Third-party-warehousing firms fight world hunger

By Todd Cohen

[Note: This was written for Stop Hunger Now.]

Third-party-logistics (3PL) providers are piloting an innovative warehousing and corporate-social-responsibility partnership with an international relief agency to help address the global hunger epidemic.

3PL providers in Indianapolis and Pittsburgh have taken on warehouse functions that Stop Hunger Now previously handled, giving the Raleigh, N.C.-based relief agency’s local staff in those cities more time to develop partnerships with local organizations and volunteers that will get more food to hungry people throughout the world.

“It is our way of giving back,” says Tim Siddiq, president and CEO of Indianapolis-based Merchandise Warehouse. “We see logistics being key to ending hunger worldwide. And being in the logistics business, it made sense to us to put together a network of public warehouses that would donate space.”

Global epidemic

Throughout the world, 795 million people do not have enough to eat. Every night, one in nine people on the planet goes to bed hungry.

To help address that crisis, Stop Hunger Now has distributed over 200 million meals to feed hungry people in 51 countries since it launched its meal-packaging program in December 2005.

The meals were packaged by 650,000 volunteers from corporations, churches, schools and civic groups at 8,387 meal-packaging events in 19 U.S. cities in which Stop Hunger Now operates meal-packaging locations, and at locations in South Africa, Malaysia, the Philippines, Italy and India.

And warehousing is central to that effort.

How meal-packaging works

A meal-packaging event is a volunteer-based, assembly-line production process that typically is hosted by a local organization that provides volunteers and partners with Stop Hunger Now through a mobile operation that delivers ingredients and supplies.

In just under two hours, a group of 50 volunteers can package 10,000 nutrient-rich meals for the undernourished globally. The assembly process combines rice, soy, dehydrated vegetables and a flavoring mix that includes 23 essential vitamins and minerals into small meal packages.

During the event, volunteers work in teams. They set up the packaging stations and equipment. At the first station in the assembly line, volunteers mix four meal ingredients through a funnel into a specially designed bag. The bag then is carried to the next station, where it is weighed and heat-sealed shut. The sealed bag is brought to the next station, where bags are counted and packaged into boxes that are labeled to indicate the package date and “best-used-by” date of the meals. Then the volunteers take down the packaging stations and equipment.

At the end of the event, Stop Hunger Now transports the packaged meals back to its warehouse to await shipment abroad. It distributes meals through feeding programs operated by partner organizations in developing countries that promote education, encourage children to attend school, improve students’ health and nutrition, address gender inequalities, stimulate economic growth, and fight child labor, and are part of the movement to address global issues.

Warehousing to end hunger

In each community in which it operates, Stop Hunger Now leases warehouse space totaling 5,000 square feet to 12,000 square feet, depending on the size of the market.

Through those leases, which typically run for two years to five years, Stop Hunger Now maintains complete control of the operations.

At each warehouse space it leases, Stop Hunger Now receives the raw materials it needs for meal-packaging events, including the ingredients for each meal, plastic bags in which the meals are packaged, boxes in which packaged meals are stored, and packaging equipment that includes rubber bins, funnels, scoops and cups.

Stop Hunger Now either rents or owns a truck in each market. At its leased warehouse space, its staff loads the truck with materials needed for a meal-packaging event, and drives the truck to the site of the event.

Volunteers unload the truck and then, after the event, load the truck with the packaged meals. Staff drive the truck back to the warehouse, and unload the meals at the warehouse, where they remain until they are shipped overseas.

At each warehouse, Stop Hunger Now needs to accumulate 285,120 packaged meals – enough for the 20 pallets to fill a shipping container – before it makes a shipment overseas.

And its costs are fixed: It must pay the cost of each of its monthly leases whether it packages 1,000 meals or one million meals at a particular location.

Third-party-logistics model

Partnering with Merchandise Warehouse and Catch-Up Logistics in Pittsburgh, Stop Hunger Now is testing a new model for its warehouse operations.

In Indianapolis, where Merchandise Warehouse is based and operates both a 400,000-square-foot warehouse and a 175,000-squarefoot warehouse, the company has taken on responsibility for all of Stop Hunger Now’s warehousing needs.

It receives the raw materials and packaging materials Stop Hunger Now needs, stores them in one of its warehouses, maintains the inventory of raw materials and packaging materials in its computer system, pulls ingredients and packaging materials when a Stop Hunger Now partner is hosting a meal-packaging event, loads the Stop Hunger Now truck for the event, unloads the truck after the event, maintains the inventory of packaged meals, and loads containers for meals to be shipped overseas.

While many third-party-warehouse providers include transportation in their services, Stop Hunger Now wants to control its own transportation to and from packaging events. Its business model depends on volunteers to load and unload its trucks at meal packaging events, and the window of opportunity for doing that is about 20 minutes.

In contrast, the estimated period of time during which many transportation providers say they will deliver a truck to a meal-packaging site is much longer, making it impractical for Stop Hunger Now to depend on transportation providers for transporting materials to the packaging sites. Merchandise Warehouse does not include transportation in its services.

Cost savings

The third-party model is expected to reduce the warehousing duties for Stop Hunger Now’s local staff, giving them more time to develop new partnerships that will package more meals for people in need throughout the world.

“This new model enables our staff to focus on what we do best – facilitating great meal-packaging events for volunteers and distributing meals effectively to end hunger, while letting experts handle the logistics, which are not our core competency,” says Rod Brooks, president and CEO of Stop Hunger Now.

Mickey Horner, director of expansion and program innovation for Stop Hunger Now, says that moving to the new 3PL model could save the organization as much as half its operating costs, allowing the organization to provide more aid, increase monitoring and evaluation, and invest in sustainable community-development projects in developing countries.

One key to those savings will be the shift from a fixed-cost warehouse model to a variable-cost model. So Stop Hunger Now will pay for warehouse space and labor only when it actually is storing inventory in the warehouse.

The third-party model also is expected to reduce by 25 percent to 35 percent the time that local Stop Hunger Now staff spend on warehousing functions.

“By partnering with warehousing and logistics experts, we can spend more time developing more partnerships to package more meals for people in need,” Horner says.

Benefits of third-party model

For Siddiq at Merchandise Warehouse, partnering with Stop Hunger Now was an easy decision.

“Everybody has the food we need,” says Siddiq, whose father was Afghan and who was born and lived in the country until he was seven years old. “It’s something we take for granted. I grew up in Afghanistan. I saw hunger first-hand as a kid.”

The partnership with Stop Hunger Now also represents a way for Merchandise Warehouse to be a responsible corporate citizen, says Siddiq, whose maternal grandfather founded the privately held company in 1951.

Because it is an accredited food-handling warehouse with third-party inspection and accreditation, Merchandise Warehouse also provides food-grade services that meet or exceed regulation and compliance requirements of governing bodies to operate a food warehouse, says Scott Whiting, vice president and general manager for Merchandise Warehouse.

“Those services are not always easily achievable under a lease,” he says. “That’s another level of service Stop Hunger Now does not have to worry about.”

Merchandise Warehouse also has agreed to contribute up to $50,000 in in-kind services to Stop Hunger Now, including office space in its warehouse for Stop Hunger Now’s local employee, and has allowed Stop Hunger Now to install a sanitation system in its warehouse. The system includes a three-bay sink and a dishwasher Stop Hunger Now can use to clean meal-packaging equipment after it is returned to the warehouse from meal-packaging events.

Future of third-party model

Based on a logistical network analysis of its third-party warehouse model that Stop Hunger Now is developing with consultants, it will decide whether to shift to that model in other U.S. communities in which it operates when its warehouse leases in those communities expire.

It also will consider the third-party model when it expands to new communities. The Stop Hunger Now board of directors, for example, has approved expansion to the New York metro area.

“Our long-term goal is to have greater efficiency in logistics, and we’ll need additional 3PL partners to make that happen,” Horner says.

Whiting says Merchandise Warehouse aims to work with its peers in other cities to build a network of third-party operators “to be able to ship food to all over the world where it’s needed.”

Support Center aims to plug capital gap for small firms

By Todd Cohen

RALEIGH, N.C. — Three years ago, unable to keep up with growing demand for the baked goods she prepared for customers in her home in Holly Springs, Jackie Green turned to The Support Center, a Raleigh-based nonprofit that provides loans and technical support for small businesses throughout the state.

The Support Center made a $200,000 loan to Green, and helped her get technical support from the Small Business Center at Wake Tech Community College and the Raleigh chapter of SCORE, formerly the Service Corps of Retired Executives.

Green , who used the funds and advice to move Sweet Cheeks Bakery out of her home to a retail location off Highway 55 in Apex and hire two staff members, says she now is on track to turn a profit by early next year.

“I would have not been able to do this without The Support Center,” she says

Founded in 1990 as The North Carolina Minority Support Center, the agency initially provided financial and technical assistance to a network of 18 small minority community-development credit unions, mainly in eastern North Carolina.

But four years ago, after the network of credit unions dwindled to 3 members, with two of them facing financial troubles, the organization rebranded itself as The Support Center and shifted its focus to small-business lending and technical assistance, as well as policy work on small business issues.

“If we were going to be viable and relevant, small-business lending was a great void” that needed to be filled, says Lenwood Long, who co-founded the agency with Martin Eakes, CEO of  Self-Help in Durham, and serves as its president and CEO.

Since 2010, The Support Center has provided a total of nearly $12 million in loans to at least 150 small businesses, supporting over 350 jobs. In 2013 alone, it made $6 million in loans, and expects to lend at least $9 million this year.

Small businesses generate over 85 percent of new jobs in the state but typically fail within their first five years, often because they lack access to capital and technical expertise on issues such as marketing, operations and matching supply and demand, Long says.

The Support Center has secured low-interest loans and grants from federal and state agencies, and low-interest loans and lines of credit from banks and other financial institutions, and makes low-interest loans to small businesses, mainly those owned and run by minorities, women and veterans.

Funds it has secured include nearly $1.3 million from the U.S. Department of Agriculture; $1 million each from the U.S. Small Business Administration and the state of North Carolina; nearly $3.4 million from the Community Development Financial Institutions Fund of the U.S. Department of the Treasury; $500,000 each from TD Bank and Wells Fargo; and a line of credit totaling $1.5 million from PNC.

Over the next five years, it aims to secure $35 million. And it has set a $500,000 goal for its inaugural annual-fund drive, which kicks off Oct. 30 with an event at the Renaissance Hotel.

“This work is value-added to the state,” Long says, “and to the economic recovery of the state, and to small businesses as they look for capital they cannot receive from banks.”

Nonprofit focuses on minority economic development

By Todd Cohen

DURHAM, N.C. – In the mid-1980s, fielding requests for information on businesses owned by minorities or women, the Minority Business Development Agency in the N.C. Department of Commerce lacked the data to respond.

To help fill that data gap, three agency employees formed the North Carolina Institute of Minority Economic Development. Housed in the former North Carolina Mutual Life Insurance Company building in Durham in the business district known in the late 1800s and 1900s as “The Black Wall Street of America,” the agency focuses on business development, research and policy, and education and training.

Operating with an annual budget of $2 million and a staff of 12 people, the Institute in the fiscal year ended June 30, 2013, served over 4,000 businesses that created 480 jobs. It provided education and training for 5,100 people.

It helped firms secure $6.4 million in loans from major bankers and nontraditional investors. And it helped firms secure $81 million in contracts.

The biggest challenge for businesses owned by minorities and women is access to affordable capital, and access to market opportunities and an available skilled labor force, says Andrea Harris, president and co-founder of the Institute.

(On October 1, Harris will become a senior fellow at the Institute. Farad Ali, senior business consultant to the Institute who for 14 years was its senior vice president, will become its president and CEO.)

In 2007, the most recent year for which minority business data are available from the U.S. Census, North Carolina was home to nearly 132,000 minority-owned firms, up from over 61,500 in 1997, Harris says. Those firms employed nearly 129,500 paid employees and generated $16.1 billion in gross receipts.

The number of minority-owned firms likely is much higher now, Harris says.

The state also was home to 267,800 businesses owned by women that employed 208,300 individuals and generated $35.9 billion in sales.

When the Institute was formed in 1986, Harris says, firms owned by women “were not at the table or getting contracts.”

The Institute also has been working with an economist at the University of Georgia at Albany, updating data it published five years on the economic impact of the 10 historically black colleges and universities in North Carolina. That 2009 study, which was based on 2007 data, reported that those institutions’ combined economic impact was $1.6 billion.

Businesses owned by minorities and women were the focus of North Carolina’s second annual Statewide Minority Enterprise Development Week celebration on September 11 in Greensboro. Hosted by the Institute and the North Carolina Minority Women’s Business Enterprise Coordinators’ Network, the event is believed to be the only statewide event in the U.S. that celebrates minority-owned and women-owned firms.

The event is modeled on local celebrations throughout the U.S. that were launched by President Ronald Reagan in 1983 to raise awareness of goods and services provided by minority businesses, and to share their best practices, Harris says.

With three of five small businesses in the U.S. typically failing within their first five years, she says, the Institute “will continue to provide assistance, and work with major lenders and other business resources to understand and better respond to the challenges that are peculiar” to businesses owned by minorities and women.

Babcock Foundation names new executive director

By Todd Cohen

WINSTON-SALEM, N.C. — David Jackson, a 25-year veteran of government, philanthropy and nonprofits who has focused on affordable housing and on workforce and economic development, has been named executive director of the Mary Reynolds Babcock Foundation in Winston-Salem.

Jackson, who is president and CEO of the Center for Working Families in Atlanta, will begin his new job in November, succeeding Gayle Williams, who has led the $154.5 million-asset foundation for 19 years.

Kathy Mountcastle, chair of the foundation’s board, said in an email message to colleagues that the organization’s senior staff would remain, “ensuring continuity in our approach and grantmaking.”

Under Williams, the focus of the Babcock Foundation has been helping to move people and places in the Southeast out of poverty.

For the next two years, the foundation will be completing a 10-year strategic plan, and then embarking on a new strategic plan that will be informed by its current work, Jackson says.

Jackson, who has a special interest in creating business-ownership opportunities for residents of underserved communities, says his work has taught him that “change is most sustainable when people who want to change participate and lead in making it happen.”

Change also results from “learning and listening and doing it through collaboration,” he says.

Both the Babcock Foundation and the Center for Working Families are rooted in working in partnership with other organizations to improve the lives of people and places in need, he says.

A native of New York City who grew up in Harlem and the South Bronx, Jackson says he saw a lot of abandoned buildings as a child and told his mother, when she asked him what he wanted to be when grew up, that he “wanted to be the guy who builds buildings.”

He studied architecture at the High School of Art and Design, and received a bachelor of science degree in architecture from the New York Institute of Technology, then went to work for the New York City Department of Housing Preservation and Development, where his first assignment was helping tenants take over the management of apartment buildings by turning them into limited equity cooperatives.

He later worked as associate director of the Atlanta office for the Enterprise Foundation, one of the largest financiers and developers of affordable housing in the U.S., and then returned to the New York City Department of Housing Preservation and Development as assistant commissioner of homeownership.

Before joining The Center for Working Families, he served as vice president of One Economy Corporation, a global nonprofit that works to use technology and information to help plug low-income communities into the economy.

He led One Economy’s expansion into new markets, including Atlanta, San Antonio, New Orleans and Kansas City.

Operating with an annual budget of $4 million and a staff of 30 people, the Center for Working Families serves about 1,200 people a  year, providing intervention services such as connections to support services for roughly half of them, and deeper services such as job coaching and financial coaching for the other half.

Jackson, who holds a master’s degree in business administration  from the Robinson College of Business at Georgia State University, says he learned in business school that “if someone does it better, don’t try to do it yourself, just buy it or partner to get it.”

The Babcock Foundation “works with communities and nonprofits that don’t have unlimited resources,” he says.

“At the Center for Working Families, I sometimes tried to think of our work like an auto plant that assembles cars from parts such as windshields and seats manufactured by other companies, working with them to serve the ‘end-user,'” he says. “We were more effective by working together with other nonprofits to serve our constituents.”

In the case of low-income families and neighborhoods that are “disconnected,” for example, nonprofits can partner with one another to connect families “to the resources they need to achieve the goals they’re setting out for,” Jackson says.

And working with constituents is key to effective collaboration, he says.

“I’ve always found that when people who are wanting a change help design and implement that change, outcomes remain sticky, it lasts longer,” Jackson says. “When it’s a top-down approach, it might work for a little while, but eventually it’s not sustainable.”

UNC Center focuses on global understanding

By Todd Cohen

RALEIGH, N.C. — In Wake County, which has over 900,000 residents and is the second-most-populous county in North Carolina, 12 percent of the population is foreign-born, a segment of the community that has grown 62 percent since 2000.

Fifteen percent of the population age five and older speak a language other than English. And foreign companies employ nearly 20,000 people in the county, where exports total over $2.2 billion a year and imports total over $1 billion.

Those are just a few facts from an interactive “heat map” developed by the Center for International Understanding in partnership with SAS Institute in Cary that in features 53 “data points” that show education, demographic and economic information for each of the state’s 100 counties.

The Raleigh-based Center hopes the map will help lawmakers, government officials, policymakers, economic developers, educators, civic leaders and others better understand the state’s global connections and help take advantage of opportunities in the global marketplace.

“From one end of the state to the other, we are active in the world in our education systems and our businesses, and we are being impacted and are taking advantage of the world,” says Adam Hartzell, the Center’s executive director. “We hope the next part of the story is how can we start to take that story and be pro-active about taking advantage of the opportunities that a globally-engaged state could have.”

Formed in 1979, the Center is an arm of the Chapel Hill-based General Administration of the University of North Carolina system.

It operates with a staff of six people working full-time, plus independent contractors and part-time employees and interns, and an annual budget of $1.3 million.

State funds account for about 30 percent of its budget, with a charitable arm of the Center known as the Council raising contributed dollars that represent another 20 percent to 25 percent, and program fees and other earned income accounting for the remainder.

To advance its mission of “promoting awareness, expanding understanding, and empowering action through global education,” the Center provides a handful of programs that focus on schools, policy leaders or communities in the state with growing Latino populations, and that connect public policy, business and education.

The Center has helped 27 schools across the state launch programs in Chinese language and culture that include guest teachers from China, for example, and it has taken 650 teachers for study abroad.

The Center also works to help educate political leaders throughout the state better understand best practices throughout the world on key policy issues.

The Center in 2010 took a delegation of state lawmakers and other leaders to Europe for two weeks to learn about clean-energy practices and policies, and another group to China last year to look at trade opportunities for the state, and will host another trip to China this year to look at developing ties in the health-care industry.

And it will take teachers to India in 2013.

The Center also provides strategic advice on statewide issues involving policy, business and education.

And since 1998, the Center has taken nearly 800 leaders from throughout the state to Mexico as part of an effort to help them better understand immigration issues and to develop programs to better integrate Latino immigrants into North Carolina communities.

A separate trip to Mexico in 2009 to study economic and educational ties with North Carolina was the catalyst for discussions that led to development of the global heat map.

“It’s a way to start to measure how communities are taking advantage of global opportunities,” Hartzell says, “and be able to identify some best practices others can evaluate.”

Arts are big business, study says

Despite a slight drop in audience spending because of the economic downturn, the nonprofit arts-and-culture industry remains an economic engine that will be a key force in the economy’s recovery, a new study says.

The industry fueled $135.2 billion of economic activity throughout the U.S. in 2010, including $61.1 billion by nonprofit arts-and-culture groups and another $74.1 billion in event-related spending by their audiences, says Arts & Economic Prosperity IV, the fourth study by Americans for the Arts of the industry’s economic impact.

That activity supports 4.1 million full-time jobs and generates $22.3 billion a year in revenue to local, state and federal governments, over five-and-half times their combined $4 billion in arts allocations, says the study, which includes customized findings on 182 regions representing all 50 states and the District of Columbia.

In North Carolina, the nonprofit arts-and-culture industry drives $1.2 billion in direct economic activity, supporting the equivalent of over 43,600 full-time jobs and generating $119 million in revenue for local and state governments.

Arts and culture groups are “resilient and entrepreneurial businesses,” the study says. “They employ people locally, purchase goods and services within the community, and market and promote their regions.”

The collapse of the economy “erased the gains made during the pre-recession years” and left 2010 spending on the arts trailing 2005 levels by 3 percent, the study says.

The recession’s biggest impact on the arts was on attendance and audience spending, it says.

“Yet even in a down economy, some communities saw an increase in their arts spending and employment,” it says. “As the economy rebounds, the arts are well poised for growth.”

Arts and culture groups also generate additional event-related spending by audiences that benefits local economies such as for parking, dining and shopping, the study says.

Based on 151,802 audience surveys, the typical person attending an arts event spends $24.60 per person per event in addition to the cost of admission.

And 32 percent of people attending arts events live outside the county in which the event takes place, spending $39.96 related to the event, compared to $17.42 spent by local residents who attend those events.

“A vibrant arts community not only keeps residents and their discretionary spending close to home, but it also attracts visitors who spend money and help local businesses thrive,” the study says.

“America’s arts industry is not only resilient in times of economic uncertainty, but it also a key component to our nation’s economic recovery and future prosperity,” it says. “Business and elected leaders need not feel that a choice must be made between arts funding and economic prosperity. This study proves that they can choose both. Nationally as well as locally, the arts mean business.”

North Carolina counties

The national report includes findings on the economic impact of arts and culture on 17 local communities in North Carolina. Among them:

  • In Mecklenburg County, the arts industry generates nearly $202.8 million in annual economic activity, 6,240 full-time jobs and $18.1 million in revenue for local and state government. The industry also fuels over $101.2 million in event-related spending in the county, with cultural audiences spending $30.72 per person, including $41.58 spent by people from outside the county who attend events in the county, and $23.54 by county residents attending those vents.
  • In Wake County, the arts industry generates $166.2 million in annual economic activity, 6,601 jobs and nearly $15.9 million in revenue for local and state government. The industry also fuels $78.4 million in event-related spending in the county, with cultural audiences spending $17.98 per person, including $36.09 by people from outside the county and $13.43 by county residents.
  • In Forsyth County, the nonprofit arts-and-culture industry fuels nearly $136.6 million in direct economic activity, 4,769 jobs and over $13.7 million in revenue for local and state government. The industry also stimulates over $65.9 million in spending related to arts events in the county, with cultural audiences spending $26.64 per person on costs related to events, including $49.97 spent by people from outside the county who attend events in the county, and $16.15 spent by county residents attending those events.
  • In Guilford County, the arts industry generates over $118 million in direct economic activity, 4,269 jobs and nearly $16.7 million in revenue for local and state government. The industry also fuels over $71.7 million in event-related spending in the county, with cultural audiences spending $19.45 per person, including $27.87 spent by people from outside the county who attend events in the county, and $16.43 spent by county residents attending those events.
  • In Durham County, the arts industry generates $125.5 million in annual economic activity, 4,550 jobs and over $11.4 million in revenue for local and state government. The industry also fuels $51.4 million in event-related spending, with cultural audiences spending $28.16 per person, including $39.33 by people from outside the county, and $14.59 by county residents.