The Edge - Volume One

THE SECRET SUPPLY CHAIN INGREDIENT

Beyond the increased demand for cold storage, the design and locations of storage facilities are also in flux due to recent changes in consumer demands. As one might imagine, busy, urban Millennials and Gen Xers are the primary users of grocery delivery services and key consumers of meal kits. The need to deliver fresh food fast to these urban audiences has created a need for cold storage facilities located near highly- populated areas. Much of this demand is currently being fulfilled through existing retail locations, particularly grocery stores. However, as the market grows substantially, demand is expected to grow for larger distribution centers, and grocery retail locations will evolve to become better optimized for last-minute delivery. The design and layout of cold storage facilities is also changing. The ceiling heights of cold storage buildings are increasing. According to MetLife/ Costar, the average ceiling height for cold storage, by decade of construction, grew from 22 feet in the 1960s to 38 feet in the 2010s. Much of this change can be attributed to efficiency –

circulating cold air vertically is more efficient and the cost of increasing the ceiling height is less expensive than building additional heated concrete floor and sub-floor base. Going vertical also provides more space on the site for delivery vehicles and is ideal for automated picking systems. With labor costs projected to increase, automation will be an important factor for companies to consider. The food industry also requires different material-handling equipment and labor. Grocery and meal kit delivery services, which require a human touch, differ greatly from the process of distributing pallets of product to retail locations. Food, particularly fresh food and produce, is delicate and easily damaged. Companies must be careful to avoid costly losses caused by damage and spoilage. There are indications, however, that material-handling technology is catching up to the challenge. Kroger recently acquired a 5 percent stake in the aforementioned British online- only supermarket Ocado, which has developed technology for automating food distribution centers.

40.7% Market for meal kits grew IN THE LAST YEAR

50 THE EDGE