Each year, Feeding America—the leading domestic hunger-relief charity in the United Sates—provides assistance to more than 25 million low-income people faced with hunger. Through a network of more than 200 food banks, it distributes more than 2 billion pounds of donated food and grocery products annually.
According to a recent study by the U.S. Department of Agriculture, more than 35 million Americans, including about 12 million children, live in food-insecure households and therefore lack consistent access to enough food to lead a healthy, active life. A slowing economy and volatile food and fuel prices suggest that the numbers will only rise—potentially dramatically—in the near to medium term.
With manufacturers’ donations on the decline, Feeding America was looking for more-efficient ways to purchase and distribute food, as its current distribution network was fragmented.
BCG’s job was to develop a five-year strategic plan that would address all aspects of the organization's operations and identify ways to increase the efficiency of Feeding America’s food-sourcing program.
BCG took a number of steps to analyze Feeding America’s situation:
We studied the organization's overall approach to purchasing food and freight
We surveyed food banks to get an understanding of their procurement strategies and also to get a sense of what collaboration existed between food banks
We interviewed existing suppliers and potential suppliers
Then, we developed a strategy for Feeding America to establish and improve relationships with its vendors and to bolster collaboration with and among food banks
BCG confirmed that sizable potential synergies did indeed exist. Regarding sourcing, BCG noted that when Feeding America's member organizations bought food to supplement donated food, they typically did so independently—on an ad hoc basis and in small quantities. As a result, members paid premiums as high as 20 percent to wholesalers and retailers.
BCG suggested that Feeding America switch to a new purchasing model to buy directly from manufacturers, rather than from wholesalers and retailers:
Increased collaboration among food banks to create food-sharing cooperatives (FSCs) will lead to lower costs and a better mix of available food products
The organization should negotiate vendor contracts for top food categories
Existing programs, like its centralized freight auction and fuel program and freight-donor sponsorship, should be expanded
Feeding America is working with its food banks to establish informal FSCs that allow members to purchase lower-cost truckload shipments of food directly from manufacturers.
The majority of its orders will be placed through a centralized ordering system, which allows it and its food banks to compare vendor costs. The system has already helped Feeding America negotiate lower prices and purchase food strategically and eventually will enable the network to negotiate based on volume commitments.
By fully leveraging the scale of its network in this manner, Feeding America could potentially save as much as $11 million a year—the equivalent of 176 million additional meals. In addition, it has enhanced its organizational capabilities to minimize shipping costs. BCG determined that this system could generate potential annual savings on fuel and freight as high as $5 million.
Feeding America is implementing the full suite of recommended supply-chain improvements, and the early results are promising.