Uncertainty prevails post-pandemic

London, UK: The coronavirus epidemic has exposed how tightly supply and demand determine temperature-controlled transport, especially in the food sector.

Panic buying among consumers has been acerbated by supply chain hiccups caused by unexpected closures of meat processing plants where staff are especially vulnerable to the virus.

According to a report from CoBank Knowledge Exchange, meat supplies in the United States were shrinking by 30% as Memorial Day approached, leading to retail price increases as high as 20%, a situation likely to persist at least through June.

The shift in consumer buying patterns in the US where locked-down consumers stocked up on non-perishable foodstuffs while cutting down on fresh alternatives led to the demise of the Union Pacific Railroad’s Cold Connect operations, a multimodal service that offered end-to-end transportation for refrigerated loads.

Adding to the pressure are logistics providers prioritising delivery of Covid cargoes. In the US, Hawaiian Airlines set up a new cargo service to deliver groceries to rural communities on Molokai while United Airlines transformed one of its cargo sites in Houston into a food distribution centre.

It will be some time before consumers resume their pre-pandemic food buying habits and there is also the risk as lockdowns are reintroduced in the US and possible the UK. will be required.

Supply-chain disruptions and surges and uncertainty compound planning while the growth of home delivery could be the big winner for some in the post-pandemic world. But for cold-chain logistics providers this may be only a short term opportunity.

In the US, Jamie Overley, chief executive, East Coast Warehouse, which operates temperature-controlled sites in Elizabeth and Philadelphia as well as port drayage services through Safeway Trucking, has seen short-term warehouse operations benefit as inventories expanded, but outbound transportation flatten as consumer demand slowed. “As we look ahead to the second half of 2020, we expect much will depend on consumer demand and the pace of recovery as the peak season of October through December approaches.”

Lineage Logistics has also experienced a surge in demand. In March, Lineage hired 1,000 new employees to meet demand globally and expected that another 1,000 would be required within a few months. “We are responding to surges in customer demand and to keep grocery stores stocked,” said Greg Lehmkuhl, chief executive, Lineage.

Lineage’s acquisition of Emergent Cold added 1.9bn cubic feet of capacity in 12 countries in North America, South America, Europe, Asia, Australia, and New Zealand, as well as distribution centres in Dallas-Fort Worth and at the ports of New Orleans, Houston, and Charleston.

MTC Logistics says its customers want it to accelerate opening new cold-chain infrastructure. It is in the process of developing a new refrigerated cargo site at the Port of Mobile, part of a $61m investment. “The feedback from processors in the southeast and our international import customers has been extremely positive,” said Andy Janson, president, MTC Logistics. “Mostly we hear, ‘Hurry up and open.’”

The uncertainties and challenges facing the industry are highlighted by a Global Cold Chain Alliance survey that found half of cold-chain participants see supply chain disruptions – such as keeping up with demand surges, slowdowns in service, and production and manufacturing challenges – as the biggest business challenge to result from coronavirus epidemic. Over half the study’s respondents experienced decreases in revenue compared to pre-pandemic expectations and approximately 80% indicated increased costs.

About three quarters of respondents to the GCCA survey said the aftermath of the pandemic will cause increased growth in direct-to-consumer delivery of chilled and frozen products. E-commerce could be a major beneficiary of the post-pandemic cold-chain industry, a conclusion also borne out by a recent report from Prologis.

US e-commerce inventories could grow by as much as 10% to support direct deliveries and rapid replenishment, according to the Prologis report. That would generate demand for as much as 600 million square feet of additional logistics warehousing over the next three years, with the groceries sector being one of the prime beneficiaries.

“We expect that lessons learned from the pandemic, will add demand tailwinds to logistics real estate in the ‘new normal.’” the report said.,
From a business standpoint, the worst consequence of the pandemic is the uncertainty it has generated. “What and where the world eats may vary in the wake of the Covid-19 pandemic,” said Fred Boehler, chief executive, AmeriCold Logistics.

Data to aid planning is scarce. “Warehouse operations may tighten as inventory declines,” said East Coast’s Jamie Overley. “Inbound transportation may soften as inventory levels stabilise, while outbound transportation may improve as shipments increase.”

He sees future risk in the cold-chain logistics space being driven by vertical—such as beer, water, confectionery, and food—and by segment. “We may also experience a soft start in 2021, depending on the state of the pandemic at that time,” he said.

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