The Industrial Revolution changed the dynamics of food supply chains through technological advancement in transportation, food preservation, refrigeration, and communication. These changes allowed food supply chains to expand geographically and initiated the trend towards globalization of food supply chains. Recently, however, we have seen a reactionary trend promoting local foods and short food supply chains. Prevalent examples of SFSCs and SFSC components include farmers markets, “locally grown and produced” labeling/advertising, local food grocers, and direct-from-producer buying options. The motivations that have spurred this trend are economic, social, and political. Participants assert that objectives include the following: to promote social responsibility by putting consumers in closer contact to laborers and animals to encourage humane treatment, to promote environmental responsibility by evoking a sense of shared interest on part of consumers due to close proximity of production location, to act as a socio-economic equalizer between producers and consumers, and to reduce costs by eliminating middle-men and food-travel miles. However, the definitive feature of a SFSC isn’t found in the objectives, it is simply a shortened and simplified process of exchange between producer and consumer.
My research objective was to answer the following question: Are SFSCs simply meeting the demands of a niche market or are SFSCs a viable competitor to conventional food supply chains?
The literature pertaining to SFSCs is predominantly qualitative. This is due to the extensive variation in structure and conduct of SFSCs, and extreme lack of data on the local level. In the few instances in which researchers attempted qualitative analysis or comparison, they utilized a case study approach. This approach is capable of generating valuable insight regarding the specific product/supply-process studied, but has very limited generalizability.
The most important points I took away from literature review are detailed below. Local producers have two restrictions limiting their ability to compete with conventional producers:
- size limitation (via demand limitation because consumer base is limited geographically to “local” areas)
- cost disadvantage (they often cannot produce at economy of scale level, and have a disadvantage in distributing through franchise supermarkets because of their local-only branding).
I found that profitability and competative-potential of SFSCs vary greatly depending on the product and distribution structure of the producer. Local producers have difficulty reaching their full potential consumer base because they have difficulty integrating into super-market type grocery stores, and are often more expensive than non-local products (despite the fact that they eliminate middle-men) because they are not produced at economy of scale level. Overall, it appears that local products are limited to a niche market although this is not true of all products. Regarding the possibility of SFSCs competing with conventional supply chains, there is a vast amount of research needed because the potential for this level of competition varies between different products and different production/distribution structures.