Commercial Surplus Inventory

How the Demand for Organic Products is Posing Challenges for the Industry?

Organic products are growing in popularity, but the rising demand also creates some logistics problems for the companies that supply them to the public. However, third party services are available to handle order fulfillment and help alleviate some of this strain.

Organic food and ingredients started out as a niche market, but recent years have seen exponential growth. Tighter control and regulations over what can be marketed as organic have increased the quality of these products and garnered more trust from consumers. The increased demand prompted many organic growers to increase their acreage in order to keep up, but this is just one part of the process.

Going Organic Is Not A Simple Switch

With the high cost of certified organic production, the growers already have their hands full when it comes to meeting the growing demand while adhering to proper crop care procedures. Not only are materials, seeds and fertilizers much more costly for organic products, but stringent requirements for the products pose additional challenges.

These products cannot be grown or raised using pesticides, antibiotics or genetically modified crops, which means more cost and care is required. Organic certification also does not happen overnight as farms that make the switch have to stop using pesticides and then maintain the proper practices for at least three years. This typically means much lower crop yields and higher input costs without the benefit of being able to charge higher prices during the transition period.

It is true that organic produce or livestock can ultimately be sold for much higher prices, but during the transition period, farmers are still stuck selling their food at conventional prices. There has been a trend in the greenhouse industry to shift to organic produce, but this is still not enough to satisfy the demand for organic products. To keep up with this growing demand, companies are increasingly turning their attention to the global market for organic ingredients.

This opens up another set of challenges for the producers and industries that make use of their products. The need for a rapid and flexible distribution system has caused the industry to turn to companies that specialize in order fulfillment services to bridge this gap. Outsourcing this important task to experts in the field who are adequately equipped to handle it allows both the producers and suppliers to focus on what they do best.

Organic products have rapidly evolved from being a niche market, but without the aid of fulfillment services this growth would not have been possible or sustainable. Companies that offer this type of service usually have their own fulfillment center where the incoming orders are processed and filled. This means that farmers can focus on the production of their organic products while suppliers will know that they can obtain these products in an efficient manner.

While organic products were initially found mostly in smaller specialty stores, the demand from mainstream markets such as large supermarket chains meant that efficient channels for the bulk distribution of these products were a necessity. This is especially important because the supply is not really located where the demand is when it comes to organic products.

Meeting the Rising Demand Requires Outsourcing

In the U.S. alone, the sale of organic foods is in the range of $37 million annually, which is an increase of 12 percent as compared to the previous year. It is also a trend that shows no signs of slowing down as organic food sales saw an increase even during the 2008 downturn of the American economy.

In addition to the rising popularity of organic food, there is also a much bigger demand for the ingredients from industries that create their own products. Even the larger mainstream companies have started to commit to GMO-free products, which of course creates a need for more organic ingredients. This demand across all food categories for non-GMO ingredients make long-term planning essential for the buyers.

The necessity of securing ingredients for their products has prompted many companies to invest more in their supply chain in an effort to keep up with the growing demand. Not everyone has the resources to expand their operations in such a manner, which is why the third-party services that are able to source ingredients from around the world play such an important role. These companies have experience dealing with suppliers and are able to obtain the ingredients at competitive prices while also making sure that everything is verified and certified. All these factors can be time-consuming and expensive for the buyers of these commodities if they need to do it all by themselves.

While many companies are investing in their own farms or financing farmers for guaranteed access to organic products and ingredients, the growth of the industry means that there will always be a need for external sources to take care of the fulfillment services. It is also a service that has seen widespread adoption across many industries, thanks to the increased online presence of many businesses.

The bar has also been set very high by companies that are able to offer next-day or even same-day delivery options. By making use of these types of services, even smaller companies can afford to remain competitive without having to invest large sums in creating their own infrastructure.

There is more to order fulfillment than simply sending out orders. Handling the orders properly is a crucial part of the brand experience for customers. Shipping can be a real headache for businesses - especially smaller ones - even when everything goes well. Instead of worrying about cost, errors and trying to stay on top of the latest technology, a company can leave all of this in the capable hands of an external service. They are better equipped to handle all of these factors and usually also able to negotiate better rates, which makes it a win-win situation for all parties involved.