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Solutions and Innovations Meet Capacity Challenges
Cold chain transportation companies take stock of the past year, and look with cautious confidence to 2021.
COVID-19 has led to large scale disruptions in supply chains all over the world and turned all aspects of cold chain transportation upside down. Further straining refrigerated equipment and transportation systems is the rush to send vaccines to populations everywhere. Still, people need to eat, and with the increasing desire for healthy foods and eat-athome options, demand has significantly risen across the globe.
“The past 10 months have shown that food logistics is resilient in crisis periods. That seems logical as food stock is a basic need,” comments Kris Verbruggen, Managing Director with Frigo Logistics in Poland. “The consumption patterns obviously have changed with a decline in the food service sector and a return to small format stores. The growth of convenience stores seems to be unstoppable, and COVID has really accelerated this trend.” Online sales have boosted last-mile deliveries, making way for huge opportunities for small delivery trucks and vans. All transportation modes, regarded essential services, have been impacted and are racing to find solutions.
Given reduced passenger services, many air carriers have reconfigured their upper decks, taking out seats to accommodate COVID-19- related shipments that today include vaccines. But perishables also remain a viable business. Air Canada, for example, converted Boeing 777 and Airbus 333 passenger aircraft to accommodate cargo flights for perishables from Israel and South America. “Shipments of perishables have remained steady for Air Canada, although with dips and spikes based on regional lockdowns and pandemic measures that affect the economy,” reports Matthieu Casey, Director Cargo Revenue Management & Business Strategy, Air Canada. “For example, there was a dip in demand for lobster to Asia at the start of the pandemic due to restaurants being closed.” Swiss International Air Lines continues to transport an array of goods within its network.
“For instance, we recently began operating flights between Zurich, Switzerland and Buenos Aires, Argentina, and on that return leg, we frequently carry foods such as meats and berries,” says Ashwin Bhat, head of cargo for the carrier. “We also continue to find opportunities to transport perishables from different destinations worldwide, such as limes from South America.” The challenge has been to meet the transport demand despite reduced capacity. “Specifically, in the case of perishables, limited capacity throughout the market affects connections to our gateways from our airline/ interline partners,” Bhat says.
Swiss Air has met this challenge by operating some cargo-only flights, many of which have flown to places outside of the traditional Swiss WorldCargo network, and which offer more capacity than previously. American Airlines’ perishables business remains robust. The carrier has broken records on cargo-only flights for some single-shipment weights, including 110,282 pounds of cherries from Los Angeles, California, United States, to Sydney, Australia, in July, and 112,349 pounds of fresh fish and 10,931 pounds of vegetables on one flight in September – all on cargo-only flights. “From salmon to cherries to soybeans, we’ve been busy meeting the world’s needs during these unprecedented times,” reports Derrick Chengery, in charge of Airport Excellence & Cargo for American Airlines Cargo.
Container lines have been fraught with challenges due to carrier consolidation, tariff wars, economic turmoil and COVID-19. The pandemic resulted in further removal of capacity in the market. Mergers and acquisitions of carrier services continue to consolidate this cold transport sector. “Simultaneously, we have seen a significant rise in overall demand of fruit and vegetables with a strong demand for citrus due to its high Vitamin C content to assist in boosting immune systems,” remarks Mark Cairns, Regional Head of Cold Chain – Africa, Maersk. Container equipment has been delayed in ports due to additional safety protocols, resulting in congestion at terminals as well as around the ports’ infrastructure. Added to this, there are labor shortages due to social distancing regulations that ultimately lead to shortages of equipment in some countries, as carriers are unable to reposition the equipment where it is most needed.
The problems are escalated by customers that need to speed the arrival of cargo related to COVID-19 assistance. Others require their supply chain to slow down as destinations may not yet be able to receive cargo. “From an African perspective, the situation is compounded by infrastructural challenges faced on the landside operations and the fact that many African countries have trade imbalances between import and export flows,” Cairns adds. “Delays faced in the supply chain can lead to increased food wastage and the inability to meet programs in export markets.” While no one knows yet how the industry will shake out in 2021, experts maintain that the pandemic will continue to impact ocean services into 2021. “Looking at the information currently available, we do expect equipment to remain tight, which may lead to implications further upstream in the supply chain,” Cairns warns. He adds that Maersk continues to work closely with all supply chain players to keep cargo moving with minimal delays.
Technology is also playing an increasing role. “We have seen across Sub-Saharan Africa, an increased interest in moving towards digital solutions to assist in growing trade opportunities,” Cairns says. “Customers want to partner on creative solutions to overcome the supply chain challenges faced in their specific markets or industries.” Cairns says the company provides an array of digital solutions that increase transparency and visibility so customers can continue their business online and track goods worldwide, using the company’s app. “As a result of the COVID-19 pandemic, we have seen a large increase in customers’ making use of seamless and tailored online services,” he says.
In recent months, seaports have reported handling record volumes of containerized freight. For example, Florida’s PortMiami in the United States processed 107,088 TEUs, (20-foot Equivalent Units) in October 2020, an increase of 1.5 percent compared to 2019. October marked the busiest month in cargo activity in the history of the port. Yet, industry observers also warn shippers to expect shortages of port-related services and equipment. The Ports of Los Angeles and Long Beach in California, United States, particularly have been experiencing a significant chassis shortage problem. There are concerns that halts and delays in transporting fresh produce, brought on by these shortages of services and equipment, will result in warehousing concerns while distributors aim to re-locate produce as quickly as possible to reduce food loss or waste. This, coupled by increased demands for imported perishables, has resulted in increased development of warehouses in and around seaports.
Rail is facing its own realignments in capacity as the cold chain. For example, in May 2020, Union Pacific ceased operations of its multimodal service Cold Connect that had offered end-to-end transportation service for refrigerated loads, primarily from the U.S. Pacific Northwest/West Coast to markets on the U.S. East Coast. The reasons for ending the service were sluggish market conditions, low freight rates and consumers purchasing more shelf-stable items, instead of fresh produce, amid the pandemic. “With this abrupt drop in capacity, customers were suddenly having to find a truck solution. That quality of truck capacity is not laying around,” says Herman Haksteen, CEO of Cyro-Trans. Manufacturers of refrigerated products, like butter, were particularly hit hard as they did not have an opportunity to ramp up production to the immediate demands resulting from the surge of consumers suddenly eating at home.
“Suppliers are still running hand-to-mouth to get inventory across the country,” states Haksteen. “Trucking has been hit with a surge, and I don’t think we have the trucking capacity to handle it. COVID may have taken us from a food service customer to shop-athome customer, but what is driving transportation capacity is not necessarily COVID.” Railroads are pushing a lot of business to intermodal and the trucking industry, Haksteen observes. “This is largely because railroads have taken capacity out of the market to create their own efficiencies,” he says. “As a result, capacity on the railroad side has tightened, while intermodal business has been booming. For the first time in history, 50% of railroad business – plus or minus 10%, is intermodal. Those are trucks that are taken off the road and put on the back of a rail car. They are now out of containers and capacity, that mode of transport is filled up, and the burden is now on trucks.” Haksteen sees an uptick for refrigerated trucking cross the United States in the first six months of 2021, but maintains it will not move efficiently. “For the first half of 2021, there will be many trucks that will be paid to be on standby and a lot that will be running across the country with small loads,” he says. Consequently, trucking capacity will remain tight with shippers paying premium prices to transport their goods. George Lee, Operations Director, United Kingdom and Ireland, ARGO Merchants, sees the market for European refrigerated truck transportation in 2021 growing substantially, as market conditions return to some sense of normality.
“New opportunities will arise as a result of Brexit, with the requirement for additional customs declarations, paperwork and health certification,” he says. “This will add time into the food supply chain cycle, both in the EU and United Kingdom. As a result, there will be a requirement for additional refrigerated equipment as the supply chain slows and eats up more equipment in the system.” Lee sees the warehousing market looking stronger in 2021, but warns that Brexit will bring its own challenges to the industry with the added complications of customs papers, veterinary certificates and tariffs on imports into the United Kingdom and Irish market. “Product that normally transited the United Kingdom on wheels may now see a shift to short sea containers directly to Ireland, avoiding all the customs and veterinarian procedures that will undoubtedly have an impact on refrigerated road transport flows in Q1 2021,” he says. Don Durm, Vice President, Customer Solutions, PLM, emphasizes how different segments of the U.S. trucking industry have been impacted, despite being classified essential by executive order early in the pandemic. “Smaller operators servicing the restaurant market segment have been the hardest hit,” he says. “With continued shutdowns imposed by local governments, it is difficult to know how they will survive the next few months with only take-out and/or delivery. There is a whole network of food distributors that specifically service this industry and without revenue, their operators will not order from them.”
Going forward, Durm expects consumer demand will continue to drive the cold chain economy. “Companies, such as GrubMarket, and online farm-to-your-kitchen services are growing at an exponential rate to meet the demands of the consumer,” he says. “The questions will be how have consumers changed their behaviors and how will supply chains have to adjust in the future to meet those demands.” Some developments, such as touchless processes, that were developed prior to COVID-19 and became more relevant during the pandemic, might become more standard. These include IoT devices, such as PLM’s TrustLink, which allows bill of lading documents to be attached to the case/pallets along with data like critical tracking events and temperature, all in a touchless environment. “It’s just a scan of the pallet or load, and the bill of lading is there,” Durm says. Consumer demands will also result in a need for smart planning strategies and cross-functional visibility in the supply chain. “Shippers/receivers/transportation will continue to work together to create frictionless handoffs through the supply chain, utilizing technology,” Durm adds. He references a Canadian company that recently utilized blockchain to settle a dispute regarding transactional costs. The problem was resolved from 70% disputed to less than 2%.
By utilizing blockchain technology, stakeholders can maintain identical copies of transactions on multiple computer systems and reduce human errors substantially. This can particularly lift the burden of proof on carriers that have had to rely on shack signs indicating “arrived by date/time” that could result in the carrier paying as much as 3% as a penalty of the load to the receiver. “The Federal Motor Carrier Safety Administration released a report at the end of 2018 showing disputes of detention time resulted in a reduction in annual earnings of more than $1.1 billion to stakeholders,” Durm says. “Technology, which is already outfitted by federal regulations, could help resolve those disputes.”
Transportation will continue to find new ways to utilize technology to engage in frictionless handoffs between supply chain stakeholders. “The last months have boosted the openness to out-of-the-box thinking. A lot more is possible than one to two years ago,” says Verbruggen. Consequently, more paperless systems that have also eliminated useless administration work and human errors have been introduced, and sustainable alternatives, such as more electric vehicles being used for short routes. “Some cities in Poland favor electric trucks by granting the right to drive on the bus/taxi lane or to make deliveries in other non-typical hours,” Verbruggen says. Another trend is the steady increase of intermodal solutions for mid-range routes that are 500 to 1,250 miles. As the vaccine rolls out and consumers feel more confident, industry experts agree that refrigerated trucking flows should begin to see a balance as retail food suppliers no longer have the need to stockpile. “The food service market, including hotel chains and restaurants, will resume some sense of normality by the end of the second quarter, and we should see sustainable growth,” concludes Verbruggen.
KAREN E. THUERMER is a freelance writer based in Alexandria, Virginia, who specializes in economic and logistics issues.
Source: Cold Facts Jan/Feb 2021 issue