Today’s global supply chains are so complex that merely identifying all of the parties involved in getting product to market, especially where there’s the potential for fraud, can be hugely difficult. So why not just cut out those intermediaries and deal directly with the actual supplier of raw materials?
The question is especially apt when it comes to food products. How can a consumer know the true origin of any given item? It is really “pure” or “organic”? Was it harvested in accordance with responsible practices and with full attention to workers’ rights? By the time many products make it to the grocer’s shelf, their provenance is understandably murky.
Sarela Herrada thinks there’s a better way. She is co-founder of SIMPLi, a food wholesaler and retailer dedicated to ensuring complete traceability and environmental sustainability of ingredients. One way to accomplish those goals, she believes, is to source directly from farmers.
When it comes to the international movement of commodities such as grain, beans, oil and spices, there’s an average of 3.5 parties standing between the farmer and the ultimate seller, Herrada says. Importers, exporters, brokers, distributors: each one adds to the complexity of the global food supply chain, increasing the possibility of fraud while clouding visibility.
Direct sourcing is no easy task; each of those intermediaries performs a valuable role that requires a particular set of skills. But Herrada isn’t daunted by the challenge. SIMPLi works with individual farmers or existing cooperatives to secure product, then handles the logistics involved in getting it to a processing facility and on to a warehouse in Baltimore, Maryland, all the while ensuring that the goods meet strict quality controls for handling. “We are the exporter and importer of record,” she says.
The farther away a farmed commodity is from the processing plant, the greater the number of brokers that are typically involved in amassing enough volume to hand over to the big processors. Herrada sees SIMPLi’s role as a “gatekeeper” for small farmers who would otherwise lack the negotiating clout with those entities.
At SIMPLi’s Baltimore warehouse, which is USDA- and kosher-certified, the company repackages imported goods for retail sale. It’s primarily a wholesaler, however, serving restaurants and institutional customers such as commissaries and universities.
In recent decades, supply chains for many industries have come to rely heavily on the outsourcing of raw materials and components for assembly. Herrada now sees a trend in the opposite direction: “We’re going back to the old methods of vertical supply chains, evaluating relationships with suppliers and bringing steps in-house.”
Herrada believes that model can help to curb fraud in the food industry. For olive oil imported from Greece, for example, up to 80% of product labeled “extra virgin” is adulterated with cheaper ingredients. And in developing countries, it can be even tougher to ensure a product’s purity, or validate claims of being organic. In such parts of the world, “sometimes visibility and transparency aren’t shared with the importer.”
Farmers benefit as well. SIMPLi’s insistence on total control of the food supply chain gives it an understanding of industry pricing structures that allows it to pay above market price, “and improve their livelihood.”
When product is loaded in the country of origin, each container is secured with a traceable lock that ensures the contents will remain undisturbed all the way to the Baltimore warehouse. In addition, each product is labeled with a code that includes the region in which it was grown, the year it was exported, the identity of the processing facility and the precise number of containers and SKUs involved in a given shipment.
Sensors placed within the containers track their location by GPS, as well as internal humidity and temperature. Although SIMPLi began by importing dry products, which continue to make up the bulk of its business, it’s now handling some frozen goods, such as artichokes from Peru.
As the entity responsible for logistics, SIMPLi is subject to the same port and terminal congestion that has plagued all importers of ocean freight for much of the past year. But the vertical integration model allows it to mitigate the impact of such delays to some degree. “We can cut lead time significantly because we don’t have a middleman,” Herrada says. In addition, the majority of SIMPLi’s imports come in through the Port of Baltimore, where clearance times are generally shorter than at megaports such as Los Angeles and Long Beach.
SIMPLi’s operations can compare with the biggest food importers, whose supply chains remain fragmented and dependent on multiple partners. “We’re more of a specialist than a generalist,” Herrada acknowledges. Nevertheless, she believes that direct sourcing can be successfully adopted by larger entities.
“We’ve seen vertical supply chains work at scale, moving millions of pounds of items,” she says. “The market is out there, and obviously hasn’t been tapped by any means.”
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