Optimizing Local Food Supply Chain Networks for Large

T E A M M E M B E R S : R E G O P U D U K A D A N , K E I T H

S M I T H , M I K E M E H A N , A N D S E B A S T I A N N A S K A R I S

OPTIMIZING LOCAL FOOD SUPPLY CHAIN

NETWORKS FOR LARGE-SCALE SUPERMARKETS

AND LOCAL FOOD HUBS IN NORTH CAROLINA

Local-to-Local

AGENDA

• Briefly describe our project

• Highlight our findings

• Share feedback from Key stakeholders

PROJECT OBJECTIVE

• To identify the optimal distribution strategy

to connect large-scale, locally owned food

retailers with small and mid-scale local food

producers while mitigating the costs

associated with sourcing from a larger

number of small to mid-scale producers.

APPROACH

• Field Research

• Literature Review

• Visualize the Current Supply Chain Using

Process Flow Maps

• Perform Quantitative Analysis Using Cost-to-

Serve Model

THEORY

• Local food supply chains could be re-

designed to increase supply chain value by

cutting inventory related costs for food

retails and transportation costs for local food

hubs.

CURRENT PROCESS VISUALIZATION

Primary Picking Process

CURRENT PROCESS VISUALIZATION

Cross-Dock Picking Process

COST-TO-SERVE MODEL

Pilot Mountain-MDI Retail Store Map

PMP Location MDI Location Retail Store

COST-TO-SERVE MODEL

• The model is based on a hypothetical connection between three

actual entities: Pilot Mountain Pride (PMP), local Lowes retail

grocery destinations, and Merchant Distributors Inc (MDI).

• The model estimates cost per case to deliver produce using four

different distribution networks:

• Pilot Mountain Pride uses their own truck to deliver direct to

stores using “milk runs”

• Pilot Mountain Pride uses contract carrier to deliver direct to

stores using “milk runs”

• Pilot Mountain Pride uses contract carrier to deliver to

distribution center using a cross-dock

• MDI backhauls orders from PMP to the distribution center

using a cross-dock

COST-TO-SERVE MODEL

• ESTIMATED VOLUMES: based on actual Lowes retail grocery

destination demand, the team assumed 2 cases (low

demand), 5 cases (medium demand), and 12 cases (high

demand)

• TRANSPORTATION COSTS: 3rd party carrier rates based on

actual rate of a NC based trucking company. Backhaul rates

are based off of MDI’s backhauling price policy, which

competitively prices its backhaul rate against similar 3rd party

LTL carriers using a discounted unloading allowance.

Integrated transportation costs estimated at $3.50 based on

industry feedback.

FINDINGS

$0.00

$20.00

$40.00

$60.00

$80.00

Three Store Model

3rd Party Direct toStore

3rd Party to Cross Dock

Back Haul to CrossDock

Direct to Store

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

Nine Store Model

3rd Party Direct toStore

3rd Party to CrossDock

Back Haul to CrossDock

Direct to Store

$0.00

$10.00

$20.00

$30.00

$40.00

Six Store Model

3rd Party Direct toStore

3rd Party to CrossDock

Back Haul to CrossDock

Direct to Store

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

Twelve Store Model

3rd Party Direct toStore

3rd Party to CrossDock

Back Haul to CrossDock

Direct to Store

FINDINGS

• For between 1 – 6 retail grocery destinations, the

optimal distribution strategy is for a food hub to

use its own truck and deliver direct to store using

“milk runs”

• For 6 – 12 retail grocery destinations, the optimal

distribution strategy is the distribution center to

back haul orders from the food hub to the

distribution center using a cross-dock

FEEDBACK FROM STAKEHOLDERS

• Lowes Foods, Director of Produce and Floral

• MDI, Director of Produce and Floral

• Food Hub Managers