Cold Storage Heats Up

The business is growing stronger, along with greater demands for services.


For years, operating public refrigerated warehouses (PRWs) was a routine and stable business. It was a model based on full pallet storage and moves in and out of the facility.

But times have changed. Rising fuel and energy costs make refrigerated/frozen warehouses expensive to operate for many food retailers and manufacturers who are also being challenged by shorter time-to-market cycles. As a result, they are turning to PRWs and demanding more services.

"It is no longer just storage," states Bill Hudson, president of the International Association of Refrigerated Warehouses (IARW), Alexandria, VA.

So the good news is that the market is very strong for quality warehouse facilities that offer value-added services including case picking/order assembly and freight consolidation and distribution. Experts say the current market also demands services such as inventory tracking, recall efforts, exporting and transportation services throughout the cold supply chain. Customers today are simply looking for and expecting PRWs to offer more.

The bad news is that those who won't or are unable to provide extra services may—ironically—be left out in the cold. "I am seeing companies push things to the warehouse that were previously thought of as a manufacturing duty such as blending three boxes into a combined mix," says Jack Ampuja, president of Supply Chain Optimizers in Buffalo, NY. "Now they are getting the warehouse to do it right in the freezer."

Ampuja adds that the big problem PRWs must get over is their reluctance to introduce new concepts and merely look for the customer or manufacturer to offer ideas. Manufacturers, on the other hand, often complain that PRWs do not do enough for the money.

For their part, PRWs are indeed picking up the pace and providing new services. For example, services today through Interstate Warehousing/Tippmann Group, Fort Wayne, IN, include order fulfillment and shipping within eight hours from receipt of order, in-house continuous replenishment services for more than 60 percent of customers and product freight consolidation services.

"Shipper load and count has become more of a standard in the industry, yet we have less customer service reps than we did just a few years ago," says Steve Tippmann, executive vice president." Our WMS manages most of our customer requested reporting and information in real time, making fax machines a thing of the past."

What's Prompting Change?

A move towards the new PRW has been occurring for the last decade and has really picked up steam in recent years. Due to industry growth as well as the short shelf life of products, more effective inventory control is required. Factors such as high service levels, lower cost, faster inventory turns, quicker reporting and the ability to provide customers with faster and more efficient service have also prompted change.

The push for change also comes from the consumer. Discount retailers such as Wal-Mart have become very popular with consumers and this has resonated down to the PRW level. To compete, everyone in the supply chain must drive costs down using their innovation and creativity.

"Cost cutting is a factor," acknowledges Ampuja. "But it is also defining who you are. A manufacturer doesn't necessarily know how to run a warehouse. Companies are now starting to realize their core competencies, and thus their need to delegate to experts. But it all comes down to cost control. They want someone to do the task for less money."

Additionally, the frozen and refrigerated food categories for both the retail and foodservice industries are growing rapidly.

Organic and natural food have already grown over 20 percent in the last few years and are poised to make a grand entrance into the frozen and refrigerated foods section of the supermarket. A manufacturer doesn't necessarily know how to run a warehouse.

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