Much like Uber did to ground transportation and Airbnb is doing to the hotel industry, doorstep food delivery is disrupting the food supply chain with its promise of delivering everything from raw ingredients to hot-and-tasty dishes right to the consumers’ doorstep.
In a world where searching for ingredients, visiting a store for those goods, and then going home to cook meals is giving way to more immediate, on-demand options, the logistics industry has found itself in an interesting position.
And when consumers can get their favorite meals with the tap of a mobile phone, both cold chains and refrigerated warehouses must be able to adapt quickly to that level of order fulfillment.
“The cold chain industry is changing fast. Between the increased development and usage of temperature sensitive biologic pharmaceuticals and consumer preferences for convenient, fresh foods, the cold chain must adapt quickly,” Datex Corp., notes in its 2018 3PL Refrigerated Warehouse & Cold Chain Trends report.
The All-Powerful Consumer is in Charge
With more than 600 refrigerated warehouse operators across the U.S., the cold storage warehouse industry is dominated by the top 10 companies, which own 80% of the market. This trend is poised to continue, Datex reports, as the largest enterprises merge or acquire smaller cold storage warehouse operations.
Consumer power is a major factor dominating the cold chain, where convenience, wholesome food, and just-in-time delivery are converging and creating new supply chain challenges. The shift away from highly-processed foods with a long shelf life to temperature-sensitive perishable food products, for example, requires an adjustment in the food supply chain.
“Because consumers value convenience and fast delivery, there are added complications,” Datex notes. “From U.S. ports to distribution centers, 3PLs and privately-owned refrigerated warehouses, designing a cold chain that meets consumers’ needs can seem daunting.”
More fresh and chilled products are being ordered in smaller quantities and from a wider range of product choices, Datex adds, leading to a proliferation of new product development, product and packaging changes, and updates.
“The food and grocery industry is changing at breakneck speed, due to consumer buying habits and expectations,” Datex concludes. “The cold chain needs to change and must become as flexible and transparent as possible and that will take technology, forward-thinking business executives and investments in innovation.”
Feeling the Impacts
In Blue Apron and the Subscription Retail Supply Chain, Arc Advisory Group’s Chris Cunnane says consumers like the model for its sheer convenience. Suppliers, on the other hand, face some unprecedented challenges in the race to provide that convenience.
Ensuring that ingredients are kept fresh during the delivery process, for example, incorporates both storage and delivery. The last mile, warehousing expenses, and labor also present their own challenges for companies with these new food delivery models.
“With continued innovation, and more companies joining the subscription ranks, the market is poised to continue to put more control over the shopping experience in the hands of the customer,” Cunnane notes. “The big question is whether these companies have the supply chain to accommodate the change.”