The Changing Food Supply Chain and the 3PL Cold Storage Warehouse

Big Changes are Coming in the Food Supply Chain

Several trends are currently affecting the refrigerated warehousing industry and are driven by consumers.  More than ever before, consumers are concerned about the safety and health of the food supply.  Consumers want easy to read labels and simple, clean food that is less processed, free of additives and preservatives.  In addition, there is a major trend toward locally sourced food, especially organic.

Perishable goods that are locally sourced, organic and free from preservatives have shorter shelf lives.  The removal of partially hydrogenated oils dramatically decreases the shelf life of many products and increases the potential for food waste.  This trend is having an impact on the food supply chain.

The second major trend is the consumer expectation for near to immediate delivery of goods.  (Yes, this is partially due to the “Amazon effect”-again.)  Order visibility and traceability are key to facilitating better customer service as well as to streamlining the delivery process.

Although these two primary issues are driving the food supply chain to make substantial changes, there are other trends that are impacting the fresh food supply chain.

Consumers have come to expect that food companies should be “responsible environmental stewards and corporate citizens”. These considerations can add more cost and complications to food supply chain partners.  This is especially impactful as the food industry is known to have slight profit margins.

In yesterday’s supply chain, food production facilities were designed to be large with many distribution centers.  Efficiencies had been designed around bulk shipments, typically driven by product assortment decisions.  The food supply chain infrastructure had been designed based on the presumption of a high proportion of heavily processed foods that had an extended shelf life.  Large players dominated the market and developed outbound distribution models based on fairly predictable demand models.  Optimized for their bottom line, these distribution models no longer meet the demands of today’s on-the-go consumer needs.

Here is what consumers want today: 

Dining habits, desire for convenience and demographics have changed.  The patterns upon which the supply chain was built are changing and so must today’s food supply chain.

Dining and Dietary Habits: 

• Prefer locally sourced food products
• Concerned about animal welfare, sustainability, environmental impact
• Desire for freshly prepared foods rather than highly processed food

Convenience, Access and Delivery

• Increase in home delivery from restaurants, grocery and specialized food stores
• Popularity of meal kit delivery to homes

Consumer Demographics

• Expanding urbanization has resulted in strong increase in urban/local retailers & restaurants
• More urbanization=more deliveries

How Does the Food Supply Chain Need to Change?

• Change in distribution model to accommodate desire for local food sourcing, delivery patterns and short term shelf life of perishable foods
• Increase use of predictive demand analytics for better forecasting
• Real time information visibility is key to customer service & order fulfillment

• Improve flexibility. According to an article in Food Logistics Magazine, “Organizations must remain flexible and ready to implement change today”
• Supply chain facilities (warehouses, distribution centers, cross docks, etc.) need to be closer to customers
• More automation for use in expediting cycle times
• Increase use of technology in the warehouse including advanced WMS & TMS
• More use of advanced modeling and scenario alternatives development

• Increase in use of unconventional transportation channel
• Improve means of performance management
• Improve means of enterprise-wide communication and collaboration

The Changing Role of 3PL Cold Storage Warehouses in the Food Supply Chain

Public refrigerated warehouses have a vital role to play in the fresh food supply chain.  How can 3PLs help?

Outsourcing to 3PLs enables shippers to conserve their capital for growth within their core operations. Another reason why shippers choose outsourcing is to gain access to cutting edge technology from 3PLs.

Shippers often choose to outsource to cold chain 3PLs for the following reasons:

• Provides access to economies of scale for cost savings
• Enables greater flexibility in transportation and logistics for dynamic route planning, minimizing hand-offs
• Provides access to sophisticated temperature tracking technology and data visibility
• Facilitates the use of shared cold storage warehouses and transportation assets for cost reduction
• Aids in maintenance and recording of temperature control throughout the cold chain for perishables

Another important reason that shippers outsource to 3PLs is flexibility.  3PLs excel in handling the diverse needs of their customers.  They are accustomed to “having to turn on a dime” and are experienced in solving problems and logistics challenges for a diverse range of clients.

Perishable food goods shippers are using 3PL cold storage warehouses for more than just warehousing.  Today, many shippers are outsourcing additional tasks such as protein preparation and portion sizing, preparation of produce such as washing, weighing, packaging, etc.  This can cut down on time and reduce costs, making it faster and less costly to get perishable goods to consumers.

What Will Help 3PL Cold Storage Warehouses Win and Retain New Business?

• Act in partnership with your customers-work on issues of mutual benefit for you and your customers
• Think like a customer:  make it easy to do business with your company
• Ensure you have a highly reliable manager who uses strategic problem solving and thinking skills
• Commit and execute on your customer service promises to instill trust in customers
• Use technology as part of your cost reduction strategy

• Look at the “big picture” and be innovative when doing business and handling unexpected challenges
• Provide product traceability including during the delivery process
• Provide web portals so that customers can access inventory and other records
• Facilitate collaboration with transportation and supply chain partners as well as with other shippers

• Utilize technology to provide a competitive advantage, especially for traceability and real time access of information
• Be transparent about your fee structure and any changes to it
• Use predictive analysis and modeling tools in order to determine how to reduce costs
• Set and use KPIs and benchmark against standardized internal & external metrics
• Use technology to provide downstream and upstream supply chain insights to customers

Larger 3PL cold storage warehouses often tend to have more experienced resources and sophisticated technology.  Typically traceability and web portals are standard offerings to customers of larger 3PLs.  Larger 3PL cold storage warehouse operations are more likely to have increased visibility across the entire supply chain.  They tend to be more likely to collaborate with other partners and customers in solving supply chain network challenges.

Summary

One of the primary product types stored in private and public refrigerated warehouses is perishable food products.  Several consumer trends are affecting the fresh supply chain including: 

• Consumer desire for fresh, less processed food products, especially those that are locally sourced
• Consumer expectation for near to immediate delivery of goods

The popularity of food products with decreased shelf life and the need for immediate delivery to consumers is driving major changes in the food supply chain.  Shippers and consumers need and desire order visibility as well as product and delivery traceability.  Both are essential to streamlining the delivery process and maintaining satisfactory customer service to consumers.

Consumers’ tastes and dining habits have changed dramatically.  Distribution models in use today do not meet the change in consumer expectations and tastes.  Previous distribution models were designed around bulk shipments and focused on a high proportion of heavily processed food with a longer shelf life.

The role of 3PL cold storage warehouses is changing.  Increasingly, shippers are outsourcing their business in order to conserve their capital for growth and often gain access to cutting edge technology. 

Shippers are also using 3PL cold storage warehouses for value added services to eliminate additional third party vendors and streamline for efficiency.  This helps reduce costs and aids in getting perishable food products to consumers more quickly.