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Time for an inevitable change in the global reefer logistics industry.

The price of doing the same old thing is far higher than the price of change

By Rafael Llerena, CEO Easyfresh. 

The price of doing the same old thing is far higher than the price of change. In fact, the world hates change, yet it is the only thing that has brought progress. Reefer logistics has initiated a path towards change. Slowly but surely, customers dealing with perishables are changing their thinking. Some retailers and few other players are driving this change.

Factors of change : Combined local and global expertise, unique but adaptable business model, brand as an asset and brand reputation, strategic alliances and common sense !

 

Dry cargo logistics is a rapidly evolving market; many factors are shaping the future of how to transport cargo during a challenging XXI century. On the contrary, reefer cargo is "more conservative". This fact leads to an obvious fragmentation of the cold chain. Grocery, seafood, meat, poultry retailers have the "muscle" and the need for a real U-turn. Certain reefer logisticians, like EASYFRESH (see www.easyfresh-logistics.com ), are gradually implementing a new culture within the global temperature controlled transport industry. This is done by designing specific "product models", adapting same to the different dynamics and maturity levels around the globe and adjusting those to the specific routes and customers' requirements.  Europe appears here as an adequate arena for change : European reefer cargo shippers and receivers are demanding first-class, efficient and mature logistics solutions. Consequently, the European cold chain is ripe for transformation and first-mover advantage is up for the taking. Time for "classic forwarding" or "usual or basic reefer shipping" should be over in some years, as it is already at its edge regarding cargoes not requiring temperature controlled environment.


Nowadays , hybrid expertise and intelligence-embedded cold chains offer a competitive advantage. But there are not many. In an environment where the mantra is "transform or you're fired", customers will identify and buy these focused reefer logistics services to create a self-orchestrated cold chain and previously unimaginable efficiencies. Focus or dedication to the transportation of perishables and a broad know-how in reefer logistics are paramount for it. Neutrality, from the trading perspective and being "truly independent" or not linked to a "big brother", being a shipping line or a cargo owner are two key additional values to effectively and honestly assist defend the real needs of the respective customers.

 

Over the past 50 years, logistics, an integral part of the reefer supply chain management, has naturally evolved along with the changes that have taken place in the fresh and frozen cargo business. Earlier, reefer logistics was a concept totally shadowed by port to port temperature controlled shipping. As long as seafreight arrangements were clear, logistics was regarded as a field that required, "not much thinking". The evolution continued in the late XX century with the incipient involvement of some retailers in the from crop to shelf trend . This led to an emergence of complex cold chains and the realization that customers and reefer logistics suppliers should jump from low-value to improved supply chain standards , at least on a, per case, or,  per transport leg, basis.

We are facing a world with utmost demanding customers with the requirement of a complex cold chain and ever-changing relationships. Therefore  reefer logistics suppliers need to closely examine the expertise in reefer trades, adaptability and agility of their logistics networks, because reefer logistics will play an ever-greater role in delivering high-performing operations. 

Given today's globalization and reefer industry trends, customers, those being retailers, fresh produce exporters or importers, etc are likely to experience an increased level of anxiety and concern. Reefer logistics operators or better, 3PL perishable logistics suppliers, should recognize this. As we say to our team in Easyfresh ; remember that our success is not an entitlement, but something we need to earn, every day. We in Easyfresh are utmost sensitive to the pressures our customers may be feeling, and do everything we can to individually and collectively exceed their expectations.

Linked to the above, to say the reefer logistics industry is becoming non-asset based or less-asset centric is a stretch because someone has to own and operate the assets. Having said that, what is interesting to see is the appearance of a reefer logistics provider, like EASYFRESH that doesn't own assets (coldstores, fleets,...), but are able to provide perishables logistics services by aggregating "information, expertise and intelligence about assets" from people who do own same. A high understanding of the documentary -remarkably the phytosanitary- procedures is a must to grant the success of successful transport packages .

Global focus comes on top of the need of true neutrality and a really flexible and independent vision with no owner or above mentioned "big brother" interfering in the real priorities of the business development and ultimately harming the customers' needs. The "fill-the slot-focus" of the shipping lines, is an understandable, but clearly low-customer minded procedure. True "reefer minded" 3PLs seek the real solutions for their "king" ; the client, dealing with fresh produce, who is more and more "internationally minded" and less "local", regardless if it is perceived from the export or the import perspective.

Said worldwide focus is a paramount priority : Crop changes, last minute diverted cargo flows, multi-origin sourcing, bans etc are a number of reasons that support the concept that customers need to have immediate solutions to the arising uncertainties within their respective markets . A global reefer specialized or "fresh mentality" is a must. A good example for that is the EU/Russia ban for fresh produce and traditional Poland to Russia apple trade that was dramatically interrupted by a sudden and unexpected political decision. Polish apple shippers had to sell their produce to other destinations in the Far and Middle East, North Africa, etc  . Only those reefer logistics suppliers who could offer combined solutions out from the Baltic, North European and Adriatic ports, like well reputed Koper (www.luka-kp.si ), could really assist the Polish apple shippers with integrated solutions.

Fundamentally, for most, simple and quick is sought after first, with no consideration for "right". Possibly this is due to lack of understanding of the real customer needs. Reefer 3PLs need to provide the necessary education to their staff and dedicate time with customers to jointly search the most adequate and viable solutions. A broad focus vs a classic local focus comes necessarily together. Particularly in all perishable trades, there are no simple solutions to tough or complex cases.

It is another common mistake that new, fancy technology gadgets or brand new software, or, even, the trendy "big data" are the tools to find the required intelligent solutions to increase margins or those that produce exporters or importers might need. Don't take us wrong : We do believe in selective innovation methods: These are clearly required. Having said that, investment in new technologies, might be a bad decision, leading to nowhere. In fact, there are a number of known success stories. Nevertheless, in our opinion, the latter happening mostly after a time of maturity. The innovation has to be tested and its results have to be clear. In other words ; not all innovations are adequate. The risk of failing in the investment decision is very much linked to the time elapsed since the inception of the technology and its application.

Remember there are a number of obsolete technologies that everyone thought would last forever.For example :  Dial-up Modems, e-Cigarettes, all Sorts of Data, video and audio storage Media, several computer ports , answering machines, cathode tube TVs, MP3 players, etc.. . Serious reefer logistics are managed by reefer experts (people !) , applying common sense. This will remain forever. The expenditure in unnecessary, fancy, short term innovation methods lead to a precipice, as we have seen in so many cases (remember the .com bubble) . And we will keep seeing it in the near future.

 

Complexity can´t be dealt with simple answers as the cartoon states. Only people's focus, expertise and intelligence can seriously add value to the cold chain. So, as always, it's all about GOOD people in the service industry. About talent, about common sense. The rest are "sweeteners" or "facilitators", but the brain, leading the perishable logistics has to be trained, knowledgable and human.

 

Another key issue is the reefer cold chain trade mark or brand value.  As a matter of fact, brand reputational value Is irreplaceable and has to be protected. Three decades ago as much as 95% of the average corporation's value consisted of tangible assets, according to a report by Thomson Reuters. Today 75% of that average corporation's value is intangible. In other words, a business's most valuable asset is its good name, its brand and reputation. In a survey released jointly by the World Economic Forum, three-fifths of chief executives said they believed corporate brand and reputation represented more than 40% of their company's market capitalization. That value is the organization's brand reputational value. Strong brand reputational value equals greater profits.

 

Furthermore, the companies with strong brands can retain employees better, too. A recent study suggests that 80% of employees between the ages of 18 and 30 will leave a company if they believe it has a weak brand or no association with ethics.

 

The cost of a compliance or ethics failure goes well beyond legal fees, court judgments, fines and penalties. It spills over into leadership distraction and turnover, forced alteration of a working profit model and heightened scrutiny in the future. Reefer logistics suppliers are non-hard-asset based companies. These subcontract most services to build up a proper cold chain solution.

 

3PLs must treat their brand reputational value like any other asset. They should manage it just the way they manage real property and equipment.  In fact, we do it as a priority task within Easyfresh. We take good care of our registered and protected trade mark , our logo, our trading patterns and logistics services, our marketing strategy, our colours, our service standards, our dedication to fresh and frozen cargoes global transportation, our unique activity and all the elements Easyfresh clients associate with the Easyfresh brand image.

 

 

The correct branding has to come with a proper planning and business goals. Within those and given today's globalised environment and uncertainties, strategic alliances become another key element for development. Sharing resources, capital equipment, knowledge and others by creating synergies and competitive advantage. Deals with ports, shipping lines, suppliers, coldstores, etc are ventures that allow to grow the business if the tasks of the parties are well defined. Typically this category are subcontractors or service providers who have  hardware assets in strategic points which form part of the full supply chain. By forming a strategic alliance this asset gets better integrated in the value chain which increases its utilization and hence market value. In fact, by selecting the right strategic alliances new, smart and alternative supply chains can be developed and offered to customers We are constantly seeking  new ones, being very selective in our final choice.

 

Published at Baltic Transport Journal 

http://www.baltic-press.com/btj76/___pdf/btj76_final.pdf 

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