The trend toward local food delivery is undeniable. UberEats, DoorDash, and Grubhub, are a few of the businesses offering consumers the ability to order online and have meals delivered to their door. The same is happening with groceries. Amazon and Instacart offers same day delivery in some locations, and recently Uber announced its plan to trial grocery delivery.
But no one is really sure that on demand food delivery is ever going to be a profitable business. Not even the food delivery companies themselves. Grubhub recently sent a letter to their investors basically saying it is uncertain if the company can generate profits on logistics alone. Further, when Uber filed for an IPO earlier this year, it warned investors that it may not achieve profitability in the foreseeable future.
As a small farm or food producer, some of your customers might be asking for home delivery. Additionally, in order to break into the wholesale market, delivery is a must. So what can you do as a small farm, ranch or value added food business, to meet customer demand for delivery without losing money on the delivery itself? We’ve reviewed the latest research on Logistic Best Practices for Regional Food Systems and have some ideas that might help.
Efficiency is key
Efficiency is a key when attempting to move food products from producer to local buyer. GrubHub and Uber will doubtfully be profitable moving dinner from restaurant to household. Similarly, farmers using their own van or truck to move low volumes of food doesn’t pencil out once time and fuel costs are taken into account. One study in Sweden found that many of the “last – mile” type deliveries done by producers are inefficient. The study found less than 50% of the available vehicle volume was utilized, resulting in wasted resources.
One way to increase delivery efficiency is by putting the work in the hands of professionals. Specifically, seek out third party logistic companies specializing in regional or local food logistics. Using a third party was named as the most common way of moving product from producer to buyer in the best practices study. Third party logistic providers can cover a host of services, including transportation, warehousing and inventory management. Contracting with a reasonably priced third party can help you focus on your strengths. You can grow and sell food while off-loading the logistics of pick-ups and deliveries to a qualified third party.
Coordination with other producers pays off
Additionally, coordinating with other producers can help when selling to chefs or institutions. Developing a delivery schedule that works for producers, delivery services and buyers can be a winning combination. Wholesale buyers appreciate receiving their purchases at one coordinated time. And a single delivery creates efficiency the deliverer. Creating ease and efficiency for the buyer will lower barriers to buying food from local producers while encouraging future purchases. And efficient delivery keeps the deliverer in business.
Taking collaboration a step further, producers can invest in a shared vehicle in order to gain efficiency. One study in Sweden found across the board increased efficiency of almost 50% in number of routes, miles driven, time spent driving when producers collaborated together on delivery.
Efficient route planning can help reduce delivery costs and increase efficiency. Whether using a shared delivery vehicle or optimizing your own delivery, fill up the delivery vehicle and plan the most efficient route. Google Maps or Waze are free and provide real time traffic information and route planning. For more sophisticated operations, logistics planning software might be worth the investment.
Whether offering your own delivery or coordinating with others, Food4All gives you the tools to offer delivery services to your customers. Find out more.