Meeting Growing Consumer Demand through a Well-Managed Cold Chain
There is a growing consumer trend for fresher products and fresher ingredients. In fact, a study from global management consulting firm ATKearney, Chicago, found that over the last five years, fresh prepared foods are a $26 billion market. Quick-service restaurants (QSRs) like Chipotle and AuBon Pain have built their brands around fresher ingredients, with other QSRs moving toward freshly prepared food offerings to cater to consumers seeking healthier alternatives.
Consumers increasingly perceive value in refrigerated foods vs. more non-perishable, shelf-stable items. Therefore, refrigerated offerings have become a must-have vs. a nice-to-have for many QSRs. However, this increased demand for fresh foods is impacting the cold chain and its temperature-controlled segment.
Well-run supply chains require effort, but they are key to ensuring that customers have what they need when they need/want it. These principles hold true for the cold chain, however there are additional challenges and complexities associated with moving refrigerated foods along the supply chain.
Those managing the cold chain need to consider factors such as:
· Increased costs from the use of refrigerated vehicles;
· Compressed timeframes from farm to fork due to perishability, meaning that execution time is shortened;
· Reduced ability to rectify planning errors or unforeseen changes in supply and demand due to the shortened timeframe;
· Heightened focus on food safety and quality assurance processes due to the perishable nature of products in the cold chain.
The importance of planning and coordinating with different parts of an organization and its partners can make or break an efficient cold chain. Adding a perishable ingredient such as fruit to an existing product is not as easy as slotting it into the existing supply chain. Those managing the cold chain need to be brought into new product development, marketing and sales discussions to provide insight into the costs and feasibility of moving specific ingredients and products through the cold chain. Supply chain managers can begin to plan and adjust their supply chains to ensure they have the right cold chain in place before new products are launched or ingredients are added. They also can plan the logistics of moving products along the chain and the various considerations that align with this process—from shipping containers, packaging and temperature control to transfer between transportation modes and storage.
Consider vegetables that need to be kept as fresh as possible. Refrigerated trucks have the capabilities to keep foods at their optimal temperature, however supply chain managers must factor in the number of stops a driver makes, which requires turning off the vehicle, time spent loading and unloading and time involved in switching transportation modes. With frozen foods, the challenges can be even greater, as ice cream cannot be transported through the same supply chain as potato chips; otherwise customers may unload the latest shipment of frozen foods only to discover a container of ice cream soup.
Execution, analytics and adjustments
Because the product and shelf life of refrigerated items is limited, fresh foods are required to move quickly through the supply chain, often in 14 days or less, from the point of manufacturing to the point of conversion and ultimately to the consumer. This compressed timeframe from farm to fork means execution time is shortened, and the ability to respond to events or unforeseen changes in supply and demand is lessened, while food safety and the necessary quality assurance processes are heightened.
To manage the cold chain effectively, supply chain managers need to be able to see supply and demand data throughout the entire chain, from suppliers all the way to the consumer facing outlets, and then share that data with their partners. If suppliers, buyers or transportation partners need to buy more of a product from one supplier and ship it to a specific location, or re-route fresh product intended for one area to another within this compressed timeframe, the data must be available in an almost real-time basis.
The other enabler of success within the cold chain is effective communication. While that may seem like an obvious statement, effective communication across functions within an organization and between partners can be a challenge. Given the compressed timeframes associated with cold chains, different functions must speak to each other to share their needs and provide insight on the supply and demand data they are viewing, as well as offer their expertise on how to best move ingredients and products through the distribution network. If a distributor responsible for moving finished products to QSRs sees that a product is selling well in one area but not another, he/she must communicate quickly with the manufacturer and other distributors to make adjustments. That may be as simple as updating information in a demand planning tool or may actually require placing a phone call.
Safety and quality assurance
The final complexity of the cold chain is the need for a heightened level of monitoring and quality assurance. Fresh and frozen foods can spoil quickly, and improperly stored and transported food can suffer from diminished flavor, thus becoming visually unappealing or even worse, unsafe to eat. Whether through temperature probes or real-time virtual monitoring and alarms, the cold chain requires increased and often dedicated quality assurance resources compared to the regular supply chain. Once again, the ability of all partners to see up-to-date and complete data is vital, as is the preservation of data in the event of a food safety issue or a recall.
The cold chain can be complex to operate, but the bottom line is that consumers want fresh. And, while any supply chain can have a significant impact on a company’s bottom line, if the cold chain isn’t managed effectively, the impact can be even greater than usual. The costs of wasted goods and the need for transportation modes that are more costly to operate mean the financial impacts of mistakes in the cold chain can be significant. However, when executed correctly and at optimal performance, the cold chain can provide a real strategic advantage in meeting an ever-growing consumer trend.