the planning stage, it also helps them manage and execute the plan throughout the season.

The planning module integrates with the producer interface, informing the producer of expected weekly volumes and sales of each product, and customer orders, allowing the food hub to create “reserve” orders based on the plan. LFM also provides reports on plan versus actual for customers and producers.  These reports will not only reduce the prep time for the annual review meetings, but also help the coordinator spot problems earlier.

Want to learn more? 

For more expert planning advice please check out Part 1 of our conversation with Johnice.  We hosted a webinar featuring Johnice on production planning on November 13, 2014.  If you missed it, you can find a link to the recording on our Resources page.    We also interviewed Mary Oldham, Regional Coordinator for Value Chain Cluster Initiative.  Read a summary of our conversation here or register for a webinar on January 22, 2015 where Mary will share her advice on working with new and emerging food hubs.  Also, be sure to check out the publication Production Planning for Aggregators written by Mary Oldham and Savanna Lyons, Leopold Center.

 

Best practices with an expert: Production Planning for Food Hubs, Part 1

In anticipation of releasing a fully integrated Production Planning module this fall, LFM is featuring expert planning advice from food hub managers and others working in local food systems.

For our first installment, we interviewed Johnice Cross about her experience forecasting production and sales for local food.  Below is Part 1 of a summary of our conversation on why planning is important and what needs to be in place to begin planning. Part 2 on getting started and the mechanics of planning is published here.

johniceAbout Johnice Cross

From 2007 – 2012, she served as the Coordinator of GROWN Locally, a producer cooperative in Northeast Iowa.   As Coordinator, Johnice managed all aspects of running the cooperative, including production planning.  During her tenure, GROWN Locally became the first cooperative to become a qualified vendor for Sodexo.  She is a food safety coach for the USDA GAP certification program.

Johnice has a degree in Finance from the University of Arkansas in Fayetteville.  Prior to her work with GROWN Locally, she owned an IBM Midrange Computer Consulting Company where she specialized in financial analysis and planning for manufacturing and distribution companies.  She is currently consulting in the local food world of NW Arkansas.

Why is planning important? 

Planning benefits food hubs, its producers and customers – it increases sales and profits of food hubs and producers while better serving customers.  Here is what planning can do for food hubs:

Consistency

Planning helps create consistent availability for buyers, which allows them to buy more.  Consistency is important in volume as well as variety and quality.  Customers like to buy the same variety of product week to week because their customers demand it.  Having intermittent supply creates challenges in stocking their shelves and building their menus that increases their costs and therefore decreases the amount of product they purchase through the food hub.  Customers also value price consistency; if food hubs can offer a price that doesn’t fluctuate like other vendors, they will purchase more from the food hub.

Pricing

Planning allows hubs to work with customers on a wider range of products over a longer period of time to more easily overcome price sensitivities.  Larger volume buyers are almost always going to be price sensitive.  If hubs work with those buyers to meet their budget for an entire season for a range of products, they won’t be competing on individual product prices week to week.

Producer engagement

In order for a food hub to succeed, it needs producer buy-in.   As with any business, producers assess the importance of the food hub’s business based on a combination of sales volume, profitability, and other benefits they might receive by selling to the food hub.   Producers are more likely to work with a food hub if they know with some certainty the sales they will make to the food hub.   Planning also helps them reduce risk because they are doing less guessing on what to grow.

Increase food hub value

For long term sustainability, food hubs need to provide services beyond sales and distribution.  When food hubs use the planning process to help shape supply to meet demand, they are adding more value to the supply chain and making the food hub more difficult to replace.

Cash flow & infrastructure planning

Forecasting will help food hubs improve cash flow and infrastructure investments.  Planning ahead will cut down on unnecessary last minute line of credit applications and purchases, which are undoubtedly more expensive than if planned and negotiated ahead of time.

What are key components to have in place? 

Production coordinator

Food hubs have different titles for this role, but ultimately this person (or group of people) is the lynchpin to making and executing a good plan.  Coordinators should have strong producer and customer relationships to be effective.

Producer experience

Although it probably goes without saying, producers that you are relying heavily on in the plan should have multiple years of experience growing the products you are planning for them.  They should also have experience growing for similar customers and at similar volumes.  If you are working with many inexperienced producers, consider offering a formal producer training program such as Wholesale Success by Familyfarmed.org.  Food hubs should also consider a peer mentoring program, which are often used by producer cooperatives, where more experienced producers offer support and assistance to less experienced producers.  These producers will expect some preference in return for their services, but in the long run, it will help the food hub continue to grow.

The food hub can minimize its risk by only planning with producers they have experience with and using other producers to fill in gaps.  As the food hub gains experience with other producers, they can add them to the planning process in upcoming years.

Written agreements

While most food hubs and producers aren’t ready to engage in binding agreements, it makes sense to formalize the roles and expectations of the food hub, producers, and customers.  Having these in place will help assess what adjustments need to be made in the future plus will ensure that all parties are committed to the same goals.

Want to learn more?

For more expert planning advice please check out Part 2 of our conversation with Johnice.  We hosted a webinar featuring Johnice on production planning on November 13, 2014.  If you missed it, you can find a link to the recording on our Resources page.    We also interviewed Mary Oldham, Regional Coordinator for Value Chain Cluster Initiative.  Read a summary of our conversation here or register for a webinar on January 22, 2015 where Mary will share her advice on working with new and emerging food hubs.  Also, be sure to check out the publication Production Planning for Aggregators written by Mary Oldham and Savanna Lyons, Leopold Center.

Embracing a few more middlemen

cinco estrellasIf you’ve made your way to our website, chances are you’ve also read Dan Barber’s op-ed “What Farm-to-Table Got Wrong” published in the New York Times this past weekend.  I read a lot of opinion pieces on local food systems, but few resonate as this one did for me.  Certainly a big reason is that just a few years ago our family began subscribing to a local bean and grain CSA and experienced a similar awakening that Barber describes when visiting Lakeview Organic Grain Farm.  Truth be told, we joined the CSA because I had become a bean fanatic and the CSA had about 6-8 heirloom varieties of beans and the grains were just a part of the deal.  I was determined to use the grains and invested in a couple of cookbooks and got creative with adding barley to many dishes that call for meat, replacing whole wheat flour with rye or spelt flour, and more.  Kasey and Jeff, our CSA farmers, insisted that CSA members get both the beans and the grains because both were required for a true investment in their farm and its ongoing success.  Our family is grateful for their insistence as we now have a pantry full of whole grains and legumes.

Barber paints a pretty depressing picture of the local food movement’s results in making fundamental changes to our food system and while I can certainly drum up success stories and statistics that are a bit rosier, its hard to argue with his conclusion that we’ve barely moved the needle.  The most refreshing part of the article is that his suggestions for driving fundamental change are based on the bigger picture of our food system instead of looking at it from his perspective as a chef and owner of a high end restaurant.  He concludes that the movement needs a “few more middlemen”, such as canneries, mills, processors, and distributors.  I think he’s suggesting that we borrow a few ideas from the big-ag playbook to begin leveling the playing field – namely creating more efficient supply chains.

We at LFM spent a good chunk of last summer looking deeply at how our customers, food hubs, can compete more effectively and ultimately drive change in our food system.  We studied best practices of successful food hubs, interviewed dozens in the supply chain including producers, buyers, and food hub managers and similarly concluded that food hubs needed to move beyond selling whatever they can get their hands on (typically whatever producers can’t sell through other channels) and begin planning with producers and customers.  A forecast helps solve a couple of key problems – it reduces producer’s risk because they have more information on what and how much to plant, raise, or produce and it helps provide buyers with a steady, consistent supply.  Please note that I wrote “helps solve” instead of “solve”.  As we all know, plans must evolve with weather, pests, and other unpredictable events.  Having a plan, though, does provide a framework for dealing with those events as they arise.

We’ve continued to study the nuances of planning for different sales channels throughout this winter and spring and are looking forward to seeing how the beta test of our planning module unfolds over the harvest season.  We’re betting that integrating supply and demand forecast into food hub operations is one key step in helping the local food movement gain some ground.  Stay tuned as we approach the commercial release of our planning module later this year.