Article 006 Ecommerce , Fresh and the Cold Chain

According to McKinsey & Company , If you are in the business of manufacturing , processing and moving Pharmaceuticals , CPG (consumer packaged goods) , Meat , Poultry , Seafood , Vegetables , Dairy and other products that require refrigeration throughout the entire supply chain , then you basically are going to have to ramp up quickly . E-commerce and certain consumer trends now provide an opportunity to increase your sales ,on the low side by 10% and on the high side 30% over the next 5 years . The retail sector on the other hand , will by 2025 only account for 37% of your total sales down from almost 50% today .

McKinsey & Company are partly giving this advice based on consumer trends that are tilting towards a demand for fresh , organic and locally sourced perishables . Part of this trend is also the expectation of consumers that food companies should also be responsible for the hygiene and safety aspects of the products that hit their dinner table .

In order to get a bigger piece of the pie and compete on speed of delivery , companies and their supply chain partners will have to go the extra mile by ramping up with even more capabilities in order to meet customer expectations . This invariably will increase cost in a business (especially if you’re a logistics service provider) that already is running on a very thin margin .

Challenges :

1) The design of the Distribution Centres .

Before e-commerce and the significant tilt towards 'Fresh' , most food production facilities were designed to be large distribution centres that hold long shelf life processed goods . The standard M.O of these distribution centres were basically ‘pallet in , pallet out’ operations with all the obvious associated efficiencies built in since they were mainly receiving , storing and shipping goods in bulk . You were able to dominate the market , if you had larger storage space (Warehouse) , pretty consistent demand and you (the manufacturer) could price your goods at a 'sweet spot' that allowed you and your supply chain partners to make a healthy margin . But now , the game is changing and the existing distribution models no longer will meet the demands of the a new and 'on the go' generation of consumers that want ‘Fresh & Healthy ‘options .

2) Spoilage

Locally sourced food has a very short shelf life and is prone to spoilage .So manufacturers and distributors are partnering up with LSPs that are capable of handling refrigeration of goods from the point of pick up right up to the retail , restaurant outlets or even to the customer doorstep . In order to ramp up to have these capabilities , the LSPs will not only have to invest in infrastructure that can support a ‘Cold Chain’ supply chain but also invest in technology platforms that can support the infrastructure .

Opportunities :

Especially if you are an LSP that wants to play the ‘Cold Chain’ game.

In order to win and retain customers with cold chain needs , these are some of the factors that you need to consider:

1. Be prepared to handle aggressive SLAs – Delivery Times and Quality Standards

2. Be prepared to provide ‘End to End’ traceability of perishable goods within your supply chain . Web portals for customers and their customers to track where their goods are and how long before it arrives at their doorstep is a great way to instil customer confidence .

3. Make QI your big differentiator and make it easy for your customers to handle product recalls if the proverbial ‘Shit ever hits the fan’ .

4. Invest in a WMS (warehouse management system) that is built for the cold chain business . With a large repertoire of functionality handling key areas like , Expiry , best by dates capture , Shelf life management , FiFO , FEFO , temperature controlled putaways…etc .

5. Better collaboration with your transport partners by having tighter integrations with their own technology platforms .

6. Invest in a EAM (Enterprise Management System ) that will help you manage and maintain your cold chain infrastructure (Refrigerated Facilities , Refrigerated trucks, Refrigerated Pallets…etc) in a timely fashion .

7. Put emphasis on cost reduction to increase margin by focusing on the KPIs of every aspect of your Cold Chain . A typical analytics tool with the capability to not only access data from your own supply chain but also all your partners will will give you greater visibility while allowing you to make better decision and be ale to to react faster to unforeseen events .

Summary :

Ecommerce and a new generation of customer tilting towards fresher food options are now changing how manufacturers , food processors and most importantly their outsourced LSP partners operate and make bank . A tweaking and re-digitization of existing supply chain operations is now due .