When Ann Arbor, MI’s Local Orbit first took root in 2010, founder and CEO Erika Block wanted a better way to connect local growers and food producers with restaurants and other commercial customers.
Six years later, the company has both expanded and refined its focus to keep up with growing customer demand and challenges in the way food is distributed. Now describing itself as a “supply chain platform for the new food economy,” Local Orbit is trying to solidify its growing supply chain expertise in part through a relationship with LLamasoft, a leading supply chain optimization software company.
In August, Local Orbit moved into LLamasoft’s new building in downtown Ann Arbor, an arrangement that Block says is mutually beneficial. “It’s good for them to engage with upstarts, and for us, there are a range of resources in the office that we can take advantage of. One is water cooler talk—they’re casual conversations, but we feed off each other.”
It was through a series of conversations with customers that Local Orbit realized it was perhaps missing a bigger supply chain opportunity. The kinds of institutional buyers purchasing food from local farmers through Local Orbit include schools, hospitals, jails, and universities—a market worth up to $82 billion annually, Block says. And even though these large institutions aren’t typically known for boutique food choices, they also aren’t immune to the national locavore trend. These days, people want to know the story behind the food they eat, she points out.
“We started by building a software-as-a-service company with sales and management tools for new local food distribution models,” Block says. “But there’s a lot of institutional interest in local food systems, and there’s real potential impact because their volume is high, but the size of their orders is relatively small compared to their needs. We started to look at that because we knew there was demand for more local food.”
Initially, Block and her team suspected a supply problem. But the food producers the company worked with insisted that wasn’t the issue. “What we were seeing was a business process challenge on the institutional side,” she explains. For example, a university may have a $20 million budget for food, but it works with one or two different large buyers or food service companies like Sysco. “That means to purchase from small farmers, they have to go outside the normal system, and there was no easy way to connect from a purchasing or communications perspective.”
Local Orbit began wondering if it could introduce a vendor management tool for large institutions. “Typically, when you order from Sysco and other large distributors, you order apples and you get apples—it’s up to the distributor to find the apples,” Block says. “Because it’s a huge operation with a complex supply chain, it’s not set up to access smaller suppliers.”
Not only that, the communications procedures and business processes involved were often siloed at big distribution companies, creating an expensive, complicated system to manage. “What we wanted to do was streamline those processes to create visibility and access,” Block says. Local Orbit is currently developing and testing a service that would allow large institutions to better manage relationships with growers, giving institutional customers a single dashboard, statement, and bill each month regardless of the number of growers they transact with. Through templates, customers can also upload historical data to compare and benchmark it against data from the USDA and other public sources.
“Part of what we’re learning is that in order to get these large institutional customers to shift, they need access to good information, such as purchase history,” she adds. “Fundamentally, they have all this data that needs to be aggregated and visualized before it can be analyzed. It’s a common problem in all sectors right now, and the food industry needs good data just like any other business.”
What Local Orbit wants to do is cover supply, demand, and logistics for food producers, buyers, and distributors—something that hasn’t yet been done in the food industry.
“It hasn’t been done before because, honestly, it’s hard,” Block says. “Not many organizations look at all parts of the supply chain. We’re building a network with access to trading partners and visibility into what’s available. From our core tools, it’s very scalable. And it fulfills our core goal of increasing local food transparency to really shift market share. We need to support the different players through better collaboration across the supply chain.”
Block says her company’s new data and visualization tool is expected to launch during the first quarter of 2017. The nine-person Local Orbit team is hosting a “supply chain problem solvers” workshop Nov. 7-9 in Ann Arbor that will explore related topics.
“If you look at the food service industry, grocery sales have flatlined, while delivery and food kit services are growing rapidly,” Block says. “Food at schools and hospitals is the fastest-growing segment in the market, with a lot of demand, and it’s a really good place for small producers to go because it’s more consistent than restaurants and it’s easier than selling at a farmer’s market.”
http://www.xconomy.com/detroit-ann-arbor/2016/11/03/local-orbit-out-to-boost-food-supply-chain-for-farmers-institutions/