Cooling off Site
February 1, 2007
Cooling off Site
by Lynn Petrak
Storage of dairy products becomes a public affair with the use of third-party refrigerated warehouses.
Third parties get a lot of buzz these days, from independent experts who conduct quality assurance audits to consultants brought on to evaluate systems such as HACCP and regulatory compliance to those enlisted to set up integrated processing equipment.
Off-site experts are also called upon not just for the services they provide, but where they provide those services. Public refrigerated warehouses (PRWs) run by third parties, for instance, are utilized by many food and beverage suppliers, including dairy companies, for the storage of products at various points in the cold chain.
The use of PRWs by dairy companies exemplifies other organizational and operational trends across this and other related industries. For one thing, dairies have continued to consolidate, as have their customers in retail and foodservice, making decision making more integrated and the need for efficient storage and quick point-to-point distribution more important.
On another level, dairy processors squeezed for space and labor that are looking to outsource expertise and square footage have discovered that they’ve freed up time and space for other functions. Also, by going with a PRW, those that produce perishable products like dairy foods and beverages entrust their products’ safety and quality to others. During periods marked by concerns over energy costs, meanwhile, manufacturers look for value through shared temperature-controlled storage space.
Beyond the operational realities faced by dairy companies, the changing nature of the products produced in today’s dairy plants has also propelled processors to go outside their walls for storage. The expansion of extended-shelf-life products is one example, with inventory able to stay in the warehouse for a longer period of time than in the past. Shelf-stable dairy and dairy-based products, encompassing items like aseptic milk, and powdered ingredients also are suited for PRWs in lieu of on-site storage areas, depending on the product type and how it fits into the processor’s product line.
Although PRWs are not for all dairies and many still opt for on-site or private warehouses, there is a steady use of public facilities for refrigerated and frozen dairy products. “Dairy is a large part of our business at several of our warehouses. They [dairy operators] are great business partners,” reports Bill Daniel, spokesman for full-service, multi-temperature storage company Henningsen Cold Storage Co., Hillsboro, Ore.
Rick Kappmeier, operations vice president, Western region for the British Columbia-based VersaCold Group, which runs 73 several temperature-controlled warehouses in the United States and Canada, agrees that throughout the food industry, companies are going public. “Our sites are very busy and we have some receiving 30 to 40 truckloads a day of product. It’s not all necessarily dairy, but we do a lot of cheese and butter,” he says.
PRW providers concur that there is a confluence of factors that have led to the increased utilization of their sites. Jerome Scherer, vice president of national sales and marketing for Union City, Calif.-based United States Cold Storage Inc. (USCS), cites the changing nature of manufacturing itself and the demands of the retail and foodservice market. “Distribution today has become regional, national and even international,” he says. “Food manufacturers need to be able to forward their production to distribution centers that are located within their target market areas and by doing so, they add the value of availability to their product while positioning it for efficient order assembly and delivery.”
That changing terrain of the cold chain is also mentioned by Kappmeier, who says distribution methods impact the choice of warehousing. “It depends on how big of an area they service and on their proximity to their marker,” he says.
Not to be discounted is the increasingly competitive environment in which dairy companies products are working.
“Consolidation in nearly every segment of the frozen-food industry is creating new competitive factors, a radically different customer landscape and the need to collaborate and work closely with customers to reduce costs,” Scherer says.
Internal factors are also influencing the decision to move inventories out of a dairy company’s own location, Scherer notes. “There are faster turning inventories and the proliferation of new SKU’s,” he says. “And accuracy is more important than ever and on time delivery of orders is a must.”
Kappmeier also points to the forces pulling on dairy manufacturers that must juggle priorities for expansion and investment. “One of the main reasons would be whether or not they want to dedicate their scarce capital to growing their business or to bricks and mortar with expensive coolers,” he says.
For whatever reason they are going with PRWs, dairies have high standards when it comes to the care of their perishable products. “Dairy manufacturers — or anyone in the food chain, for that matter — are looking for consistent temperatures and safe environments and, because products may have a short shelf life, they re looking for people with the discipline to handle first-in, first-out requirements,” Kappmeier says. “They have a very disciplined approach to the supply chain.”
Daniel, from his perspective, says that in addition to stringent demands for quality control through proper temper and fulfillment, dairies are looking for other service and support from PRW providers like Henningsen. “Having the space available and keeping product is very important. However, having a PRW that can track product to the case level is important, too,” he says. “Dairy in general has a short life span and the PRW you store with must have experience with dairy products and understand how to manage date codes, proper rotation and hold requests.”
PRW providers, of course, do more than just offer square footage space. Warehouses rented by dairy manufacturers often feature the latest state-of-the-art elements, such as temperature controls, automated storage and retrieval systems, radio frequency applications and high-tech security measures.
At USCS, for instance, Scherer says that the company continues to invest heavily in technology. “We have been retrofitting existing facilities and adding new equipment to improve efficiency in refrigeration systems and materials handling,” he says. “We continue to grow, building additions at existing locations and expanding into new areas of the country to widen our national distribution capabilities.”
Currently, the company is constructing warehouses in Illinois, Texas and California, and working on blueprints for another new facility in Pennsylvania.
In addition to physically growing its warehouse presence in the United States, Scherer says the burgeoning use of radio frequency identification (RFID) technology by manufacturers, including some dairies that work with customers like Wal-Mart that require RFID tags on products or pallets, has not gone unnoticed by USCS. “We’ve developed real-time warehouse management systems using RF bar code and have implemented them nationwide,” he says, adding that product movement and related information is visible for PRW users via the USCS Web site.
At VersaCold, meanwhile, Kappmeier says that the company has invested in its own facilities and the pursuit of the latest technology. Recently, VersaCold finished an expansion of its facility near Houston and is making plans for other upgrades. On the data front, the PRW provider also allows user to access its inventory system via a Web site and has invested in radio frequency technology with voice pick features. “We are expanding that almost every day,” he notes.
As for trend of multifaceted services, VersaCold also offers other programs for its clients in the refrigerated or frozen food industry, including transportation “from soup to nuts,” Kappmeier says. In addition, the company works with retailers who use PRWs to pick product for their stores, another reflection of the blurring of the lines between processors, distributors and merchandisers.
Henningsen also has expanded its offerings beyond mere space. “Our warehouses are key, but at the same time, transportation for the final mile is a huge added service,” Daniel says. “This winter, we are rolling out a dedicated fleet at our Scranton, Pennsylvania, operation and we have an excellent carrier base at our Portland and Seattle operations to handle delivery to the end customer.”
Security is another matter on the minds of those who entrust their products destined for the U.S. food supply to PRWs. “We are very diligent, and it all starts in the hiring process in the investigation of employees,” Kappmeier says, adding that the company has boosted many of its security steps in recent years. Scherer, too, cites food safety and security as top concerns, and notes that USCS has put in place “elaborate” security measures in all facets of its facility operations and product tracking system.
To be sure, there are many other PRW providers in the U.S. who work with dairies to store their refrigerated, frozen and shelf stable dairy products. The International Association of Public Warehouses, based in Alexandria, Va., has several members around the country who specialize in temperature-controlled storage and supporting services for food businesses like dairy operations.
Keeping up with needs of those who use their facilities is a job in itself for those who operate PRWs, who face their own challenges of increased energy costs, transportation costs, labor strains and intense competition. “Demand changes on a regular basis and consolidation is huge right now and so the customer you have today may be totally different tomorrow, with different request and procedures,” Daniel says. “PRWs need to be flexible and able to make changes on the fly while making things happening in the background be transparent to the end users.”
Lynn Petrak is a freelance journalist based in the Chicago area.$OMN_arttitle="Cooling off Site";?> $OMN_artauthor="Lynn Petrak";?>