Terminal Produce Markets at the CrossroadsSponsored by: The Maryland Food Center AuthorityThe Supply Chain Management Center, Robert H. Smith School of BusinessTerminal Produce Markets at the Crossroads Study Team: Dr. Martin Dresner Dr. Thomas Corsi Dr. Sandor Boyson Donald Darnall Federico Montealegre Loren Zadecky Cherrie Hughes The Supply Chain Management Center, University of Maryland1. IntroductionThe Supply Chain Management Center, University of Maryland1. IntroductionTPMs are no longer the primary distribution point in the produce supply chain in the U.S.1. IntroductionIn this presentation, we analyze how TPMs got to the position they are in today, and make recommendations for improving market share.1. IntroductionThe analysis reveals: TPMs fall into 3 broad categories.“A Tale of 3 Markets“1. Introduction“A Tale of 3 Markets”1. Thriving Markets - updated infrastructure - located in growing metropolitan areas1. Introduction“A Tale of 3 Markets”2. Markets In the Balance - dated infrastructure - located in growing metropolitan areas1. Introduction“A Tale of 3 Markets”3. Declining Markets - dated infrastructure - largely replaced by competitors1. IntroductionAs we indicate in the recommendations section of the presentation, all three types of markets have the opportunities for improving their position.2. Situation AnalysisThe Supply Chain Management Center, University of Maryland2. Situation AnalysisTPMs: Then and NowTPMs were originally established by railroads as primary wholesale produce distribution centers.2. Situation AnalysisTPMs: Then and NowOriginal TPM customers were small “Mom buyers came directly to TPMs.2. Situation AnalysisTPMs: Then and NowTPMs were the hubs of nationwide food distribution system well into the 1970s.2. Situation AnalysisTPMs: Second PhaseTPM position was challenged as regional/national grocery chains displaced small local shops and centralized their purchasing.2. Situation AnalysisTPMs: Second PhaseRetailers began buying directly from growers, reducing spoilage costs and increasing freshness.2. Situation AnalysisTPMs: Second PhaseTPMs were relegated to smaller accounts, and performing niche functions (e.g. filling shorts and accepting surplus consignments).2. Situation AnalysisTPMs: Second PhaseBuyer consolidation sparked supplier consolidation. Large Grower-Shippers disintermediated produce wholesalers.2. Situation AnalysisTPMs Current SituationMajor growth areas: Organic produce Hispanic segment Asian segment2. Situation AnalysisTPMs in a Segmented Supply ChainLarge grower-shippers and retailers have been slow to cater to these specialty segments, leaving an opening for TPMs.2. Situation AnalysisTPMs in a Segmented Supply ChainBut. The opportunity is already closing as grower- shippers and independent distributors enter the specialty segments.2. Situation AnalysisTPMs in a Segmented Supply ChainAnother important development: Food security land values low2. Situation Analysis“A Tale of 3 Markets” Markets in DeclineThe only way to rescue these markets would be through large public investments in infrastructure2. Situation Analysis“A Tale of 3 Markets” Trend AnalysisFinancial models for the 3 market types project future growth (given assumptions).3. The Future of TPMs:RecommendationsThe Supply Chain Management Center, University of Maryland3. The Future: RecommendationsThere are critical strategic actions TPMs across the country must take to overcome the threats and capture the opportunities defined in the situation analysis.3. The Future: Recommendations2 Types of Recommendations:- near-term- longer-term These apply to all 3 types of TPMs.3. The Future: RecommendationsNear-Term Actions Raise StandardsSome suppliers refuse to sell to TPM Wholesalers due to security and contamination concerns3. The Future: RecommendationsNear-Term Actions Raise StandardsTPMs Should Raise Standards: - Expand Supplier Certifications Among TPMWholesalers to conform to modern safety/securityrequirements - Implement food traceability procedures -Provide training/counseling to wholesalers to reachcertification3. The Future: RecommendationsNear-Term Actions Expand into New Market SegmentsExpand into Ethnic and Organic Foods3. The Future: RecommendationsNear-Term Actions Maintain/Expand Core CustomersBe more proactive! - provide delivery service - offer inventory management - make menu suggestions3. The Future: RecommendationsNear-Term Actions Maintain/Expand Core CustomersMake better use of information technology Example: online posting of inventory availability to meet customer shorts3. The Future: RecommendationsNear-Term Actions Shared Services Approach- market-sponsored forums on strategic marketing - explore the possibility of alliance formation between wholesalers3. The Future: RecommendationsNear-Term Actions Shared Services ApproachManagement must convince wholesalers that training and education is essential to improving efficiency