Posted on September 1, 2020 · Posted in Industrial / Flex, Retail

Frozen foods are in vogue, which should come as no surprise to anyone.

Amidst the ongoing pandemic, health concerns are making consumers hesitant to return to in-restaurant dining and economic uncertainty has them gravitating towards easy-to-cook and cost-effective alternatives.

In fact, frozen food sales were up significantly in March and April of 2020, with 86% of consumers sharing that they had bought frozen food, according to the American Frozen Food Institute. Importantly, 7% of consumers who have purchased frozen foods since the onset of COVID-19 in the U.S. said they did not (or very infrequently) purchased frozen food items pre-pandemic.

But supply chains for frozen food have some of the biggest challenges in the food industry — as its popularity grows, cold storage facilities are feeling the pressure to keep up. Traditionally, cold storage facilities are either run by the manufacturer or public refrigerated warehouses (PRWs), providing services that efficiently (some more so than others) deliver frozen food to grocer retailers.

But even before COVID-19, facilities were being strained due to unfavorable working conditions (typically -10 to -20 Fahrenheit in the warehouse), a tight labor market and ongoing concerns over employee safety. The pandemic has only exacerbated these issues, resulting not only in grocery shelves empty of essential products, but freezer cases without frozen foods. Similar result, yes, but the supply chain challenges limiting frozen foods are not the same as those keeping perishables off of shelves.

Cold Storage Warehousing: Frozen in Time

Historically, PRWs have largely functioned as smaller, family-operated businesses with short-term “handshake” agreements with clients that make it difficult to commit to longer term plans. These agreements were advantageous for grocers, but not so much for the PRWs who had to remain flexible handling products at different temperatures, storing and handling a variety of pallet sizes on demand.

COVID-19 brought new pain points for PRWs — more frequent (yet smaller) orders and delivery inconsistencies. For example, instead of supplying a full pallet of a single product to a warehouse, PRWs are now delivering a pallet with multiple products directly to a store. Such smaller orders increase labor requirements and drastically changes transportation options.

Outdated software is also a sore spot for PRWs, despite up-to-date technology being essential to manage inventory visibility, accuracy, order fulfillment speed, quality assurance and productivity. Still, there has been limited software investment among PRWs (both before and during the pandemic).

Another issue is limited infrastructure for growing e-commerce. Global real estate services firm CBRE recently explored the relationship between e-commerce grocery growth and cold storage warehouse capacity, suggesting that an additional 75 to 100 million square feet of industrial freezer/cooler space will be needed to meet the demand generated by online grocery sales in the next five years.

Scale Through Automation: A Sustainable Path

One way to navigate these challenges is by implementing automation designed to scale with operations. In one recent example, food retailer Ahold Delhaize announced an integrated temperature-controlled warehouse solution that includes goods-in-receiving, automatic delayering, tray handling, sortation, automatic pallet building, dispatch trailer sequencing and ergonomic case picking.

Automated Storage and Retrieval Systems (AS/RSs) are capable of handling pallets, totes, trays, bins, and cartons in ambient, chilled or freezer environments in racking up to 100 feet tall.

But what does this automation actually look like? A great example of automated technology for cold storage facilities are autonomous fork-lifts or Automated Guided Vehicles (AGVs) for transporting and storing pallets. AGVs can replace manually operated forklift trucks storing and retrieving pallets in the harsh cold storage environments. Another more traditional automation technology to consider is Automated Storage and Retrieval Systems (AS/RSs), which are capable of handling pallets, totes, trays, bins, and cartons in ambient, chilled or freezer environments in racking up to 100 feet tall.

For some, automation is immediately equated with the replacement or removal of jobs. And it is true that it does replace jobs manual labor jobs within a cold storage facility. But these are positions that PRWs either cannot find applicants to fill or have extreme difficulty retaining, with the labor turnover rate averaging 32.6% in 2019, according to the 2020 IARW North American warehouse survey. In the end, automation can turn out to be a net job producer, creating new opportunities for engineers and software developers as companies develop new divisions of labor between people and machines.

Next Steps: The Importance of Automation

It shouldn’t have taken a global pandemic to focus the discussion about the future of refrigerated warehousing. But it did. And now that the conversation is underway, PRWs must come to realize how important automation is from the warehouse to the last mile of delivery.

Of course there are factors unrelated to technology that PRWs will need to resolve, such as working toward longer-term contracts with food manufacturers and grocers, and the financial stability that would come with them. But clearly without a move toward automation, PRWs will continue to struggle to fill demand, mitigating profits and stakeholder returns.

 

Source: Forbes

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