Completing the cold chain: a conversation with Stein van Est, Head of Fulfilled by Maersk – Europe
Maersk has ambitious plans to help bring together a fractured but rapidly growing cold chain market
Keeping your cool in the cold chain is not easy. Every delay or transport issue could mean a complete consignment is lost. With demand expanding rapidly, there is a need for a more complete overview of the cold chain and the capacity to be dynamic in getting goods to market.
Following on from our in-depth white paper on building a sustainable cold chain, which you can download for free here, we spoke with one of Maersk’s top cold chain experts in Europe - Stein van Est - to get their view on how this can be achieved.
This interview has been edited for length, clarity and continuity.
Alex, Hadwick, Head of Research, Reuters Events, Supply Chain
What are the structural issues in how cold chains are structured now versus what is required by the market?
Stein van Est, Head of Fulfilled by Maersk – Europe
What you'll see in the white paper and in the market today is that there's an increased interest in storing cargo in temperature-controlled environments due to health and safety requirements and a stream of new products entering new markets.
So, in general, there's an increased demand for temperature-controlled storage, but the capacity has not grown to accommodate that so far.
Part of that capability gap is the existing capacity is not always in the right locations to service new customer requirements. As a result, what you see today are reefer containers typically travelling quite far out from the port to an existing facility. Not only is the capacity there limited, but also the reefer containers tend to be tied up for quite a while journeying to these hinterland facilities.
At Maersk, we see a big gap in the current offering through port-centric facilities. Therefore, what we're doing is building and adding cold chain capacity very close to the container terminals.
Furthermore, existing facilities in some cases are not up to the latest environmental standards in terms of sustainability.
Let’s take a deeper look at that sustainability question, which has taken on greater urgency given the energy crisis and climate emergency. What are the issues inherent in older facilities?
Stein van Est
It basically comes down to three components. Firstly, if you look at the older facilities quite often the refrigerant used was ammonia-based, which is just not as good for the environment as new refrigerants that use CO2.
The second is that these all the facilities tend to not to be well insulated, so you have a relatively high energy consumption.
Thirdly, the energy requirements obviously come at an increased cost, especially as many of these facilities are still using fossil fuel energy sources, even as renewable sources become more efficient, notably solar power and wind turbines.
Has the energy crisis changed perspectives and spurred investment to improve efficiency in cold chains?
Stein van Est
From a Maersk company perspective, we aim to have all our warehouses carbon neutral by 2030 whether there's an economic sense to it or not.
However, we do consider the economic perspective and it depends very much on the location. We’re building a facility in Norway. There's not a lot of sunshine there, but we're also building one in Egypt, where it’s a perfect business case.
We do look at it regardless of the payback period, but typically one would say that for cold stores in general, it makes sense to fit them out with solar panels because of high energy consumption and many of the flat roof surfaces on cold chain warehouses are actually very well suited for it.
Let’s turn now to digital infrastructure. How are cold chains restricted currently?
Stein van Est
Physical capacity is only one part of the improvements that are needed. The other part is to create additional visibility and what we see in the market today is a lack of visibility between the different supply chain components.
To give a practical example: if you've got a container with certain perishables and something goes wrong with that container for whatever reason, you obviously want to ensure that you can make the right supply chain decisions to ensure that the cargo arrives at the final destination in time or in the right state. However, there are currently very limited digital tools available that allow proper decision making. Largely, you put it on the vessel and then you just wait for it to arrive somewhere else.
While we are pretty well-advanced industry-wide in monitoring the reefer container itself - we typically know where the container is, and have a download of the temperature settings and humidity – we still lack the translation of the data and the decision making based on that.
As a result, re-routing cargo, changing destinations and all of these kinds of things are not really there yet and it's mainly due to a lack of digital capabilities.
If we can shift towards that, the end result of is obviously higher quality produce, less food waste, and so on.
What is your approach to solving these issues?
Stein van Est
Our ambition in Europe is to build around 20 new cold store warehouses. The reason we're making these investments is because we firmly believe that having the physical infrastructure enables us to provide supply chain management opportunities to our customers.
As an example, let’s look at shipping grapes from India. The vessel sails with Rotterdam as the destination, which is the typical European unloading point for fruits, but gets delayed in the Suez Canal. One of the options we will have, but don't today, is that we would be able to discharge the container in Egypt, put it on a feeder into the port of Rijeka (Croatia), or Koper (Slovenia), and transport into the European market from there.
With that, instead of losing those six days or so of transit time shipping around Europe and into Rotterdam, you put it into either the same market, but via a different route, or decide these perishable grapes are simply not going to sustain another six days, so we need to sell it into a different market, changing it from the Netherlands to Italy, for example.
Effectively, what we are aiming for is to offer our grape-exporting customer in India entry into the European market regardless of what the port is eventually going to be.
As you mentioned, the digital will be key alongside the physical assets, so what do you need to execute this vision and how will that look?
Stein van Est
It will be even more critical in the future to really understand exactly where the inventory positions are across the board. That means that all these facilities and all of these supply chain components need to be linked up. We need to know exactly how many pallets do we have on a vessel underway way? How many do we have in this facility or that facility, so that we can balance everything out and fulfill the customer requirements in terms of moving so many pallets to a certain customer in a certain location?
That goes the other way as well. By gaining a lot of visibility and using all of this data, especially on inventory positions, we can enable our customers to react much faster to market circumstances.
That matters because for any time-sensitive good, it's critical to have a very detailed and granular approach to know what inventory do I have in all the facilities I'm working with? How can I supply my customer with enough volume? How much volume is on its way? How can I ensure that I can then fulfill this requirement, but also potentially my other customers’ requirements?
That visibility is completely unavailable to anyone at this point in time.
It’s clearly a very ambitious plan. What kind of timescale is Maersk working to?
Stein van Est
Our plan is to have the infrastructure built in the next three-to-four years. Construction is ongoing at seven locations at the moment, and we have a number of other projects lined up. Then the digital platforms are also being constructed and rolled out. We aim to have the ability to carry out these dynamic operations in enabled locations in that three-to-four-year timeframe and then the horizon to realise our complete vision is 2030.
For more on the evolution of cold chain, download the white paper here.