The Cold Chain Industry in 2021

Warehouse operators from five continents reflect on the year ahead.

One year into the global COVID-19 pandemic, temperature-controlled warehouse operators on five separate continents reflect on the year ahead.

Outlooks range from challenging to pretty optimistic. The issues top of mind for these operators run the gamut as well. Africa “I expect COVID-19 to continue to be a challenge in 2021,” says Paul Gibbons, Customer Director for Vector Logistics in South Africa. “The safety of our staff will remain a top priority, ensuring that the supply chain continues to operate.” Gibbons says information technology advancements that allow for efficiencies through innovation and collaboration will remain a key theme this year. This will include the use of automation and Artificial Intelligence to drive supply chain functions that are repetitive in nature. “Real-time information updates to customers through the use of BOTS and portals will assist in driving on demand information and efficiencies,” Gibbons maintains. “Vector Logistics has invested in a customer service BOT that allows real-time queries from customers on key items, such as order status, using social media applications.”

He also believes the move to carbon neutrality and green supply chains will continue. “Good progress will be made in the use of alternative energy, such as solar power, to replace traditional forms of energy,” Gibbons believes. “We use solar power in one of our major facilities to reduce its carbon footprint and the load on the national power grid.” Gibbons adds the combination of electrical and autonomous vehicles will create new opportunities to drive supply chain efficiencies. He notes Vector Logistics has tested drone scanning in its warehouses, and it has proven to be faster than traditional stock counting methods. 

 

Australia

I believe 2021 will continue to put challenges on our industry similar to 2020,” says Richard Winnall, Managing Director, International, Americold. “COVID-19 and international trade issues remain major disrupting forces on country and state borders, flow of goods and reliability of the supply chain.” He notes the temperature-controlled industry in Australia and New Zealand remains a strong sector attracting huge investment activity from REITs (Real Estate Investment Trust), retailers and logistics operators. “Service providers will have some interesting discussions with their workforces and unions on vaccination strategies,” Winnall points out and says he hopes a good balance is found for all stakeholders in the industry. “I certainly expect supply chain strategy is back on the table trying to find a new balance to service, cost, quality and flexibility in the year, and the decade, ahead,” Winnall says. “If we learnt anything, nothing is certain and we must all make decisions and execute change faster than we ever have before.”

Jeff Hogarth, Senior Vice President Asia Pacific, Lineage Logistics, notes that in Australia, the implementation of online retail in the food and beverage market had been lagging for two decades, but now has taken off and is becoming the fastest-growing product category in e-commerce. “The key challenges in this sector are facilitating the particularly fast delivery of perishable goods, solving the ‘last mile’ problem and reducing the high cost of flexible, same-day delivery,” Hogarth explains. “Therefore, only the largest e-commerce market players and well-established offline retailers can afford to conquer the food and beverages market through e-commerce.” Hogarth sees changing lifestyle and eating habits as a result of COVID-19 accelerating these trends and challenging the traditional supermarket channels, but also maximizing opportunities for suppliers and food and beverage supply chains. Hogarth also expects automation to further impact last-mile logistics. “Automation has been an industry priority for a while, but precautions against human interaction due to COVID-19 may further accelerate the shift,” concedes Hogarth. “Automation is an opportunity to further ensure efficiency, food safety and sustainability in the customers’ extended supply chains. We just recently launched a technology solution that extends process automation into our network for deeper collaboration and visibility.”

SKU proliferation is driving more focus on accuracy, availability and last mile delivery capability, Hogarth reports, and performance is key to deliveries that are direct to the consumer in most markets. “Customers have expected greater flexibility, response times and creative solutions through the COVID-19 pandemic, but we do expect a change in expectations, post-COVID, around flexibility and response. “ Since Australia is a highly trade-exposed economy, Hogarth says he anticipates several ongoing trade deals to impact its cold chain in 2021. Among these is the onset of Brexit, which saw Australia defer back to traditional ties, launching negotiations for a free trade agreement with the United Kingdom and Northern Ireland in June 2020. Hogarth points out that the massive Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) trade deal, which evolved after the Trans-Pacific Partnership was disbanded under the Trump administration, may be impacted by the new Biden administration. 

 

South America

“I believe the cold industry has strengthened this year and will continue like this in 2021,” suggests Salvador Figueroa, Director, CLC Logistics, Dominican Republic. “The industry is finally getting important recognition as key to the movement and storage of products.” He adds that growth projection, in terms of infrastructure and demand for frozen products, tends to increase due to the pandemic. Jose Carranza, Manager, Agroempaques in Peru, agrees. “As the delivery of fresh products is more difficult, we expect an increase in the consumption of frozen products in 2021.”

He adds that new storage companies may emerge to supply the demand, and retailers and food producers will increase their infrastructure capacity to accommodate this new trend. Carranza points out that logistics has become a critical issue, as people choose to have meals delivered to their homes and as a result, the use of motorized vehicles has skyrocketed. “Retail industry was not used to delivering food at home, it was almost a nonexistent practice.” The pandemic has also drastically changed product delivery Carraza says. “We are establishing new storage and control systems for case and product picking. Also, we see more companies forced to use or adapt their current technology to more robust systems to sell only, product delivery tracking and accurate inventory control.”

“For 2021, I see a growth in exports,” asserts Raul Hernández Butrón, CEO, Holding Precisa, Chile. “There are new possibilities to export to China and the opening of the U.S. market (chicken) from Chile and exports to Europe, that will all contribute to reduce shipping costs.” Butrón also sees great possibility for growth in the 3PL industry. “More investors are evaluating options in countries like Chile and Colombia to invest in well-established warehouses or new infrastructure, as it has become clear that the demand for refrigerated space has not been met yet.

 

Europe

The COVID-19 pandemic will cause an accelerated movement towards e-commerce for foods – a development that normally would take several years is now taking place in a few months, observes Jesper Toft Mathiasen, CEO, Claus Sørensen in Denmark. “We see a significant growth in door-step deliveries, but even more in the ‘click-andcollect’ format, where you just order from your laptop or mobile device, drive to the supermarket, open the trunk of your car and the groceries are placed inside without having to leave your car at all,” explains Mathiasen. “This type of grocery shopping is both convenient and safe.” Another change resulting from customer behavior might be a change towards higher stock levels due to breaks in the supply chain as a consequence of COVID-19, suggests Mathiasen. “Focus might change from reducing net working capital to risk minimization, which will then lead to higher safety stock levels.”

 

North America

E-commerce and consumer preferences are also on the mind of Larry Rauch, President, Los Angeles Cold Storage, United States. “It appears e-commerce is set to grow and those warehouses that are doing it, are already seeing good growth in their businesses,” he points out. “During the pandemic, people got used to having food delivered and as they become more comfortable with the process, it is reasonable to assume this will grow and offer us opportunities.” The greatest food industry casualty of the pandemic is the foodservice sector and the restaurant business, specifically, has been devastated says Rauch. “Many of those restaurants may not come back. The first half of the year is likely to see a continuation of this downturn, and what does that mean for our customers that service that industry?”

Rauch is confident once the population is immunized and comfortable going out – they will explode out of their homes. “However, it’s going to take time for restaurants and other companies in the food service industry to ratchet back up to pre-pandemic service levels. Restaurants will have to re-engage – but they’re re-engaging with a population that will be overjoyed to have them back.” Rauch says labor/talent will continue to be a significant issue in 2021. He points out that they compete for workers with both big retailers, like Walmart, as well as their own processing customers as they ramp-up production. He adds another talent issue to the list – the shortage of truck drivers. “That we are a temperature-controlled industry is clearly a challenge and it’s a driver of automation. We have to look for ways to automate or make the environment more attractive – like with enclosed forklifts with temperaturecontrolled cages.”

Rauch points out, on a related note, that President Biden has indicated a bias towards unions, and that, combined with a new National Labor Relations Board, could potentially create additional challenges for U.S. 3PLs. “Regulatory matters will be a bigger issue with the new administration with the potential to make operating more difficult,” Rauch explains. “In addition, the FDA (U.S. Food and Drug Administration) is considering changing the traceability rules, which could be onerous in the future.” Rauch explains spending more time dealing with regulatory issues can be positive and make for a better organization, but it can be a challenge when government feels more heavy handed than helpful. Rauch adds there are also changes to some voluntary auditing inspection requirements, making certification more challenging and costly. “We are quite optimistic about 2021,” sums up Rauch. “As an industry, it should be a pretty good year. As things come back, the industry is well positioned and as people go out and consume more and travel, that will be to our benefit.” 

ALEXANDRA WALSH is a Senior Publishing Consultant with Association Vision and Editor-In-Chief of COLD FACTS.

 

Source:  Cold Facts Jan/Feb 2021 issue