Organic Wheat Supply Chain feasibility report

Breadshare Community Interest Company Scottish Border LEADER Organic Wheat Supply Chain Project
Feasibility Report
Breadshare Community Interest Company Organic Wheat Supply Chain Project
CONTENTS INTRODUCTION 4 OVERVIEW STAKEHOLDERS RELATED PROJECTS SUPPLY CHAIN COMMITTEE 4 4 5 5 PRODUCING ORGANIC SCOTTISH FLOUR 6 STAKEHOLDERS AND KEY FINDINGS GROWERS IN THE REGION MILLERS SAMPLE TESTING PRODUCT DEVELOPMENT HYBRID BARLEY/WHEAT LOAF WHOLEMEAL FLOUR PRODUCT DEFINITION PRODUCT TESTING TEST RECIPES TEST CASES TEST RESULTS 6 6 6 7 8 8 9 9 10 10 10 11 DEMAND FOR ORGANIC FLOUR 12 STAKEHOLDERS AND KEY FINDINGS MARKET SURVEYS SCOPE AND METHOD SURVEY RESULTS LATENT DEMAND MARKET TESTING 12 12 12 13 15 15 BUSINESS MODEL 16 STAKEHOLDERS AND KEY FINDINGS SUPPLY CHAIN MODELS PROPOSED MODEL MILLING OPERATIONS COSTS FEASIBILITY ESTIMATED ESTABLISHMENT COSTS 16 16 19 19 20 21 21 APPENDIX: STAKEHOLDERS 22 APPENDIX: TEST BAKING RESULTS 24 APPENDIX: BIBLIOGRAPHY 25 2 Breadshare Community Interest Company Organic Wheat Supply Chain Project
FIGURES AND TABLES Figure 1: Trial Product......................................................................................................................9 Figure 2: Structure of Wheat Supply Chain for Human Consumption...................... 17 Figure 3: Local Supply Chain Models....................................................................................... 18 Table 1: Wheat Samples ...................................................................................................................7 Table 2: Wheat Sample Test Results...........................................................................................8 Table 3: Flours used in tests........................................................................................................ 10 Table 4: Test recipes....................................................................................................................... 10 Table 5: Test cases........................................................................................................................... 11 Table 6: Demographic Summary............................................................................................... 13 Table 7: Market Data ...................................................................................................................... 14 Table 8: Supply Chain Stage Costs ............................................................................................ 21 Table 9: Estimated Establishment Costs................................................................................ 21 3 Breadshare Community Interest Company Organic Wheat Supply Chain Project
Introduction One of Breadshare’s social objectives is to establish an unbroken local food supply chain built on trust between growers, producers, bakers and the community1. In essence this means that local bakeries as well as retail and wholesale businesses would have access to locally produced and milled organic flour. This report discusses the feasibility of growing organic milling wheat in Scotland, the latent demand for products and describes a possible supply chain business model that could meet that demand. This report is a deliverable of the Organic Wheat Supply Chain Feasibility project undertaken by Breadshare Community Interest Company in 2013. The project was jointly funded by Scottish Borders LEADER 2007-‐2013 Programme and Breadshare CIC. Overview In 2013 only 11% of organic wheat grown in Scotland was grown for the purpose of milling for human consumption (SRUC, 2013), with most of it being used for animal feed. Whilst this is good for supplying organic meat to the market, it also means that demand for organic food produce made from organically grown wheat in Scotland is not being met. Establishing an organic wheat supply chain would enable Scottish food processors to meet this demand by encouraging producers to supply the market for human consumption of organic wheat. The wheat supply chain includes producers (seed merchants, farmers), processors (millers) and consumers (retailers, bakers, customers), along with the logistics and transport operations needed to move inventory from producers to consumers. In Scotland the producer, consumer and logistics components are well established and represented. However, organic millers of wheat for human consumption are not well represented. To establish a Scottish organic wheat supply chain it is necessary to create an organically certified milling operation to tap into local supplies of organic wheat and supply bakeries and retailers in the region with flour and value-‐added products. Stakeholders Stakeholders for the project generally fall into one or more of the following groups: • Supply chain contributors (producers/growers, millers, wholesalers/retailers and distributors) • Parties with an interest in the project (such as other flour supply chain initiatives, certifying bodies, providers of business advice and marketing services and policy makers) 1 Breadshare CIC Social Outcomes Plan v1.2 (September 2012) 4 Breadshare Community Interest Company Organic Wheat Supply Chain Project
•
Potential consumers including bakeries, home bakers. Stakeholders were provided with an outline of the project objectives and invited to take part, or register their interest. A newsletter and twitter campaign was established with a number of responses from ‘followers’ supporting the project. For example Gilchesters organic millers in Northumberland and the Wheatrig project in East Lothian. Wheatrig has been active over the last 3 years in developing a local flour product from locally grown wheat (although not organic). There was also strong interest from Greencity Wholefoods (wholesaler and distributor), Romanno Mains Renewables (distributor), the New Leaf Cooperative in Edinburgh and Dods of Haddington (seed merchant). A complete list of stakeholders is at Appendix: Stakeholders. A project page was added to the Breadshare website2 which outlined the project’s objectives and main activities. Links to the project page were included in Breadshare newsletters, emails and tweets. Around 60 potentially interested parties have been contacted by email and invited to join the project mailing list, which currently stands at 22 subscribers. Along with the twitter campaign and the project website, this has created broad interest in the project. Related Projects A related project identified was Bread Matter’s ‘Scotland the Bread’ project which seeks to identify strains of wheat and other grains that would be feasible to grow in Scotland. This is a longer-‐term undertaking than Breadshare’s current project but has complementary outcomes. Where appropriate, key messages to stakeholder groups included a clarification of the common goals and objectives between the two projects. For example, re-‐establishing wheat varieties and other grains more suited to Scottish conditions will, in the longer term, support local flour supply chains by expanding sources of grain. The ‘Barley Bread’ project conducted by Mylnefield Research Services at the James Hutton Institute in Dundee is looking at the feasibility of producing a distinctly Scottish loaf made from barley. There was some initial collaboration between the projects and agreement to share project findings. Supply Chain Committee The project formed a Supplied Chain Committee consisting of potential partners in a supply chain, the purpose of which was to help the project to collaborate with stakeholders to develop an appropriate supply chain business model. At a meeting of the Supply Chain Committee (SCC) held on 11th April, those present discussed the objectives and constraints of the project, with the concept of ‘Scottish’ agreed to mean the supply chain is about grain grown and processed in Scotland. 2 www.breadshare.co.uk/project.htm 5 Breadshare Community Interest Company Organic Wheat Supply Chain Project
Producing Organic Scottish Flour Stakeholders and Key Findings The stakeholders in producing organic Scottish flour are the seed merchants, farmers, growing cooperatives, grain elevators such as W.N. Lindsays in Haddington and the transport and logistic operators who distribute seed and harvested grain. A key finding from discussions with stakeholders on the supply side is that issues with supplying organic wheat lay with the quality and availability of sowing seed and whether the growing season is good or poor. These issues are normally managed through farmers growing grain suitable to the season (for example barley or oats when it is not suitable to grow wheat), or building safety inventory through grain and seed stores. Wholemeal flour and bread made from Mulika Spring 2013 wheat obtained from Mungoswells Farm was found to be suitable to be marketed as a locally produced product. Growers in the Region Farmers that were contacted were willing to grow organic wheat for human consumption. In January, 2 tonnes of organic mulika winter wheat grown by Angus McDowall of ‘Mungoswells’ farm in East Lothian in 2012 was purchased for use by the project. Mulika is a strain of organic wheat suitable for sowing in the Spring. It is a new variety and replaces earlier strains such as Paragon and Ashby. Silvery Tweed Cereals in Berwick-‐upon-‐Tweed milled this wheat into wholemeal and white flour. Some of the wholemeal was purchased by Breadshare for use in its ‘Border Country’ bread (10%) and some white and wholemeal by Bread Matters to bake bread with mulika content for the National Farmers Union dinner in February 2013. Samples of organic paragon and ashby wheat grown by Murray Cooper in Aberdeenshire in the Spring of 2011 were also obtained; and later in the year further samples of mulika 2013 Spring wheat from Mungoswells Farm. From discussions with Dods of Haddington and other seed merchants, there was no further organic mulika seed available for Spring sowing due to the poor season in 2012; and many farmers were choosing to sow barley because of the high moisture levels in fields. John Stewart of Langraw farm in Fife was very keen on supporting the project and trialling organic mulika spring wheat but was unable to do so due to lack of supply of seed for sowing. Instead he planted barley that Spring. Prices from seed merchants in the South varied from £670 to £800 per tonne. Millers Although there are a number of organic millers close to Scotland in the North of England, none of these meet the criteria for being a Scottish operation. 6 Breadshare Community Interest Company Organic Wheat Supply Chain Project
Only one organically certified mill that processes wheat for human consumption has been identified in Scotland. This is Golspie Mill in Sutherland who supply rye and wheat to retailers such as Real Foods in Edinburgh. However, even this mill processes grain obtained outside of Scotland. The mill is water-‐driven and as such its outputs are dependent on the supply of water available. Golspie’s throughput is around 1 tonne per week. This feature of traditional mills is a limiting factor in supporting a responsive supply chain model. There are a number of organic mills close to Scotland in the North of England such as Silvery Tweed at Berwick upon Tweed, Gilchesters organic mill in Northumberland, Little Salkeld in Cumbria and Yorkshire Millers. Angus McDowall also has a roller mill on his farm at Mungoswells in East Lothian and, although not currently certified, he has not ruled out setting up an organic milling operation in the future. There is some evidence that a number of smaller mills/millers exist throughout Scotland, although not necessarily organically certified. Initial discussions with a small group in Glasgow (Pasta with Love) identified such an operation. More work is required on identifying small milling operations in Scotland. Sample Testing The project tested 7 samples of wheat from Aberdeen and East Lothian, with protein, moisture, specific weight and Hagberg Falling Number (HFN)3 analysis undertaken by WN Lindsays of Haddington. Of these, the Winter and Spring varieties of mulika performed better in baking trials than did Spring paragon or ashby. Samples tested and sample results are shown below. Description Wheat (Paragon) Source Murray Cooper Mains of Thornton, Aberdeenshire Season Spring 2011 Notes Wheat (Ashby) Murray Cooper Mains of Thornton, Aberdeenshire Spring 2011 Wheat (Mulika) Angus McDowall Mungoswells East Lothian Winter 2012 Flour (Mulika) Angus McDowall Mungoswells East Lothian Winter 2012 Wholemeal Roller milled at Mungoswells Farm. White flour (Mulika) Silvery Tweed Wholemeal flour Silvery Tweed Winter 2012 Winter 2012 Hammer milled from wheat supplied by A. McDowall Hammer milled from wheat supplied by A. McDowall Table 1: Wheat Samples 3 Hagburg Falling Number (HFN) is a measure of protein content of wheat and flour. It is the standardised process that measures the time it takes for a probe to fall through a slurry made from the flour sample and water. See http://en.wikipedia.org/wiki/Falling_Number 7 Breadshare Community Interest Company Organic Wheat Supply Chain Project
Sample Description Moisture Protein (%) (%) Specific Weight HFN (Seconds) (kg/hl) A B C Spring Wheat from Mains of Thornton, Aberdeenshire Spring Wheat from Mains of Thornton, Aberdeenshire Winter wheat (mulika) from East Lothian 14.44 12.01 72.9 181 15.11 11.72 70.9 176 15.06 14.00 73.1 320 Table 2: Wheat Sample Test Results HGCA4 quality standards for milling quality wheat is 13% protein, 76 kg/hl sp. wgt and 250 HFN. None of these samples completely meet all of these criteria, with the mulika coming close enough to be considered milling quality. Mulika has performed well in Breadshare production baking comprising up to 50% of wheat content of loaves over the last two years. Product Development Hybrid barley/wheat Loaf The recent poor seasons for wheat highlighted the vulnerability to supply of grain for a purely Scottish product. The notion of a hybrid wheat/barley loaf was discussed at the supply chain committee meeting (held 11th April) as a way of potentially addressing this issue. Following discussions with the miller at Golspie Mill, Mylnefield Research Services (MRS) at the James Hutton Institute (JHI) in Dundee were contacted to look at the feasibility of using barley for bread-‐making. A meeting was held on the 9th May 2013 with representatives of MRS (along with samples of Breadshare’s ‘Border Country’ bread) and the need for resilience of local supply chains to uncertain climate was discussed; and to see if there could be collaboration between the two projects. The meeting achieved the following outcomes: •
•
•
•
MRS was keen to collaborate with Breadshare to develop a bread that can be successfully baked using barley and wheat; MRS was willing to supply grains, scientific reports and services, ‘in-‐kind’ to assist Breadshare; The product would need to acknowledge the JHI in some way; Breadshare will provide baking services to MRS and thereby assists their barley project to achieve its outcomes. 4 Home Grown Cereals Authority (www.hgca.com) 8 Breadshare Community Interest Company Organic Wheat Supply Chain Project
Wholemeal Flour The sample testing of mulika indicates this would be a promising strain to be grown for milling into wholemeal bread-‐making flour. The ‘Scotland the Bread’ project is looking at further strains of wheat that would be suitable for Scottish conditions. Product Definition The product is defined as follows: •
Locally grown •
Locally milled wholemeal using stoneground method •
Packaged by Breadshare in the Borders: o 500g packets for home baking market o 15kg bags for bakery market •
Labelled: o Organic o Produced by Breadshare o Provenance including date wheat was grown o Identified as stoneground and wholegrain o Allergy and best before advice o Recommended bread recipe (for home baking). Figure 1: Trial Product Baking characteristics of the wheat to be used were analysed by W.N. Lindsays of Haddington and suitability for milling and baking assessed by Breadshare. 9 Breadshare Community Interest Company Organic Wheat Supply Chain Project
Product Testing Locally produced mulika flour was used to bake loaves to determine the baking characteristics of the flour and the quality of bread that could be produced. Loaves baked using Shipton’s white flour (organic #4) and organic wholemeal (14%) were used as controls. Test Recipes The following flours and leavens were used in tests. Flour Description S1 Organic Shipton Mill White S2 Organic Shipton Mill Wholemeal L1 Breadshare leaven made with Shipton flours L2 Local leaven made with Mulika flours M1 Mulika white hammer-‐milled by Silvery Tweed M2 Mulika wholemeal hammer-‐milled by Silvery Tweed M3 Mulika wholemeal stoneground at Breadshare A1 Sample A stoneground at Breadshare Table 3: Flours used in tests Two recipes were used – white/wholemeal and wholemeal: Recipe A Weight (grams) Ingredient Recipe B Weight (grams) Ingredient 300 Water 300 Water 300 White flour 400 Wholemeal flour 100 Wholemeal flour 8 Salt 8 Salt 300 Leaven 300 Leaven 1008 Total weight 1008 Total weight Table 4: Test recipes Test Cases Test cases were made using combination of the above recipes and different flour types as shown in Table 5. Loaves were scaled from the dough as “boules” weighing 500g each and baked in stone-‐lined ovens at Breadshare. Tests planned but not conducted due to time constraints are greyed and noted as “not used” in the table. Loaves produced for each test were rated according to quality of crumb, crust and taste; as well as how well they proved and baked. A summary of test results for these characteristics is at Appendix B. 10 Breadshare Community Interest Company Organic Wheat Supply Chain Project
Test Recipe Flours used Description 1 Recipe A S1 (White) S2 (Wholemeal) L1 (Breadshare Leaven) Breadshare border country bread 2 Recipe B S2 (Wholemeal) L1 (Breadshare Leaven) Shipton wholemeal flour loaf 3 Recipe A M1 (Mulika white) M2 (Mulika wholemeal) L2 (local leaven) Border country bread made with East Lothian flours. 4 Recipe B M2 (Mulika wholemeal) L2 (local leaven) Local wholemeal flour loaf 5 Recipe B M3 (Mulika wholemeal) L2 (local leaven) Wholemeal flour loaf made with mulika sample from Mungoswells and stoneground by Breadshare. 6 Recipe A M1 (Mulika white) A1 (Sample A wholemeal) L2 (local leaven) Border country bread made with East Lothian and Aberdeenshire flours 7 Recipe A M1 (Mulika white) B1 (Sample A wholemeal) L2 (local leaven) Not used 8 Recipe B A1 (Sample A wholemeal) L2 (local leaven) Wholemeal flour loaf made with Aberdeenshire wheat 9 Recipe B B1 (Sample B wholemeal) L2 (local leaven) Not used Table 5: Test cases Test Results Photos of loaves for each test are at Appendix: Test Baking Results The loaves baked with the mulika flour (samples M1 and M2) exhibited a bitter taste, indicating the flour had begun to turn rancid. This is consistent with its BBE date of July 2013. Breads baked with Spring 2013 mulika (sample M3) exhibited a “nutty’ flavour and were quite tasty. Overall, most of the loaves baked had good crumb structure and caramelisation of crusts. The exception here was test 8, which was made with the Aberdeenshire wheat which did not rise as much as the other tests and had a rough, poorly formed crust. This is most likely due to the low protein content and HFN. In terms of crumb and crust structure, the breads produced could be considered of suitable quality for production. They produced doughs which performed within Breadshare’s quality standards for mixing and molding, proving and baking. 11 Breadshare Community Interest Company Organic Wheat Supply Chain Project
Demand for Organic Flour Stakeholders and Key Findings The stakeholders on the demand side for organic flour include wholesalers and distributors, retailers, bakeries and home consumers. Retailers such as Waitrose in Morningside and the Margiotta stores in Edinburgh have a stated policy of supporting local products and are a potential retailer for locally produced organic flour. Breadshare’s existing network of wholesalers could also be leveraged for this purpose. There were also a number of bakeries such as The Earth’s Crust Bakery, Bakery Andante and Wee Boulangerie who would use locally produced organic flour. Key findings were that there is a latent demand in the local region for locally produced flour and bread products. Market Surveys Surveys were conducted to assess consumer attitudes towards bread in general, Breadshare and opinions on locally-‐produced flour. Breadshare ascknowledges the assistance of Alexandra Littaye, DPhil Candidate at the School of Geography and the Environment, University of Oxford, for collaboration in designing the surveys, conducting interviews and performing initial data analysis. Scope and Method The scope of the surveys was: -‐
-‐
-‐
Determine demographic characteristics of consumers. Gather market analysis data including spending habits and attitudes towards bread; and Gather opinions on locally-‐produced flour or other barley for bread making Surveys were conducted at Breadshare stalls at Portobello market held 6th July 2013 and Commonwealth Pool market held 7th July 2013 in Edinburgh. Respondents were asked whether they would like to participate in the survey and their answers recorded by the interviewer. 12 Breadshare Community Interest Company Organic Wheat Supply Chain Project
Survey Results Demographic characteristics of respondents are summarised in Table 6. CUSTOMER Portobello Number surveyed Commonwealth Pool Aggregate 8 22 30 Male 13% 41% 34% Female 88% 59% 67% 68% 63% Nationality Scottish 50% UK (not Scottish) Foreign -‐ 50% Household 9% 7% 23% 30% One -‐ 18% 13% Two 25% 45% 40% Three 38% 5% 14% 38% 32% 34% -‐ 5% 4% 20-‐30 43% 5% 15% 31-‐40 25% 9% 13% 41-‐50 -‐ 27% 20% 51-‐60 25% 41% 37% 61-‐70 -‐ 5% 4% -‐ 9% 7% Four Age (in years) <20 yrs >70 Table 6: Demographic Summary There was a marked difference between Portobello (P) and Commonwealth Pool (C) in terms of who came shopping. P attracted couples that had time on their hands (kids left home explaining the high percentage of 2 person household, 45% and 41% are between 51-‐60 years old) or retired individuals. As expected, foreigners love the taste of bread (the majority have lived in Scottish for over 10yrs). C had a strong presence of students, and was generally younger in demographic with women tending to be more represented. All had a profession that was placed them in the middle class or upper middle class bracket (if they weren’t retired). Responses to questions about buying habits and attitudes towards bread and local grains are summarised in Table 7. 13 Breadshare Community Interest Company Organic Wheat Supply Chain Project
BREAD Portobello Commonwealth Pool Aggregate Price Range > £1 8% 6% £1-‐£2 43% 62% 57% £2-‐£3 14% 23% 21% £6-‐£7 29% 8% 14% <£7 14% 4% 50% 82% 73% 38% 27% 30% Frequency First timers of BS Eat bread daily Priorities in food purchases Taste 44% 26% 31% Price 13% 15% 14% Local 13% 23% 20% Traditional 2% 1% 31% 15% 19% Fair Trade 9% 7% Sustainable 11% 8% Health Barley-wheat loaf Yes 63% 53% 56% Why not? 25% 37% 34% Not interested 13% 11% 12% Grain sourced in Scotland Important 50% 37% 40% Support 25% 42% 37% Doesn’t matter 25% 21% 22% Table 7: Market Data In general, most people spend between £1 and £2; however, nearly 20% purchased more than £5 worth of bread. One respondent expressed an opinion that when people love the bread, they don’t hesitate to spend. Three quarters of respondents were first time Breadshare customers, although this was more prevalent at Commonwealth Pool (C) than at Portobello (P). At C, customers seemed a lot less informed about their preferences in food and tended to be Sunday strollers. Whereas, at P, customers purposefully went to the market to buy food and people had more articulated preferences – making a distinction between artisanal or home made bread vs products from the supermarket. The leading priority in food purchases was taste. At P, localness was almost as important as taste, whereas at C, both localness and health were a close second. People in general seemed interested in trying and experimenting with bread so seemed amused by the idea of a barley and wheat loaf. Most were happy with sampling it at least. The idea of Scottish sourced grain came as a surprise but in line with many individuals’ ethos, ie. they would support a local supplier. 14 Breadshare Community Interest Company Organic Wheat Supply Chain Project
At P, many customers mentioned the improvement they noticed in the quality of bread in the past decade (strongly noticed by foreigners who arrived over a decade ago). Some compared Breadshare’s bread to the Polish bakeries that are apparently multiplying in number in Edinburgh. Latent Demand The surveys indicate strong support for locally-‐produced flour and bread. Further, Breadshare has received much feedback over the last 2 years of trading at markets and selling to wholesalers for it’s current product range which is largely sourdough based and made using artisan, slow fermentation techniques. Breadshare’s ‘Border Country’ range uses a percentage (depending on performance characteristics) of locally grown wheat which contributes to the product’s taste and character. Given the above feedback, it is likely the local market would support Scottish produced flour and bread products, provided they are of high quality and meet the taste demands of the market place. Market Testing Flour made from organic mulika wheat was supplied to Breadmatters for use in products they supplied to the Farmers Federation dinner in February 2013. In November, the project began producing a product for trial in the marketplace at Breadshare market stalls in Portobello and Edinburgh, and through The New Leaf Coop and Whitmuir Farm shop. 15 Breadshare Community Interest Company Organic Wheat Supply Chain Project
Business Model Stakeholders and Key Findings The stakeholders in a local supply business model include local producers, millers, wholesalers and distributors and consumers. Local producers will be encouraged to supply organic wheat (and potentially other grains such as barley and oats) to the local milling operation. Initially this will have minimal effect on other markets for their grain, but may have more of an impact in the longer term as the local business builds in size. Some producers have attempted to provide value-‐add such as milling and related operations (eg. Malting) on-‐site, or out-‐sourced to other operations such as Silvery Tweed. Farmers who have an interest in milling on-‐site (such as Mungoswells Farm) may be encouraged to move to an organically certified operation. Establishing regional mills in Scotland will present a unique opportunity to locally based distribution and transport providers. In addition local wholesalers/distributors such as Greencity in Glasgow will be able to add additional locally produced products to their catalogues. A key finding was the importance of the miller and grain stores in the supply chain. Independence from large, vertically integrated milling operations brings the supply chain under the control of local producers and consumers and provides the opportunity to take advantage of locally produced grain and to service local market demands. Further, a local supply chain would be based on a responsive model which is able to deal with uncertain demand and higher product variety. An issue with implementing a local milling operations is access to skilled resources to establish and operate the mill. Supply Chain Models A supply chain simply refers to a means a firm uses to get inputs to production, inventory management and distribution of final product to market. It is more generally part of the firm’s value chain which covers: inbound logistics, operations, outbound logistics, marketing and sales and customer service. Taking this view, a firm can develop vertical linkages across the value chain to expand its management and understanding of transaction costs and information flow in an effort to improve its competitive advantage. In contrast, the supply chain is focussed on logistics which can be defined as: the process of planning, implementing, and controlling the efficient, cost-
effective flow and storage of raw materials, in-process inventory, finished goods, and related information from point-of-origin to point-of-consumption for the purpose of conforming to customer requirements. (Lambert and Stock, 1993) (Lambert and Stock, 1993 cited in Titus and Dooley, 1996) 16 Breadshare Community Interest Company Organic Wheat Supply Chain Project
This translates to the following components for the wheat to flour supply chain: • Input supplier (seed) • Storage and silos, which may be run as cooperatives • Producers (Farmers) • Industries that use the grain (Animal feed, milling wheat and the baking industry) • Retailers and Consumers of processed product (flour, baked products and animal feed) A general structure of a supply chain producing wheat for human consumption is shown in Figure 2 5, with the above functions grouped under three major stages: Producer, Processor and Consumer. The supply chain is supported by transport and distribution functions that ensure the supply of products along the supply chain are matched to demand. For instance, grain elevators provide a central place where the produce of a number of seed suppliers or grain growers can be stored and held over seasons; and released as required by the consuming industries. Input Suppliers
(Seed Merchants)
Coops
Farmer
Grain Store
CONSUMER
PROCESSOR
PRODUCERS
Smaller, regional milling operations with built-‐in resilience and ability to respond quickly to demand also enables millers to be located closer to consumers of flour and provide an ‘on-‐demand’ service to bakers. Wheat Milling
Industry
Wholesaler/
Distributor
Bakers
Retailer
Home Consumer
Figure 2: Structure of Wheat Supply Chain for Human Consumption 5 Adapted from RSA DAFF. See Bibliography. 17 Breadshare Community Interest Company Organic Wheat Supply Chain Project
Modern baking is characterised by a relatively small number of large millers vertically integrated with plant bakeries as a result of rationalization and improved capacity utilisation. Small millers in such an environment cannot compete with larger, integrated operations who are better able to control procurement costs and leverage economies of scale. The role of the miller is critical to making a flour supply chain work because of their position in the value chain between producer and consumer. In a large integrated operation, the miller can control supply of processed ingredients to bakeries to meet demand. Grain stores and end-‐to-‐end logistics management, ensures continued flow of raw and processed ingredients along the supply chain that can be matched to demand. In comparison, smaller millers are unable to leverage the efficiencies of larger milling operations and supply chains and typically service niche markets (such as little Salked Mill in Cumbria). Others simply produce as much milled product as their resources allow such as Golspie Mill in Sutherland. An example of a local supply chain model is Wheatrig where the farm controls the production, processing and distribution of the end product (wholemeal bread flour). This is achieved by out-‐sourcing the milling of the grain, but with the farm packaging and distributing the end-‐product. A further example is on-‐
farm processing as in the case of plans underway at Mungoswells farm. The proposed distributed model is for mills established regionally, close to producers and close to consumers. Figure 3 compares these models. Proposed
On Farm
Processing
Wheatrig (East
Lothian)
Seed Supplier
Producer
Processor
Farm
Miller
Wholesale/Retail
Distribution
Consumer
Farmers
Market
Retail
Customer
?
?
Wholesaler
Retail
Customer
Seed
Supplier
Farm
Seed
Supplier
Farm
Farm
Seed
Supplier
Farm
Miller
Farm
Bakery
TRANSPORT & LOGISTICS
Figure 3: Local Supply Chain Models 18 Breadshare Community Interest Company Organic Wheat Supply Chain Project
Proposed Model The key to implementing a local supply chain for organic wheat and flour is that it should meet the latent demand for a product that cannot be delivered by the larger, integrated firms. This demand can be realised through a combination of delivering a differentiated product along with a marketing strategy that targets consumers based upon their preferences for local, organic, better tasting and healthier bread. Rather than competing in the modern flour industry, smaller operations could develop and manage their own supply chains to service the market demand for their own differentiated products. Organic bakers in the UK typically utilise smaller operations for their flour supply, however, as we have seen there are no similar suppliers of Scottish organic milling wheat from locally-‐grown sources. The proposed local organic supply chain is shown in Figure 3 and is an alternative to out-‐sourcing milling whereby local milling operations are established that service local farms and supply local wholesalers/distributors as well as bakeries and retail outlets. Such operations would need to build partnerships with grain storage firms or with farms who have the facility to store grain and be able to honour “nearby contracts” with producers for sale of grain for milling. In short, a local milling operation would need to be more than just a provider of milling services. They would also need to act as a buyer of grain for milling and as a seller of processed end-‐product. Local organic wheat mills would be based on a responsive supply chain model that is able to react quickly to market demand. According to Ling (2007), a responsive model is based on low inventories and a short cycle time for product delivery and will have the capability to be flexible on volumes and provide customisable products. This would be an advantage for an operation that would be producing flours based on ‘vintage’ grains that were suited to the current growing season; for example, barley or oats in seasons not suited to wheat. It would also be an advantage to supply a number of local retail and wholesaler/distributor outlets. To work, this model needs to be able to draw on inventory reserves above its normal utilisation rate of resources to cushion the effects of demand variability. Such reserves would require the ability to store grain at the milling facility, or to have access from silos at short notice. In terms of flow of inventory along the supply chain, the responsive model combines a ‘push’ process from silo to miller, where there is ‘safety stock’ to ensure supply. And a ‘pull’ process from the miller to consumer requiring flexibility to respond to an uncertain demand. This demand uncertainty would come in the form of bakeries and wholesale/distributors responding, in turn, to their own customer demands. Because of this competition between push and pull, there is a risk that inventory supply flows could be artificially distorted leading to increased costs of safety stock. Addressing this risk requires collaboration and free flow of information across the supply chain. Milling Operations A typical small milling operation would consist of a stone grinding mill with capacity in the range 150-‐250kg per hour for wholemeal flour. These mills are 19 Breadshare Community Interest Company Organic Wheat Supply Chain Project
around 5 feet high, and have mill stones approximately 2 ½ feet in diameter. Manufacturers include Engsko, Skiold and Diamant. Equipment additional to the mill will also be needed including inlet/outlet systems, cleaners, sifters and bagging systems may also be required. Given there is some evidence of small millers operating in Scotland, this model could be replicated, or production spread across many smaller operations. Costs The costs in this model can be categorised as acquisition, operating, inventory and transit (logistical) costs (Titus and Dooley, 1996). • Acquisition costs arise from purchasing inventory such as grain or flour and include the margin paid by the facility. • Operating costs are those associated with operating the facility and arise from how well the facility (or asset) is utilised, labour and running costs. • Inventory costs are those incurred from holding inventory and are a function of utilisation of the inventory (shipments per capacity), costs associated with value adding to the inventory and carrying costs which arise from the nature of the inventory itself. For example, for a silo lower protein wheat is cheaper to hold than higher quality. • Logistic costs of transporting inventory between links in the supply chain; these are similar to the carrying cost of inventory. Table 8 shows these costs as they apply to the key supply chain stages of Producer, Processor and Consumer (baker) (after RSA DAFF, 2003). A lagged price is the price set by “nearby contracts” with producers and specifies the timeframe or lag for when the price is payable. Supply Chain Stage Costs Producer Producer Price of wheat: = cost of seed for sowing (including logistics and inventory costs) + agricultural inputs + capital costs + overheads Processor Mill Door price: = Producer price of wheat (lagged price) + Distribution + handling and storage + overheads less any income from sale of bran Consumer (baker) Mill Door Price + Conversion Cost: = Mill Door Price + Mill Site costs (Operating, Inventory, Logistics and overheads) + Distribution Consumer Bakery Door Price: (Wholesaler) Cost of flour per loaf, based on how many loafs can be extracted 20 Breadshare Community Interest Company Organic Wheat Supply Chain Project
from a tonne of flour. + packaging, labour, overheads + handling and storage + overheads Table 8: Supply Chain Stage Costs Feasibility A local organic supply chain could be viable if investment was made in establishing a local milling capacity for producing flour suitable for baking. Investment would be required in the form of capital for a milling facility and working capital for entering into contracts for the first year for supply of grain, operational costs of running the mill including wages and overheads. There would also need to be working capital to invest in people to operate and manage the milling operations in the form of recruitment, training and wages for the first 12 months. Work so far has revealed that producers have the capacity to grow greater quantities of organic wheat. However to establish a local milling operation initial funds are needed to kick start regional milling operations. An issue with establishing local milling operations is lack of on-‐site milling expertise. In both of the above scenarios, milling is effectively out-‐sourced to skilled personnel who offer these services. This is likely to be unsustainable for a local milling operation which will need to be more responsive to local supply and demand conditions. This issue could be addressed by entering into partnerships to provide the required expertise and assist regional mills in their startup phase. Estimated Establishment Costs Working Capital for single small milling operation Purchase of wheat 30 tonnes @ £350 per tonne incl. transport and handling @ £60 per tonne Conversion costs including processing and mill site costs @ £200 per tonne Training (Theory and practical experience) Wages p.a. (at 2 days per week) Total WC Capital Costs Purchase of mill equipment (based on quote from Engsko) Installation and setup Overheads (rent, power, supplies etc..) Total Capital Total Project – year 1 Table 9: Estimated Establishment Costs 21 £12,300 £6,000 £4,000 £12,480 £37,780 £55,000 £15,000 £15,000 £85,000 £119,780 Breadshare Community Interest Company Organic Wheat Supply Chain Project
Appendix: Stakeholders The following stakeholders were identified during the course of this project. Stakeholder Doorstep Bakery Earth’s Crust Bakery Engine Shed MHOR Bakery Breadshare Breadshare Breadshare Firstport Scottish Enterprise Bakehouse Café Jonathan Snape Scottish Agricultural Organisation Society Ltd (SAOS) Romanno Mains Renewables Carmichael Farm Locharthur Enterprise Food Scotland Food and Drink Balkemback Farm Coldwells Farm Easterkincaple Farm Huntlaw Farm Langraw Farm Mains of Thornton Mungoswells Wheatrig Farm Balerno Village Trust Pat Abel Borders Food Network Golspie Mill Silvery Tweed The Watermill, Little Salkeld Yorkshire Millers Shipton Mill Gilchesters SOAS SOPA Breadmatters Contact Neil Stoddart Paula Benhaddad Tom, Pav Marian McDonald Alison Jones Debra Riddell Jill Sales Sandy Watson Mylnefield Research Services Jackie Walker Interest in project Bakery Bakery Bakery Bakery Breadshare Breadshare Breadshare Business advice Business advice Café Commercial grain research Cooperative providing rural sector supply chain management consultancy services Distribution Julie Duncan Paul Coates Lucy Cuthill Andrew Cadzow John Stewart Murray Cooper Angus McDowall Hugo Whitaker Transition Edinburgh (South) Michael Shaw Jill Fleming Nick Jones Farm shop Farm Shop Food Hub Government advisory Grower Grower Grower Grower Grower Grower Grower/Producer Grower/Producer Interested party Interested party Joe Coughlan Alan Osmond Colleen McCulloch Claire Ellis Andrew Whitley Miller Miller and Breadshare supplier Millers and Breadshare supplier Organic certifying body Organic certifying body • Project Advisory Group • ‘Scotland the Bread’ project Project Advisory Group • Project Advisory Group • Scottish Borders Council Provider of marketing services. Restaurant Breadshare Scottish Borders Joe Hind Chris Trotman QMU The Sunflower Restaurant Miriam Smith Val Brunton 22 Local food business body Miller Miller Miller Breadshare Community Interest Company Organic Wheat Supply Chain Project
Edinburgh Markets Craigies Farm Shop Edinburgh Larder Gosford Bothy Shop Margiotta New Leaf Coop Olive Tree Deli Real Foods Tapa Organic The Orchard & Biggar Flavour Waitrose Core Health Penicuik Press Scotland Rural College (SAC) Cope Seeds Dods Organic Arable Steamie Bakehouse Whitmuir Organic Farm Vicky McDonald Bob Webster Franco Margiotta Karen Tostee Ivan Stott Kim Betney Robert Winters Retail outlet for Breadshare Retailer Retailer Retailer Retailer Retailer Retailer Retailer Retailer Retailer David Lincoln Rob Lawson Roger Kelly Caroline Mahomed Shahin Simon Tim Harper Andrew Trump Pete Ritchie Retailer Retailer and interested party Retailer and interested party Rural consultancy services Greencity Bex Woodsford 23 Seed Merchant Seed Merchant Seed Merchant Cooperative Steamie Bakehouse • Supply Chain Committee chair • Organic farm and farm shop Wholesaler/Distributor Breadshare Community Interest Company Organic Wheat Supply Chain Project
Appendix: Test Baking Results 24 Breadshare Community Interest Company Organic Wheat Supply Chain Project
Appendix: Bibliography Home Grown Cereals Authority. Market Information [Online]. Available: http://www.hgca.com/markets Home Grown Cereals Authority. Market Information [Online]. Available: http://www.hgca.com/markets Li, Ling. (2007). Supply Chain Management: Concepts, techniques and practices. Available: Google books. NABIM (2012). UK Flour Milling Industry Booklet [Online]. Available: http://www.nabim.org.uk/content/1/100/statistics.html NABIM (2013). Total UK Wheat Usage 2013 [Online]. Available: http://www.nabim.org.uk/content/1/100/statistics.html Republic of South Africa. Dept of Agriculture, Forestry and Fisheries (2003). The Wheat to Bread Value Chain [Online]. Available: http://www.daff.gov.za/docs/GenReports/FPMC/Vol4_Chap3.pdf SRUC. (2013). Producer Survey 2012 -‐ 13 Summary Report, Sector Update and Market Overview [Online]. Available: http://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&ved=0CEIQFjAC&url=htt
p%3A%2F%2Fwww.sruc.ac.uk%2Fdownload%2Fdownloads%2Fid%2F1240%2Forganic_market_lin
k_producer_survey_2012-13&ei=o4TpUtfzIKiv7Abo3ICACQ&usg=AFQjCNHreMciFMeHCOGwl3s5Rt2fVXOCA&sig2=CvOTe9iRbQ59gFaxFZWvxA&bvm=bv.60157871,d.ZGU Titus, M. J., Dooley, F.J. (1996). Supply Chain Management: Assessing costs and linkages in the wheat value chain [Online]. Available: http://www.mountain-‐
plains.org/pubs/pdf/MPC96-‐61.pdf [July 2013] Whitley, A. (2012). Scotland the Bread [Online]. Available: http://www.breadmatters.com/pdf/Scotland_The_Bread_201013.pdf 25

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