Ohio farmers turn to supply chain innovation to boost consumption of locally-grown Ohio food

As a former manufacturing engineer, Jessica Eikleberry admits that logistics within local food systems may not exactly be "textbook."

Yet the market manager of Local Roots Market & Cafe, a Wooster-based co-op, admitted the distribution challenges also represent the system's beauty.

"With us, a producer walks out to the greenhouse and she has spinach. I didn't know it was coming. She didn't know it was coming, but she has to bring it now because it's fresh and perishable. So much of our model is based on being flexible."

Such are the challenges of working with small Ohio farmers, who often do not have the sophisticated distribution systems that larger producers enjoy.

Research estimates that less than five percent of food consumed by Ohioans is locally sourced. A 2011 study from The Ohio State University cited that given current production levels, Ohio farmers could be satisfying 26 percent of the state's vegetable needs alone and circulating more dollars locally. There are nearly 4,800 farmers and 170 firms involved in the growing and distribution of Ohio produce.

An ill-defined and inefficient local foods distribution system leaves the vast majority of Ohioans consuming "exports" that can be obtained more cheaply from systems with national economies of scale. Even amongst Ohio-based businesses distributing produce to retailers, the OSU study noted only one-quarter supply large supermarkets and supercenters. 

Despite these challenges, several players throughout the Ohio local foods value chain are embracing innovation and technology to improve system efficiency and "reshore" more food.

For example, OSU's Ohio Agricultural Research and Development Center has launched a social networking website, localfoodsystems.org, with backing from Northeast Ohio's Fund for Our Economic Future. Entrepreneurs build online business cases to connect with potential supply-chain partners and support systems such as the research companies at OARDC.

"To gain the efficiency we're talking about, you need a collaborative business network," said Dr. Casey Hoy, an OARDC professor in Agricultural Ecosystems Management overseeing the project. "Even if two people are doing something similar, together you are at such a small scale that you should be working together to compete against a larger company."

For example, Trumbull County produce farmer Floyd Davis combines deliveries to Cleveland-area retailers with other nearby livestock and poultry/egg farms. Marketing directly to retail food operations to avoid distributor costs, Red Basket Farm clients range from restaurants to South Euclid-Lyndhurst Schools.

"Instead of all three of us going that way, we combine efforts...The retailer says I need this item at this time, so we're aggregating these products," said Davis, who has scaled his business from a roadside stand.

Moreover, Davis has capitalized on technology to build a half-acre of low-cost greenhouses allowing produce to grow in-ground during winter. The "high-tunnel" structures are unheated and naturally ventilated, yet still provide ample protection for production.

"You have to pay attention to day length and varieties that tolerate the cold, but once you get that stuff figured out it works well," said Davis, whose winter demand is so high he adds new structures each year.

Ohio's Athens area, home to one of the country's first kitchen incubators, has long promoted local foods. That is where Michelle Ajamian launched a certified organic mill for whole grain and bean products in 2010. Shagbark Seed & Mill  fills the niche between large commodity mills and boutique operations with small client bases.

"We're looking at a model that other regions can use to connect with the farmer and use local food," said co-owner Ajamian.

Shagbark works with family farms in five Ohio counties, and distributes the processed product to more than 50 retail outlets in rural and urban areas throughout the state. She noted one supplier is phasing out his commodity soybean operation to focus exclusively on black bean production.

When banks were hesitant to provide start-up capital, Ajamian used her experience as a nonprofit organizer to help develop a pool of community investors. These have included some retailers willing to prepay for processed product in exchange for discounts. Sales have grown from $10,500 the first year to nearly $250,000 in 2012.

"This gave us the cash flow to pay the farmer to get the chips made," said Ajamian. "This dispels the notion of not letting other businesses know what we're doing. We decided to go for an open-first transparency model."

Shagbark is one of nearly 120 famers or processors that supply Local Roots' unique co-op model in downtown Wooster – which Eikleberry claims is the first of its kind in the nation. The store, launched in 2010, operates as a hybrid farmer's market/grocery store that sells on consignment with a nearly all-volunteer staff.

"Everyone wanted a store with local food, but no one could afford to quit their job," said Eikleberry. "So necessity is the mother of invention, and we asked 'How do you do this, spread the risk and make it most profitable for producers?'"

So far the model is working, as sales topped nearly $530,000 in 2012 with 90 percent of revenues directed back to local farmers. With so many suppliers, she joked that "everything in the store is on wheels" to allow for quick re-arranging of inventory.

Local Roots has launched a branch operation in Ashland, as well as consulted with groups in Mount Vernon, West Virginia and Massachusetts to replicate the model. Moreover, the store has added a café and is raising funds for a pay-by-the-hour community kitchen for processing food to sell in the store.

Red Basket Farms, Shagbark Seed & Mill and Local Roots all have placed business cases on the localfoodsystems.org site. Groups such as the Toledo-based Center for Innovative Food Technology are likewise sponsoring presentations and networking events to promote local foods.

While their efforts are helping distribution more efficient, Hoy cautioned it will probably never match the bottom line of national systems. "But what is it worth to have farmland nearby, or milk in glass bottles?"

Davis added an expansion of local food distribution might actually save retailers and consumers in the long run through less wasted product.

"Restaurants and schools have certain price points to meet, but counter that with having to throw some of it away. (National systems) don't have the shelf life or usability of local foods ... We pick to order."

Tom Prendergast is a Mansfield-based freelance journalist. He has significant experience in public policy, higher education and economic development issues.