Can cold chain keep up with hot demand?
Cold chain was already under pressure from changing consumption patterns and now must handle the most critical and sought-after product of 2021: COVID-19 vaccines. We look at how it is handling the load
Cold chain is under more scrutiny than it probably ever has been, as a complex 2020 transitions into a 2021 of continued, heightened demand. The most intense segment of this will be the transportation and storage of the new COVID-19 vaccines, which require specific conditions to maintain their shelf-life, and thus efficacy.
Running alongside this is driving fulfilment across some hard yards in the grocery space. Distributors need to get cold chain goods to a profusion of consumers across the costly last mile, as demand has transitioned away from businesses and towards our homes.
So, how will the sector juggle competing demands and costs in 2021?
Cold chain goes hot in 2020
It is worth stepping back and taking a moment to take stock of what has happened in the last year within cold chains.
When it comes to the prior 12 months, cold chain was like most other supply chains: Deeply affected by the shifting conditions brought about by the pandemic. However, it has had to cope with an added layer of complexity in juggling the sudden shifts whilst maintaining product integrity across different temperature regimes, at a time of heightened health concern.
Fortunately for cold chain operators, the sweeping effects of COVID-19 largely brought about more demand for their sector.
As lockdowns came into effect, demand was suddenly jolted “Taking volume and demand out of the restaurant, food service channel and driving it more towards retail or grocery home delivery,” says Jessie Gates, Director – Supply Chain Solutions for supply chain consulting company Envista, but at an enhanced level as consumers looked to stockpile long-lasting frozen goods.
Angie Hansen, Director of Communications & PR for cold chain giant Americold, agrees that “Demand remains higher on the retail side than food service.
“In 2020, due to the COVID-19 pandemic, we saw smaller household gatherings and fewer large parties,” she notes.
The difference this time is that there were many points of ripple. Just about every economic region created a ripple across the rest of the globe
Although a player of Americold’s size could leverage a “Portfolio diversified by geography, customer, commodity type, facility type and node in the supply chain,” to “reduces volatility from shifts in consumption behaviour and specific commodity disruptions,” this wasn’t the case for everyone.
“What we saw happen, again around a Black Swan event, is the lack of supply chain preparedness, resiliency and risk management,” says enVista Vice President Geoff Milsom.
This was magnified in this instance explains Milsom. “Usually, they're isolated in one part of the world [and that] that has a rippling effect throughout the rest of the world. The difference this time is that there were many points of ripple. Just about every global economic region created a ripple across the rest of the globe,” which “showed that most companies, while they might have done things like diversify their supply base [and] have theoretical redundancy in supply, they really weren't ready for this type of event.”
Supporting a vaccine very much in demand
Just as cold chains began to adjust to the new reality of the pandemic’s demand patterns in their typical business lines, vaccines were rapidly becoming the next big ticket on the horizon.
Currently, vaccines seem to be the most likely means to reach an escape velocity from the effects of COVID-19 and reduce its global impact, creating an enormous wellspring of demand. However, this is easier said than done, as vaccines are temperamental in their storage and transit requirements.
They need specific temperatures to retain their structures and keep their ability to create an immune response when finally delivered. Indeed, it is estimated that a huge quantity of vaccines are wasted each year as a result of falling outside these conditions before use, with the WHO believing that it could be more than half of pre-pandemic production levels.
For example, AstraZeneca and Moderna’s vaccines require standard refrigerated temperatures to be preserved, ranging from 2oC to 8oC, and can sustain several days outside of this.
There are many facilities that aren't really sure what they're getting as far as the vaccine, because different vaccines require different cold temperature requirements
However, one of the most promising vaccines from Pfizer requires an even more stringent regime of -70oC and can only be kept in a standard refrigerator for a few days before losing efficacy. This may become even more important as the mRNA technique used to create this vaccine makes it one of the more adaptable in the face of virus mutations.
This has generated urgent demand within healthcare for refrigeration but major difficulties in serving their needs.
United Low Temp Storage, a US-based start-up supplying refrigerated storage, is on the frontline of this, and sees complexity both from customers still figuring out what they need and the industry trying to supply storage.
On the healthcare provider side, “There are many facilities that aren't really sure what they're getting as far as the vaccine, because different vaccines require different cold temperature requirements,” says company CEO Denys Karia. “Just based on that, there are quite a few facilities sitting there unsure of what exactly they need at this point, and the states are still working through the whole communication process of really letting them know what's required.”
Shipping times from these manufacturers are very, very long because they're stretched so thin. They're pretty much at capacity
Henry Patterson, one of United Low Temp Storage’s VP of Operations finds that “Since a lot of vaccination sites are hospitals, they're just very preoccupied with handling patients. So, it's, it's all unfolding, and it's kind of messy overall … with all the different manufacturers of vaccines and the different requirements.”
Flipping over to meeting the demand “There's a lot of bottlenecks here domestically, with manufacturers that make these freezers,” says Patterson. “They have long wait times, and then the shipping from foreign suppliers just takes a long time.”
“Shipping times from these manufacturers are very, very long because they're stretched so thin. They're pretty much at capacity,” finds the start-up’s other VP of Operations Marcus Bunsness, but delays in deliveries for freezers are also arising because “it's tough for them to get product overseas into the hands of buyers as soon as possible [via] ocean freight,” which is snarled up at a number of major ports.
“There is a massive bottleneck on the western coast of the United States that any company that gets domestic products into the states is experiencing right now,” explains Bunsness.
With the massive bottlenecks from ocean freight, it's a huge opportunity for freighters to get the distribution channels to run through the air
The three therefore founded the company, in order to meet demand in such difficult times. Indeed, such is the restriction from this port bottleneck that the company has found it cost-effective to air freight in freezers from where they are usually made in Asia-Pacific. “We're able to fly in some of our merchandise into the Minneapolis St. Paul Airport here in Minnesota, and also work with ports on the eastern coast of the US and also ship up the Mississippi.”
Bunsness believes that “With the massive bottlenecks from ocean freight, it's a huge opportunity for freighters to get the distribution channels to run through the air.”
Their experience illustrates the complexities at hand and how this will continue to be an unfolding challenge throughout 2021 that will require a coordinated effort from public bodies, cold chain suppliers and shipping handlers to overcome.
Taking a more flexible approach in the future
As with so many other supply chain segments, the lessons are to be found in adaptation, flexibility and visibility, which apply especially so for cold chain due to its specific requirements.
We definitely saw our customers in the cold chain having more difficulty dealing with all the changes in supply and demand
“As the equipment requirements get more specialised with respect to warehouse distribution and transportation, capacity becomes more and more of a problem, and in the pandemic things requiring cold chain went up in terms of how much stuff was moving, and at smaller quantities further downstream to end consumer,” notes Milsom. “So, we definitely saw our customers in the cold chain having more difficulty dealing with all the changes in supply and demand.”
Significant long-term adjustments will need to be made as the appetite from consumers to get more deliveries made direct to their door is not going to fade after the pandemic is over, and this carries a notable resource burden. “What that does is it shifts the average shipping characteristics from a transportation perspective from very large truckload volume or … reefer shipments characteristics to package level characteristics,” says Gates.
An additional way that we improve efficiency and meet the needs of food manufacturers and retail establishments is through automation
“That draws capacity constraints, from the parcel delivery folks perspective, and it also changes the appetite for commercial real estate and the labour market, because you need a lot more labour to put into those types of outputs … moving more labour upstream in the manufacturing or cold chain,” as well as down towards deliveries to consumer residences.
Hansen says that for Americold they are finding that “An additional way that we improve efficiency and meet the needs of food manufacturers and retail establishments is through automation. We’ve recently announced construction of three new highly automated facilities that we’re building for two of our customers— Ahold Delhaize and ConAgra.”
One big place we saw folks either successful or now sort of licking their wounds and coming up with new strategy around is around their data management in their IT infrastructure
Facility automation will be important to the future of cold chain, as will investment into the supporting IT.
“One big place we saw folks either successful or now sort of licking their wounds and coming up with new strategy around is around their data management in their IT infrastructure,” warns Milsom.
He gave an example of one of their customers, a wholesaler that utilises cold chain in their food distribution who “Fortunately had gone through a digital and physical transformation at their facilities. When restaurants, hotel, casino and sporting event [clients] closed, they quickly pivoted to a direct-to-consumer model. The only reason they can do that is because they had the front-end customer systems – the master data management and systems integration set up such that they can go direct-to-consumer and do grocery home delivery. That isn't their primary business strategy for the next decade, but it got them through six or nine months of potential devastation as their primary customer channel was disrupted.”
It's really about how are we able to remain flexible with our integration approach, such as if we change vendors, or if we change logistics service providers … how fast are we able to keep up from an integration standpoint
The new cold chain model will be one with the tech that enables companies to react very quickly and service different types of customers, believes Milsom.
In Gates’ view, “It's really about how are we able to remain flexible with our integration approach, such as if we change vendors, or if we change logistics service providers … how fast are we able to keep up from an integration standpoint, so that we're feeding our customer base with information that's timely and accurate and reliable?”
That is reinforcing “A continued drive towards visibility all the way to the point of receipt,” observes Milsom, “and I don't just mean down on the map visibility, I mean estimated time of arrival, current temperature.”
For Gates, the key for cold chains will be in their ability “To consume that information from their systems faster and more reliably, such that they can quarterback that information to the consumers in a consistent, reliable manner.”