The growing demand for perishable food is challenging food shippers to find sufficient cold transport and storage. This demand is propelled by health-conscious consumers around the world, seeking more fruits and vegetables, fresh and frozen, all year long. Suppliers are busy building temperature-controlled facilities and using refrigerated trucks, trailers, containers, and other technology to meet this growing demand with quality and safety.
Consider the market for bananas. They are the most consumed fresh fruit in the U.S., with an annual consumption of just over 11 pounds per person. Many shipments of this popular fruit come from Central and South America. Since shippers seek the most optimal shipping route, the Port of Tampa decided to build a cold storage facility to accommodate inbound shipments. Completed and opened this year, it can receive nearly 4,000 pallets of bananas in a given week. For example, the facility receives Chiquita bananas from Ecuador so they can go into storage and await distribution to markets throughout the U.S.
Going to Tampa instead of further up the Eastern Seaboard to Philadelphia (where many cold storage facilities are located) saves about three days in the supply chain timeline for these perishable items. Such careful calculation and concern have gained heightened importance in this robust global market.
Slightly more than 20 percent of fresh fruits were imported about 40 years ago, compared to just under 50 percent today. Additionally, about 5 percent of vegetables were imported over the same period, compared to about 35 percent today. Almost half of fresh fruit and nearly one-third of fresh vegetables consumed in the U.S. are imported from other countries.
According to USDA’s quarterly report from late 2017, shipments of refrigerated fruit and vegetables have been increasing since 2000. The report states, “At 7.72 million tons, reported shipments of refrigerated fruit and vegetables in the fourth quarter of 2017 were the third highest on record for any fourth quarter, behind 2016 at 8.05 million tons and 2011 at 7.99 million tons. As a whole, the reported annual tonnage for 2017 was the highest on record at 33.6 million tons, an 0.5 percent increase from 33.4 million tons reported in 2016.” Additionally, spot rates for some refrigerated trucks have reached 40-year highs.
This trend has created a logistics problem; too many fresh and frozen goods with too few assets to store and transport them.
Increased Demand, Logistics Shortage
“The overall shortage in the trucking industry is hitting the less-than-truckload cold transport hard,” says Mark Nelson, CEO of Perishable Shipping Solutions, a Youngstown, Ohio-based company that runs a fulfillment service for food companies serving online food shopping networks. “We continually experience shipping delays and no-shows. It’s one thing to have a trucking company quote a high price; but they often confirm shipments and drivers don’t show. This is a common occurrence.”
Tal Paperin, vice president of business development for Israel-based KSW Solutions, a consulting firm whose services include logistics consulting, says public concern in food safety is growing. “In the past, consumers weren’t so interested in where their food came from, how it was stored, or how it was transported,” he explains. “But that’s changing. Companies are serving a more health-conscious consumer as well as many more concerned about food safety.
“With the Internet, people are more aware of the food transportation and storage industry,” continues Paperin. “Not just consumers, but even people working in quality control in the grocery store pay attention. This awareness has stimulated heightened demand for fresh foods, worldwide. Consumers want fresh food all the time, from wherever it’s grown. Cold transport makes that possible. A tightening in the supply of cold transport not only makes such fulfillment more difficult, but also could jeopardize the safety of food that could perish with any substandard cold storage or transport.”
Paperin goes on to talk about the new technologies in storage as well as the new logistics and sales chains, so foods will be stored and transported in different ways. For example, he says, “Currently, the majority of Driscoll’s berries come from California; but they will be able to buy berries from Peru and sell to Germany directly, rather than just importing to Holland and distributing throughout Europe. Places that are known for poor food quality will be ignored in favor of places that have better supply chain logistics and quality.”
Consumer demand for fresh food has opened new trade routes and caused nations from distant continents to capitalize on cold transport to meet the rising needs. Sue Rutherford, vice president of marketing for ORBCOMM, Rochelle Park, N.J., says the global trade in perishable food is growing at about 4 percent per year; trade within and between some nations is expanding even faster. New trading routes are also opening, for instance between Latin America and China, as global economic relations and dynamics shift. Demand for cold storage and transport will continue to grow worldwide, especially in nations that currently lack a well-developed cold chain infrastructure, including India, China, Africa, and Southeast Asia, particularly Indonesia. However, mature economies like the U.S. and Europe also need to address cold storage capacity that is aging and/or in the wrong locations for emerging industry dynamics.
Technological Improvements
Rutherford says digitization is helping improve food quality while aiding the supply chain. Technology allows vigilant monitoring of food shipments and inventory, so it may be appropriately stored for advantageous lengths of time, while remaining safe for market where and when it reaches it.
For instance, ORBCOMM provides Industrial Internet of Things (IIoT) telematics and sensor hardware, network connectivity, and cloud software that enable remote visibility and control of refrigerated trailers, containers, and perishable cargoes in-transit and in-facility.
“Companies are looking to have more data and to use it better,” Rutherford explains. “In cold chain, investment in telematics and sensor technology, such as we provide, has initially been driven in many cases by regulatory compliance with the FDA Food Safety Modernization Act, other food safety regimes like Hazard Analysis and Critical Control Points, and related transport safety rules. But technology is now being used in many other ways to help companies maximize utilization of the assets, improve cargo care, and get a more proactive control over their cold chain.”
These developments open the market aperture for food supply. “The outlook is absolutely positive in opportunity terms, but regulatory, capacity, and investment headwinds continue,” she notes. “What we see is companies turning to data and digitalization to give themselves much better insight and control over cargo care in transit, asset, and proactive cold chain management.”
Jeff Van Pelt is a principal with OSIsoft, which collects, analyzes, and visualizes large amounts of big data and IoT data from various sources for real-time decision-making in several industries, including cold transport.
“There’s an opportunity for companies to take better advantage of technology and data, from manufacturing, warehousing, and distribution, to connect the cold chain and provide real-time visibility throughout the process,” he explains. “The availability of sensors to collect massive amounts of data, and for systems to collect, harmonize, and store that data for analysis, provides an opportunity for significant efficiency gains.”
Van Pelt says that domestic investments in newer, more technologically advanced storage facilities are providing more efficiency. The global demand for fresh and temperature-sensitive products requiring cold chain capabilities is increasing the need for the appropriate logistics services.
Cold Chain Suppliers and Food Brands
Food companies are looking to cold chain logistics providers as more than a proffer service; they consider them representatives of their brand. According to the Global Cold Chain Alliance’s (GCCA) 2018 Customer Demand Research Report, which surveyed some 200 food companies in 14 countries, food companies see cold chain providers as extensions of their brand and key performers to ensure food safety. When the food companies were asked what top business trends will most impact their company, the No. 1 response (122 of the 200 respondents) was “food safety and protecting the brand.”
In the survey, one of the respondents replied explicitly, “It’s a shared journey, absolutely. I think it has to be, because [the cold chain providers] are effectively stewards of our quality program and our brand.”
GCCA’s report summarized the next turn in the economic dynamic of increased demand. Temperature-sensitive food in a global transportation market, where supply lags but technology is greatly advancing, will rely heavily on suppliers that respond to this market.
Like the Chiquita bananas that find their way into Tampa’s cold storage facilities, the increasing volume of imported fruits, vegetables, and other perishable foods will only grow more. Cold chain suppliers must expand to meet this need. New technology will help, as will the acquisition of new logistics assets. Cold chain logistics providers, from ships to rail carriers, telematics developers to warehouse providers, will all be expected to play an important role: to serve as an extension of the brand that delivers quality food, safely. All eyes are on cold chain logistics.
GCCA’s report summarizes it succinctly: “Cold chain providers must find opportunities to position themselves as an integral part of the customer’s food, safety, and brand initiatives. Nothing is more important to food manufacturers than ensuring the safety of their food. Cold chain providers are experts in that process and critical to it. To be an extension of the brand, providers must create dialogue and build the brand into the conversation when communicating with customers.”
Romeo is a journalist focused on business and technology and is based in Chesapeake, Va. Reach him at [email protected].
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