Encyclopedia
Please note this is an old version of this entry, which may differ significantly from the current revision.
Subjects:
Agricultural Economics & Policy
A local food system is defined as a supply chain system that distributes food from local producers for consumption by local customers. It is an alternative food network that shortens and more effectively structures the supply chain system. An intermediary actor functioning as an aggregator is needed in the local food system. The food hub is one such intermediary actor with an essential role in strengthening the local food system and increasing the competence of small farmers to compete with large-scale food distribution. The results show that two transformations are needed to achieve a local food system: changing the supply chain system to one that is shorter and more structured and increasing quality consistency.
- local food system
- food hub
- soft system methodology
1. Introduction
Agricultural commodities are highly perishable food commodities with a short lifetime [1], whose distribution requires proper handling. The handling of agricultural commodities in the supply chain is different from the management of other commodities with a longer lifetime due to continuous and significant quality changes, from producers to end consumers [2]. As delays in distribution to consumers can reduce quality, increase the risk of food loss, and reduce profits, the agricultural food supply chain should focus on minimizing the shipment time [1]. The shipment time can be reduced by shortening the supply chain. Therefore, a strategy to create an alternative network that aims to shorten the supply chain is needed.
A local food system is an alternative food network (AFN) that aims to shorten the supply chain of food commodities, including agricultural commodities. The local food system supplies food locally based on regional characteristics [3,4], and involves small farmers as producers [5,6]. It affects certain social or supply chain characteristics in producing food [7,8] and creates new economic opportunities [9].
The local food system has a mission for social, economic, and environmental sustainability [10,11]; it is expected to build relationships between farmers and customers, provide fair-trade opportunities for small–medium farmers to sell their products, and shorten the supply chain in the distribution process. To achieve these goals, the most effective marketing strategy for commodities in the local food system is direct sales from farmers to customers [5,12]. However, direct selling can only operate efficiently if the customers are individual, not institutional customers. The supply of several small farmers can meet the demands of customers of one institution. With a direct selling system, institutional customer demand is not efficiently met, and the environmental sustainability of the local food system cannot be secured. Therefore, an intermediary local food system that can perform aggregation is needed to meet institutional customer demand and achieve the missions of the local food system.
The fastest-growing intermediary local food system is the regional food hub (RFH) [13]. RFHs function as an intermediary [14] to shorten the food supply chain [15,16] and increase sustainability [17,18]. RFHs play crucial roles in the local food supply chain system: providing operational services, producer services, and community/environmental services [19,20]. The differences between a regional food hub and a food distributor lie in the RFH paying more attention to economic viability, social justice, and ecological sustainability [21,22,23]. Furthermore, RFHs have social and coordination activities [16,24].
Koch and Hamm [24] categorize food hubs into three stages: planning, development, and operation. The food hub is still in the planning stage if it does not have physical facilities, paid employees, or a legal entity to support its operational activities, but has already developed operational ideas. A food hub is in the development stage if the food hub has physical space, funding, business plans, and staff or volunteers. A food hub is classified as operational if it has been sourcing and distributing food.
Among studies of food hubs in the planning stage, Mejia and colleagues [25], Perdana and colleagues [26], and Ge and colleagues [27] constructed a mathematical model to determine the location of a food hub that maximizes farmers’ coverage and minimizes logistics and operational costs. Cleary and colleagues [28] sought to determine the optimal number of food hubs in a county by estimating breakeven market sizes and identifying factors that affect the profitability of food hubs. Their mathematical model found that the factors that need to be considered before building a food hub are the capacity of the food hub and the population to be covered. Martinez [29] explored the barriers to local food expansion and types of policies that can best encourage future growth, arguing that the obstacles that can hinder the development of a local food system through a food hub are inconsistent availability and quality, difficulty identifying reliable local suppliers, difficulty in making purchases due to farmers’ ordering procedures, and dealing with multiple suppliers.
In the planning stage, knowing the exact location and number of food hubs and the barriers that hinder the development of food hubs are not enough. The critical success factor in supply chain management in the local food system is coordination, which serves to increase profits and customer service performance [30]. As intermediaries of local food systems, many food hubs fail to fulfill their functions due to unsystematic coordination-related supply chain management [31]. The concept of a food hub as an intermediary for local food systems is complex because it involves many actors and has dense interactions [32]. A holistic problem-solving approach needs to be applied to achieve the objectives of each actor in the food hub. Building a food hub requires significant funding on the financial side because it requires adequate infrastructure and equipment [33]. The success of a food hub is measured not only in profitability but also in the achievement of food security, a stronger local food system, and increased regional economic activities. It is thus essential to design effective food hub coordination at the planning stage.
Soft system methodology (SSM) is an appropriate approach to finding solutions in the form of multi-objective system problems that are equally important and complex, and involve human activities [41,42,43]. A soft system approach is appropriate for coordinating the design of a local food system and food hub because SSM accommodates systems that involve complexity and different perceptions without reductionism. SSM is suitable for solving problems related to improvement and coordination. SSM articulates the learning process from the system situation under study and compares the real world and systems thinking [43].
2. Local Food System
A local food system can resolve social problems such as instability in supply, unavailability of healthy food, and inequality in economic growth between rural and urban areas.
Strengthening regional or local food systems will increase food consumption from local producers and enhance access to healthy and fresh food [45,46,47,49]. A regional food system is an alternative food system that can reduce the environmental and social sustainability problems of a conventional food system [22]. However, there are obstacles to localizing the food system, such as a lack of economic, organizational, and physical structures of the appropriate scale for moving locally grown food to local eaters.
The local food system concept prioritizes direct sales from producers to customers [12], enabling communication and the establishment of bonds between the two parties [18,50]. From this communication, customers know the characteristics or features of the product. Product differentiation is the unique attribute contained in the product, consisting of farmer identity, the story of the product, and the planting process. This product differentiation causes customers to buy local products at higher prices.
3. The Conceptual Model
The ultimate goal of this structured and shortened agriculture supply chain system is to achieve a local food system. The parameters of success of the local food system are not based only on the economic aspects but also on the environmental and social aspects [17,18,19]. Intermediaries are still needed in designing a shorter and more structured supply chain because farmers in Bandung Regency are small and medium farmers. One high-demand customer must be supplied by several farmers through an intermediary that functions as an aggregator to make the transaction process more accessible. However, the developed intermediary must have a different principle from existing intermediaries and must support the achievement of a local food system. This new intermediary must also provide benefits for farmers and high-demand customers. An intermediary that fits this concept is a food hub [21], which not only prioritizes profit but also promotes social and coordination activities between farmers and customers [23].
Figure 5 subsystem 1 is carried out at the food hub. Farmer participation is the first thing that needs to be achieved in developing a new supply chain system because farmers are the primary producers who produce products sold to customers. Therefore, the first activity to be carried out is to build farmers’ cooperation for collaboration in selling commodities together to reach high-demand customers (1). Another actor no less important in achieving a local food system is the participation of high-demand customers. Marketing to high-demand customers (6) is carried out after operational activities at the food hub have been clearly defined.
Figure 5. The conceptual model.
Disclosure of information can build resilience in the supply chain [37]. With detailed information about the commodities being sold, trust will be formed between farmers and customers. Therefore, in the local food system, information is not only about basic information of commodity (e.g., variety, quantity, and quality) but also about commodity profiles, such as farmer identity and planting process. Commodity profiling allows customers to know the final quality of the commodity and the history of the product. Commodity profiling also makes customers more familiar with farmers to open broader collaboration between farmers and customers. Openness and ease of information about commodities will ease high-demand customers’ purchasing decisions. This information is also helpful in making contract decisions with farmers and customers.
To achieve a local food system, coordination activities are needed that not only help farmers produce commodities that meet the needs of high-demand customers but also provide science-based training tailored to the needs of farmers and the standard requirements of the high-demand customers, through collaboration with universities and living innovation laboratories. Such training, carried out in an integrated manner through a food hub, increases the ability and knowledge of farmers. The farmer competency improvement program does not stop at training; assistance in the field is also needed. The mentoring and training process will minimize crop failures and supply uncertainty regarding both quality and quantity.
The proposed alternative supply chain system has aims to increase economic, social, and environmental advantages. However, changing an agriculture supply chain is not easy. According to Mejia and colleagues [25], the middleman, small wholesaler, and big wholesaler will not give up on letting the supply chain system change. They argue that the strategy that can be implemented is to create intermediary memberships in the food hub. In the context of Bandung Regency, intermediary (i.e., middlemen, small wholesalers, and big wholesalers) membership can be applied. Middlemen and small wholesalers can act as coordinators in farmer groups that do not have the human resources to carry out aggregation, and the sorting and grading of operations. Small wholesalers and big wholesalers can still conduct their business but are limited to particular commodities. These wholesalers cannot do business in strategic commodities that are only sufficient to meet the needs of Bandung Regency. In this way, a local food system will be achieved without losing the livelihood of the intermediary.
5. Conclusions
Activities and coordination are recommended to achieve a local food system. Two transformations are needed: the shortening and structuring of supply chains and increasing the competence of farmers to produce crops with consistent quality to meet demand. An intermediary is needed in the recommended supply chain system in the form of a food hub, whose activities agree with the economic, social, and environmental aspects of the system. The recommendations provided do not eliminate intermediaries, such as wholesalers, who are recommended to form partnerships with actors in the new supply chain system to not disrupt the intermediary’s livelihood.
This entry is adapted from the peer-reviewed paper 10.3390/su14063281
This entry is offline, you can click here to edit this entry!
