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Food Producers Look to 3PLs to Combat Rising Rates

Monday, May 12th, 2014

A recent article in Inbound Logistics reports that overall food costs in 2014 are expected to rise by 3.5 percent as the result of drought and changing habits in the domestic food chain. That means that food producers will either need to pass the price increase on to consumers or find alternate ways to cut costs in their current supply chains. In favor of staying competitive, many producers are choosing the latter.

As anyone who works in this industry knows, cold storage comes with its own unique set of challenges. Even a momentary lapse in temperature control or quality could mean serious consequences in for both the manufacturer and the consumer. With such sensitive products, how can distributors save money without cutting corners? David Stuver, president of the world’s largest cold storage company, Americold Logistics, says that innovation is the answer.

To battle rising energy costs, many warehouses are trying to go a little greener. Even small changes, such as switching to LED lighting, can work towards reducing costs. Automation, however, holds the greatest potential for savings. Currently, however, most warehouses in the United States have not incorporated a high degree of automation into the cold storage chain. The increased complexity inherent with most refrigerated products (more flavors and sizes per product mean more SKUs to contend with) makes automated picking extremely difficult. As technology advances, the high initial cost of incorporating automated systems into the cold chain will become less of a financial obstacle, and the potential for trimming labors costs will be significant.

In the meantime, many warehouses are offering value-added services to food producers in order to help drive back rising costs. CWI Logistics, for example, has more than 15 years of experience with multi-temperature contract packaging for food-grade products. With the ability to optimize for both short and long runs, CWI Logistics can convert “raw” product into re-packed bundles customized for service distributors or larger retailers. By offering value-added packaging services later in the supply chain, producers can shave off labor and transportation costs by consolidating supply chain legs, as well as mitigate the risk of tampered packaging or exposure to temperature change.

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