August 17, 2015

Changes in consumer demand, buying patterns present challenges

Growers, distributors, wholesalers, and retailers know that when it comes to demand for fresh produce, consumer behavior has been changing.

They want it fresh. And local. If it’s not available locally, they still want it. All year long.

Cold Transport“Produce transportation has always been complicated because it’s seasonal,” said Kenny Lund, vice president of operations for the Allen Lund Co., a national third-party transportation broker with headquarters in La Cañada, California. “And instead of those seasons being the U.S. and kind of a few countries, now it’s all over. The Holy Grail is a consistent produce product, year round.”

That means perfect peppers, he said, and a bin full of the same-size watermelons at any time of year. Growing in greenhouses is expanding – especially in Canada and Mexico, Lund said – and those who are doing it are doing well.

Also in Mexico, high-end farming is on the rise and there’s a completed highway now that makes it possible to transport product quickly into the McAllen area of Texas, Lund said. More and more produce is coming from China, Chile and South Africa, and product is being sourced from all over the United States now, too.

What Global Means

“Our market is international,” said Dan Vache, vice president, supply chain management, for the United Fresh Produce Association. “We ship internationally. We receive internationally. It has changed the trends.”

In a Berlin Fruit Logistica 2015 report, Anne Maurier, global marketing manager for the Easyfresh global reefer logistics supplier, indicated that the world fruit and vegetables market grew by 25 percent over the last five years. By this year, she reported, the market is projected to reach more than 690 million tons in volume, up 5 percent compared to 2010.

While about 50 top companies account for 70 percent of revenue in the global fruit and vegetables market, she reported, that’s going to change – and become more complex – with new producers and farming trends, innovation, new production and consumption areas, food security, food waste policies and the consolidation of shipping lines.

Growth in the logistics industry will no longer be driven by exports from Asia to North America and from Asia to Europe, she said. It will come from elsewhere and be more fragmented, unpredictable and volatile.

At the same time, meeting consumers’ requirements at multiple locations with multiple transport modes at different times requires a flexible supply chain.

“The fresh produce industry, just like the seafood and other commodities requiring temperature-controlled environment, is very much linked to the concept of globalization,” said Rafael Llerena, Easyfresh CEO. “Emerging markets, being new consumption or production areas, are creating a complex matrix of cargo flows that only a broad or global perspective can cope with.

“As an example, cross-trades, as a consequence of a bad crop or a sanction or ban, shift the cargo flows rapidly. A prompt response to these sudden shifts, linked to local know-how, is the answer to construct reliable reefer transport solutions.”

For those loads coming from outside the United States, the cold chain can be fragmented. Llerena said there’s a new normal when it comes to the refrigerated supply chain.

“Shipping lines use very expensive reefer equipment,” Llerena said. “This needs to have the quickest turnaround to maximize revenues.

“Likewise, containerized inland transport is very expensive, being a collection or a delivery. Therefore, utmost efficient cross-docking stations at terminals shall benefit both liners and customers.”

Global transport has also been affected by some shipping lines consolidating and fewer scheduled/direct ports of call, Llerena said. The volume of dry cargo can lead carriers to make choices that might have a negative effect on refrigerated traffic.

“At this stage, we seek the quickest way to link origin and destination, which, strange enough, sometimes does not mean that the shortest seaborne transit time is the adequate one given other bottlenecks,” he said.

And mode of transport has to vary, depending on the commodity.

“Citrus and that sort of thing, you can put on a slow ship,” Vache said. “Berries and that kind of thing, you can’t … you’ve got new technologies (smart containers with electronic tracking systems) coming out there. They’re investing money in these big vessels, they have tracking sensors on those vessels so you know what’s going on, you know the temperature inside, you can contact the ship and let them know if there is a challenge with a specific container.

“It’s collecting that data in real time, which is so important to everybody whether you’re the seller or buyer or transportation company.”

Back in the USA

On the ground in the United States, Lund said, the new normal can mean consistency, in that he might work with a supplier who’s moving a particular commodity year round rather than one or two times a year. But consistency goes out the window when it comes to sourcing.

“I know what their parameters are, what their needs are,” he said. “But they’re sourcing from all over the place, so it’s inconsistent as far as what we’re picking up. There’s a lot more product, a lot more SKUs.”

And refrigerated transportation is still dominated by “small trucker guys with five trucks or less,” said Lund, noting that his company alone works with 22,000 trucking companies and sets up 700 trucks each month.

Put all of those factors together and it can get complicated. Allen Lund Co.’s answer was to develop customizable transportation management system (TMS) software under a separate business entity – North Carolina-based ALC Logistics – that is designed specifically for produce. Other companies have developed similar products, he said.

“That’s the hottest thing in logistics, when you go to the trade shows, is the TMS systems,” he said. “Several have been built by transportation companies like us … built by people who use it and understand transportation.

“So we’ve had to do complex supply chain stuff tying in with warehouse companies, cold chain monitors, tying in with receivers and retailers as well as growers of product. We’ve kind of been that conduit, so we’re a natural to kind of fill that void.”

Lund said it’s basically communication software.

“They can tender loads to their transportation providers, they can see where loads are more efficiently rather than by phone calls, they can spot bid – send to 30 or 40 truck lines, automate the payments, so it allows transportation departments for shippers to be much more efficient and find savings,” he said.

“It allows you to do a lot of stuff on the fly. All of a sudden, you get 20 loads out of McAllen you’re not used to, and you can spot bid to your suppliers.”

The software also makes it possible to run a variety of scenarios, Lund said.

“Should I bring the broccoli out of Mexico or central California – do those ‘what-if’ scenarios to see what is most cost effective,” he said.

Real-time monitoring on trucks continues to be an essential tool for refrigerated loads, said Vache, who also runs a supply chain logistics council through United Fresh with about 40 members.

“Everyone in that supply chain can keep an eye on where that product is,” Vache said. “I think we’re getting better at that.”

Appointment systems also offer a more efficient alternative to, say, having a driver arrive to pick up a load only to learn it’s not there and he has to come back in six or eight hours, which translates to down time and lost money.

“These new management systems allow that communication so that a driver can be at that location at 1 p.m., perhaps be loaded in that hour, get down the road for another pickup or get on the freeway to get to the distribution center,” Vache said. “At the receiving end, that distribution center is communicating with the buyer at the transportation company.

“They’re getting better and better because of the ability of everyone to be connected. It wasn’t that long ago that a trucker had to stop and find a pay phone.”

Down the road, trucks that can be put on autopilot for part of a trip, enabling a driver to sleep, may be in the cards.

“They’re already doing it in the military,” Lund said. “It’s technology that’s coming to be in use very soon – I think in five years.”

Bottom line? It’s about making sure the refrigerated supply chain flows consistently.

“That’s what everybody is trying to do – maintain the temperature and get it to the market quickly,” Vache said. “How do you remove the roadblocks to that? That’s what everybody’s working on.”