Perhaps the most challenging part of a retailer's supply chain is the cool chain.
That's the part responsible for transporting, from the producer to stores, the highly perishable and time-sensitive products that are increasingly vital to food retailers. The value of perishable products depends in no small way on their getting to the store in pristine, ripe condition.
So it's no surprise that retailers are investing a lot more in upgrading their cool chains. Indeed, some retailers, like New York online grocer FreshDirect and perishables-oriented U.K. retailer Marks & Spencer, have separated themselves from their competition with their emphasis on world-class cool chain logistics.
Cool chain excellence will be the main topic at the IARW-WFLO (International Association of Refrigerated Warehouses and World Food Logistics Organization) Annual Convention and Trade Show scheduled April 30 to May 5 at the Hyatt Regency Lake Las Vegas, Henderson, Nev.
The latest example of a major cool chain upgrade comes from Price Chopper Supermarkets, which is building a new $15 million state-of-the-art frozen foods distribution center in Rotterdam, N.Y. When it opens at the end of the year, the 152,000-square-foot facility will service frozen food distribution for all of Price Chopper's 109 stores in six Northeastern states, replacing two existing freezer warehouses in Colonie and Waterford, N.Y.
Price Chopper was prompted to build the new facility based on its growth projections. Its two existing facilities are operating at or near capacity, and "we project growth on top of that," said Mona Golub, spokeswoman for Price Chopper. The new DC, which can accommodate a 25,000-square-foot expansion, will be larger than the other two combined.
Another factor is location. The new frozens DC will be close to Price Chopper's main office and warehouse in Schenectady, N.Y., whereas the two current facilities are 20 to 30 miles away. The proximity of the new DC will "minimize distribution and transportation costs for us," said Golub. Currently, the chain has to shuttle frozen-food trucks from the main DC to the satellite facilities, rather than maintain all of its vehicles in one spot.
As important as the size and location of the DC is what Price Chopper is putting inside the facility. This includes a custom-engineered ammonia refrigeration system featuring screw compressors and variable frequency drives, said Golub. In addition, it will be monitored by an energy management system "to assure us of maximum efficiency and optimum performance, she said.
Rather than build a new DC, Associated Grocers of the South, Birmingham, Ala., converted 40% of its dry grocery space to perishables in fewer than four months at its 420,000-square-foot DC. At the revamped facility, open now for more than a year, refrigerated and frozen space increased by 50% without boosting the cost of utilities. It also includes a "swing room" where the temperature can be adjusted from 55 degrees to 25 degrees.
AG of the South worked with Tippmann Group, Fort Wayne, Ind., on the project. Tippmann has also worked with a number of other major food retailers and wholesalers on frozen warehouse development, including Safeway, A&P and Marsh.
In some perishable facilities that Tippmann has designed, banana rooms are undergoing change., said Steve Tippmann, senior vice president, Tippmann Group. Rather than using tarps to direct air flow through bananas for ripening, new computer-controlled technology, running off a refrigeration system, can accomplish that more effectively, said Tippmann.
One of the most advanced perishable DCs in food retailing is operated by FreshDirect, Long Island City, N.Y., winner of SN's 2005 Technology Excellence Award in the online sales category. Its DC contains 12 temperature zones, ranging from a 14,000-square-foot freezer area (at minus-36 degrees Fahrenheit) to a kosher meat room at 33 degrees.
London-based Marks & Spencer has attracted much notice for its radio frequency identification project, which is aimed at speeding delivery of perishable products through its DCs and to stores. Even apart from the RFID project, Marks & Spencer, winner of SN's 2005 Technology Excellence Award in the international retailer category, has demonstrated dedication to a superior cool chain -- not only at its own DCs, but also in the process of getting products delivered to them.
Raul Villavicencio, general manager, Hellmann Perishable Logistics USA, Miami, described Marks & Spencer as being in the "vanguard of retailers who are deeply concerned about the importance of maintaining a cool chain for their perishable products from origin to shelf."
In a presentation given last year for the Cool Chain Association in Billund, Denmark, Phillip Symons, produce category buyer for Marks & Spencer, outlined the steps he believes suppliers should take to ensure the best possible cool chain. Produce, he said, should be "harvested while it's cool, cooled in the field, and transported to the pack house regularly." In addition, produce should be "blast or hydro cooled, transported in refrigerated transport, and packed in lined containers with dry ice." In air transport, product should be flown chilled, and unloaded to a refrigerated truck for transfer to an airport facility.
Communicating with SN recently, he said, "We have many instances of this happening across our supply base, but also areas where it needs to improve." Marks & Spencer is also trying to get suppliers to "further reduce total temperature hours and temperature swings wherever possible." The investment in temperature management, he added, "pays for itself many times over in reduced wastage, better product life and quality."
Symons also pointed out the need for a change in the cost structure for procuring perishables. "Freight and logistics are by far the largest cost component of overseas sourced perishables," he said. "These services are bought very inefficiently across a huge range of suppliers." Symons advocated a more streamlined procurement process by which retailers would buy direct from the farm. In addition to economies of scale, "this should give retailers full transparency and better costs."
Marks & Spencer does not currently procure produce in this manner, but there are retailers who are already buying overseas produce direct from the grower, noted Symons. "I see this as a development that will gather momentum over the next few years."