Online Food Exchange Connects Local Buyers and Producers to Strengthen Food System in Northeast
December 8, 2011 | Jessica Vernabe
When buyers start relying on farms in their own communities for purchasing food, the logistics can get tricky in areas such as order processing, inventory management and timely transportation.
That’s why entrepreneur Jonathan “JD” Kemp started the Organic Renaissance Food Exchange, or ORFoodEx, in 2009. It’s a Boston-based company that serves the New England food market and that aims to eventually expand on a broader scale. The idea, he said, is to help local buyers form efficient and direct relationships with local producers in order to reinvigorate and re-regionalize the current food system, which Kemp says is flawed.
The business model relies on an online platform that serves as a business-to-business marketplace with full warehousing and logistics support. Through the platform, farmers and other food producers can update their inventories and manage their prices. Buyers—consisting of restaurants, grocery stores, distributors and larger institutions—can browse food products from regional growers, place orders and conduct real-time tracking of their orders. ORFoodEX then handles the logistics without ever owning the product or marking it up, which keeps prices low, Kemp said.
“We look at the ways to organize the market so that as a buyer in Boston, you have access to (food in) Vermont and you know exactly how much it’s going to cost,” Kemp said.
Using technology Kemp created, the platform uses an algorithm to determine pricing—based on travel and dock time—as well as expected delivery times and other logistics. The company then picks up the ordered products at farms and designated food hubs, sorts the food and delivers the orders by truck according to the optimal routes chosen by ORFoodEx’s technology system, Kemp said.
The process allows buyers to go through a single portal instead of contacting various small farms and trying to determine how the farms’ product availability matches with the buyers’ demand, Kemp said. It also provides more selling opportunities to smaller-scale farm and growing operations, he said.
ORFoodEx currently has between 600 and 800 food producers that use its platform, though many of the producers are organized into co-ops, Kemp said. From the buyer side, ORFoodEx averages between 200 and 300 orders per week, with deliveries usually going to about 115 to 120 addresses, though these numbers can fluctuate by week, he said. The company has about eight trucks on the road on any given day.
ORFoodEx has a large warehouse in Central Massachusetts where it stores food and will eventually provide processing. It also has crossdocks—or smaller depots that serve as loading zones for food pickups—in Boston and Long Island, New York. Kemp said the company is also launching another location in Vermont. ORFoodEx’s service region spans from the Manhattan area up to the Canadian border, with a focus on the entire New England market.
In 2009, Kemp was running CropCircle, a nonprofit organization geared at helping local farmers maximize their business within their local New England region. That gave way to CropCircle Kitchen, a kitchen incubator in Boston that provides space for 40 startup food enterprises, Kemp said.
By working on projects such as trying to secure a year-round farmer’s market and trying to organize home deliveries of Community Supported Agriculture (CSA) shares, Kemp realized that food delivery infrastructure was much more disjointed than he thought—especially in Boston, which lacked a recognized food hub, he said. Kemp described a food hub as a designated area where farmers and food producers come together to drop off orders for pickup.
“It dawned on me that this was a systemic problem and that we had to back up and look at the system as a whole in order to provide some solution,” he said.
That’s when his current business partner, R. Bruce Kirk, told him nothing would get resolved unless he started buying trucks, building warehouses and creating a global software solution, he said. Kemp got to work on the technology that could potentially close the gap between the local farmer and the local buyer. Kemp had the knowledge base since he was an engineer—he has a doctorate degree in mechanical engineering and optimization and previously worked for multiple technology companies, including startups.
ORFoodEx was officially formed in 2009, and Kemp and Kirk spent the first year and a half getting a couple hundred producers on their database and fulfilling orders, Kemp said.
“It turns out the biggest need was on the supply side—to start with organizing supply and allowing suppliers to get to market, because today, if there’s not a distributor involved, all of the marketing and selling and organization happens at the producer level,” Kemp said. “We had to build a system to allow them to organize things like inventory and ordering.”
One of their first clients was Crown O’ Maine Organic Cooperative, a regionally-focused distributor that extended its delivery services down to the Boston area. Marada Cook, the company’s co-director, said the trips were becoming too difficult since the Boston area has a complex road system. Crown O’ Maine started using ORFoodEx to handle the deliveries.
“The service that they’re providing is very, very unique,” Cook said, noting that she can have ORFoodEx deliver her products without having to worry about competition because of its business model. “Calculating distribution in an innovative way is a very difficult thing to do. Distribution is a very cost-driven element of the food system.”
ORFoodEx’s focus on the buyer side came later on, Kemp said. One of the company’s first attempts to bring a larger institutional buyer onto its platform was its relationship with Chartwells, a dining service provider for universities and a division of Compass Group North America, he said.
In August, Chartwells started working with ORFoodEx after it obtained a contract with the University of Massachusetts Dartmouth where a new initiative required buying ingredients from local farms, said Kevin Blaney, regional executive chef for Chartwells’ northeast region.
“The missing piece has always been how, ‘How does the farmer get his product onto my loading dock?’ And then, ‘How do I pay him in a timely manner without having to carry a whole bunch of petty cash?’” Blaney said. “JD (Kemp) was the missing link for me.”
Blaney said ORFoodEx allowed him to make payments through one invoice, even though the company ordered products from several different farms. He said he also had the security of knowing that ORFoodEx had certain food-handling safety certifications.
A few months later, Chartwells also started using Kemp’s company for Northeaster University in Boston, which the dining service provider also had a contract with. Both campuses require about 16,000 to 22,000 pounds of food products a month, Blaney said.
“The plan for next year in 2012 is to get more campuses in Massachusetts onto this program,” Blaney said. “JD’s going to help me expand my farm-to-table initiative, and I’m going to help him expand some of his distribution areas.”
Going forward, ORFoodEx is planning on expanding its logistics model to Vermont, where it is launching a new location, Kemp said. He noted that Vermont state officials and community partners are interested in using the system to help connect food hubs across the state and create more efficient logistics.
ORFoodEx, which first generated revenue in the first quarter of 2010, is now seeking a second round of investment. Kemp said in the company’s first investment round, completed last year, the investment leader was MassDevelopment, which describes itself as the state of Massachusetts’ finance and development agency that focuses on stimulating economic growth. He added that the goal of the company is to grow its platform and share its model.
“We don’t need or want, quite frankly, to own all the trucks in New England,” Kemp said. “We have interest in reinventing the food system in the region and having that be a replicable model to anyone that that’s useful for. … There’s a lot of collaborative effort that’s happening to try to pull together the resources of the food hub.”