Increasing Transparency in North Carolina Food Supply Chains
Published on: Mar, 30, 2017
Over the last year I have been afforded the opportunity to work as a Supply Chain Fellow for the Center for Environmental Farming Systems. My work has contributed to the completion of the USDA-funded University Food Systems (UFOODS) Project. The project was created to build market opportunities for small and mid-size farmers by developing supply chains linkages from these farms to North Carolina university campuses. My role has been to work with supply chain players in six different university systems to create value chain maps of the entities, processes, and decision points that govern the movement of food onto university campuses in North Carolina. This information will soon be published in a “How it Works” guide for university food systems. The ultimate goal of the project is to provide transparency into the supply chain processes that govern the movement of food from the farm to the fork of North Carolina college students and contribute to an increase in procurement of local foods on these campuses.
All public university food systems in North Carolina, with the exception of NC State, who is self-operated, are governed by a Food Service Management Company (FSMC) like Aramark, Compass Group, or Sodexo. Universities contract with FSMCs to manage all aspects of their food system and their buying power is significant. These companies can receive price discounts for agreeing to purchase a minimum volume of food from manufacturers and management is often incentivized to purchase from these authorized vendors because it receives a percentage of the food dollars back as a rebate for the high volume. This represents a huge obstacle for local foods to enter the system. However, there is precedent for local foods entering the system through authorized vendors and outside of these large organizations.
There are multiple market channels from farm to university. Farms who are Good Agricultural Practices (GAP) Certified and maintain the proper insurance can become a supplier to distributors like FreshPoint, which is owned by Sysco. Oftentimes, university dining management already purchases from FreshPoint, so this is the optimal solution for farmers who can overcome the barriers (investment in GAP certification, insurance, etc.) that face them to enter this market. With some additional work by the farm and the FSMC at the partner university, GAP certified farms can become approved direct vendors of the university. However, this requires a high level of investment by the university as it necessitates additional work to set up the farm as a vendor and purchase from the farm outside of the FSMC’s usual avenues. Additionally, there are few tangible financial incentives to purchase from local farms because of the volume discounts that can be achieved through purchases from authorized distributors. The main point of leverage for local foods in university food systems is the interest and initiative of students who have the power to increase demand for local foods at their university. This reveals a classic Principal Agent Problem at North Carolina universities. The principals (university students) have the power to communicate their commitment to local foods and contribute to the increasing demand for local foods on college campuses. The agent (university administration) makes decisions concerning the provision for local foods in the Food Service Management Company’s contract on behalf of the students. The principals employ the agent to perform a task and the agent is accountable to the principal because the principal is their customer and major stakeholder. In this case, the task that university administration is accountable to perform on behalf of the students is the creation and management of the contract with the Food Service Management Company. Without the initiative of students who demand local foods on their campus, the university administration has very little incentive to make a provision for local foods in this contract. However, students who are knowledgeable of university food supply chains and committed to local foods can provide the sparks necessary to motivate university administration to make provisions for local foods a priority in their next Request for Proposal and, ultimately, their contract with the Food Service Management Company.
Read the Supply Chain Management Professional Newsletter
Read the latest supply chain research, articles, and news as soon as we post them.