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THE LOGISTICS IMPACT OF U.S. AND NORTH KOREAN CONFLICT

Food Logistics

THE ROAD TO RAIL

THE FOOD AND BEVERAGE INDUSTRY LOOKS TO RAIL AS AMERICAN ROADWAYS CONTINUE TO DETERIORATE.

®

Global Supply Chain Solutions for the Food and Beverage Industry LOGISTICS

GETS FRESH THE RISE IN DEMAND FOR FRESH FOOD REQUIRES THE FOOD INDUSTRY TO REINVENT FOOD LOGISTICS FROM FARM TO FORK.

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ERP IN THE CLOUD ON-PREMISE ERP IS MAKING WAY FOR CLOUD-BASED TECHNOLOGY.

PORTS EXPERIENCING A SEA OF CHANGE

Shippers and carriers of perishable cargo see challenges ahead as the industry continues to transform.

Issue No. 186 May 2017

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BECAUSE TH UPSIDE TO D INTRODUCING THE FORD

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ON THE MENU

OCTOBER 2015 ISSUE NO. 171

ON THE MENU

May 2017 ISSUE NO. 186

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COLUMNS FOR STARTERS

F  ood and Wine Exports Propel the Port of Oakland

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The Port of Oakland took on numerous initiatives over the past year to expedite cargo and support agricultural shippers.

COVER STORY

Changing Landscape among Carriers, Ports

Challenges lie ahead for both shippers and carriers of perishable cargo as the industry continues to transform.

SECTOR REPORTS

COOL INSIGHTS

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FOOD (AND MORE) FOR THOUGHT

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WAREHOUSING

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P  allets and Totes in the Foodservice Industry

Pallet and tote manufacturers are facing new challenges in an evolving food safety landscape. TRANSPORTATION

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T  he Food and Beverage Industry Looks toward Rail as American Roadways Continue to Deteriorate

Rail freight finds a seat at the table thanks to old roads and highways, and its own environmental efficiency and consistency. SOFTWARE & TECHNOLOGY

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FEATURES THIRD-PARTY & REFRIGERATED LOGISTICS

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L ogistics Gets Fresh

The rise in demand for fresh food requires the food industry to reinvent food logistics from farm to fork.

ERP in the Cloud

The comfort of on-premise enterprise resource planning (ERP) is making way for the low infrastructure costs and improved accessibility of cloud-based technology. OCEAN CARRIERS & PORTS

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W  hat’s on the Ocean Horizon?

There are plenty of promising omens and technologies to help ocean carriers stay afloat.

Fresh Global Trends

A growing middle class and increased consumer demand for fresh produce is impacting food supply chains around the world.

I f Tension Between the U.S. and North Korea Escalates, How Will Food Logistics Be Impacted?

From worst case to best, look at the possible scenarios, their likelihood and outcomes on food logistics.

DEPARTMENTS

Supply Scan 10 Food on the Move 41 Ad Index 8

WEB EXCLUSIVES • New Wording to Help End Food Label Confusion foodlogistics.com/12325565

• Q&A: How Restaurant Chains Can Successfully Adapt to Order-In Culture foodlogistics.com/12324507

• Food Logistics’ Educational Webinar Series foodlogistics.com/webinars

Published and copyrighted 2017 by AC Business Media Inc. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording or any information storage or retrieval system, without written permission from the publisher. Food Logistics (USPS 015-667; ISSN 1094-7450 print; ISSN 1930-7527 online) is published 10 times per year in January/February, March, April, May, June, July, August, September, October and November/December by AC Business Media Inc., 201 N. Main Street, Fort Atkinson, WI 53538. Periodicals postage paid at Fort Atkinson, WI 53538 and additional mailing offices. POSTMASTER: Send address changes to Food Logistics, P.O. Box 3605, Northbrook, IL 60065-3605. Canada Post PM40612608. Return undeliverable Canadian addresses to: Food Logistics, Station A, P. O. Box 25542, London, ON N6C 6B2. Subscriptions: U.S., one year, $45; two years, $85; Canada & Mexico, one year, $65; two years, $120; international, one year, $95; two years, $180. All subscriptions must be paid in U.S. funds, drawn from a U.S. bank. Printed in the USA.

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www.foodlogistics.com

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DELAYS CHANGE EVERYTHING. That’s why Penske Logistics has customized supply chain solutions to help ensure deliveries arrive on time and in good condition. So you can keep your business moving forward. Visit gopenske.com or call 844-868-0818 to learn more.

Š 2017 Penske. All Rights Reserved.

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FOR STARTERS

FROM THE EDITOR’S DESK

FOOD AND WINE EXPORTS PROPEL THE

PORT OF OAKLAND R SOWINSKI

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ecently, I stopped by the Port of Oakland to chat with a few executives about the success the port is having with food and wine exports, and get an update on the Cool Port project. Mike Zampa, director of communications, and Robert Bernardo, communications manager, graciously shared the numerous initiatives the port has undertaken over the past year or so to expedite cargo and how ongoing investments are helping support agricultural shippers. The numbers say it all. Over the past five years, the port’s agricultural export tonnage grew a whopping 233 percent. Currently, agricultural commodities make up 53 percent of total export tonnage with most of those commodities produced by growers in California. I asked Zampa how the port stacked up against competitors, namely Los Angeles and Long Beach, which also handle significant volumes of agricultural goods. He noted that Oakland is the closest port for growers in Sacramento, San Joaquin, Salinas and Napa valleys, which export to Asia. Furthermore, Oakland is the last U.S. West Coast port of call before ships head back to Asia, which means time-sensitive perishables spend less time on the ocean if they are loaded in Oakland. The Port of Oakland understands the needs of its agricultural shippers and is making sizable investments to make sure they are supported. It created the Port Efficiency Task Force to bring stake-

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holders together to share concerns and brainstorm solutions. Beneficial cargo owners (BCOs), shipping lines, marine terminal operators, harbor draymen, longshore labor, railroads and others now have a formal platform in which to work collectively. The port also developed a $1.6 million incentive fund to launch night gates at the Oakland International Container Terminal. Permanent night gates are now operating four nights a week, Monday through Thursday. As for Cool Port, groundbreaking for the new temperature-controlled facility will take place in June, with operations commencing in 2018. Lineage Logistics and Dreisbach Enterprises will operate the 283,000-square-foot facility sited on 25 acres of port property. The facility will be capable of handling 36 rail cars a day, while annual throughput is projected at 27,000 containers. All told, the Port of Oakland is spending more than $600 million on an array of projects like new facilities, equipment, technology, infrastructure and related investments over the next few years, explained Zampa and Bernardo, and Food Logistics will continue to monitor the progress. Enjoy the read.

LARA L. SOWINSKI, EDITORIAL DIRECTOR LSOWINSKI@ACBUSINESSMEDIA.COM

DETAILS

Published by AC BUSINESS MEDIA INC. 201 N. Main Street, Fort Atkinson, WI 53538 (800) 538-5544 • www.ACBusinessMedia.com

WWW.FOODLOGISTICS.COM PRINT AND DIGITAL STAFF Group Publisher Jolene Gulley Associate Publisher Judy Welp Editorial Director Lara L. Sowinski lsowinski@ACBusinessMedia.com Editor Ronnie Garrett rgarrett@ACBusinessMedia.com Managing Editor Carrie Mantey cmantey@ACBusinessMedia.com Assistant Editor Amy Wunderlin awunderlin@ACBusinessMedia.com Senior Production Manager Cindy Rusch crusch@ACBusinessMedia.com Creative Director Kirsten Crock Sr. Audience Development Manager Wendy Chady Audience Development Manager Angela Kelty ADVERTISING SALES (800) 538-5544 Associate Publisher (East Coast) Judy Welp (480) 821-1093 jwelp@ACBusinessMedia.com Sales Manager (Midwest and West Coast) Carrie Konopacki (920) 542-1236 ckonopacki@ACBusinessMedia.com National Automotive Sales Tom Lutzke (630) 484-8040, tlutzke@ACBusinessMedia.com EDITORIAL ADVISORY BOARD Jaymie Forrest, Chief Supply Chain and Commercial Officer, ScanTech Sciences Inc. John Haggerty, Vice President of Business Development, Burris Logistics Robert A. Norton, Ph.D., Professor of Veterinary Microbiology, Public Health and Biosecurity, Auburn University; and Coordinator of National Security Initiatives, The Futures Laboratory Jon Shaw, Director of Sustainability and Global Marketing Communications, UTC Climate, Controls & Security Smitha G. Stansbury, Partner, FDA & Life Sciences Practice, King & Spalding CIRCULATION & SUBSCRIPTIONS P.O. Box 3605, Northbrook, IL 60065-3605 (877) 201-3915, Fax: (800) 543-5055 circ.FoodLogistics@omeda.com LIST RENTAL Elizabeth Jackson, Merit Direct LLC (847) 492-1350, ext. 18; Fax: (847) 492-0085 ejackson@meritdirect.com REPRINT SERVICES Carrie Konopacki (920) 542-1236 Fax: (920) 542-1133 ckonopacki@ACBusinessMedia.com AC BUSINESS MEDIA INC. Chairman Anil Narang President and CEO Carl Wistreich Executive Vice President Kris Flitcroft CFO JoAnn Breuchel Vice President of Content Greg Udelhofen Vice President of Marketing Debbie George Digital Operations Manager Nick Raether Digital Sales Manager Monique Terrazas Published and copyrighted 2017 by AC Business Media Inc. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording, or any information storage or retrieval system, without written permission from the publisher.

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SUPPLY SCAN

NEWS FROM ACROSS THE FOOD SUPPLY CHAIN Daily Updates at FoodLogistics.com

PERDUE CONFIRMED AS SECRETARY OF AGRICULTURE

Sonny Perdue was elected the 31st Secretary of Agriculture last month, having won confirmation by the U.S. Senate in an 87-to-11 vote. The former governor of Georgia succeeds Tom Vilsack, who led the U.S. Department of Agriculture (USDA) for the past eight years and who endorsed Perdue as his successor once the former Georgia governor was nominated by President Donald Trump. Like Vilsack, Perdue was governor of a large diversified agricultural state who takes over the USDA with broad support. The Senate vote was another illustration of the depth of support for Perdue, with his 87 votes in record territory for a Trump cabinet nominee.

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TYSON FOODS TO ACQUIRE ADVANCEPIERRE FOODS

Food giant Tyson Foods will buy AdvancePierre Foods Holdings for $4.2 billion in a move that will expand its portfolio of prepared foods and protein-packed brands. Tyson President and CEO Tom Hayes credits the acquisition to AdvancePierre’s leadership team who he says “has created significant value through the implementation of a new business management model, focus on quality and service, and attention to the growth opportunities in convenience foods. “The addition of AdvancePierre aligns with our strategic intent to sustainably feed the world with the fastest growing portfolio of protein-packed brands,” he adds. “We believe that AdvancePierre and Tyson are a natural strategic fit, and together, will accelerate growth for customers by delivering on-trend, high quality products consumers love.” AdvancePierre President and CEO Christopher D. Sliva adds: “By combining our complementary, market-leading portfolios, both companies will realize greater opportunities. This combination will allow AdvancePierre to accelerate its growth and broaden its distribution network by leveraging Tyson’s existing distribution infrastructure and go-to-market capabilities.”

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SMART TECHNOLOGY KEEPS MARINE HARVEST PRODUCTS FRESH

Marine Harvest, the world’s largest salmon farmer and processor in Europe, the United States and Asia, is planning to add a freshness indicator to its products in Europe. “Keep-it” indicators will provide consumers with a tool that shows accurate and real-time freshness and shelf life throughout the cold chain. The indicators are attached directly after the fresh fish is cut and packed. Test launches are already underway in select countries, including Norwegian retailer REMA 1000, which has implemented it on more than 20 million fresh food products over the past few years. The company plans to introduce its products with “Keepit” indicators in 10 European markets by 2019.

U.S. AND AUSTRALIA RECOGNIZE FOOD SAFETY SYSTEMS AS COMPARABLE

Australian exporters are in a significantly stronger position as preferred suppliers of safe, high quality food to the United States after the signing of the bilateral Food Safety Recognition Agreement last month. Department of Agriculture and Water Resources (DAWR) head of exports Greg Read says the agreement was the third the United States had undertaken with a trading partner, and provided for the United States and Australia to recognize one another’s food safety and regulatory systems as comparable. This agreement, signed by the U.S. Food and Drug Administration and the Australian DAWR, will result in fewer in-country audits—with compliance being managed by the exporting country. www.foodlogistics.com

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FOOD ON THE MOVE

LOGISTICS TRENDS IN OUR INDUSTRY

FEDERAL MARITIME COMMISSION APPROVES VIRGINIA-GEORGIA PORTS ALLIANCE

The federal government gave its approval in April to an innovative agreement that allows the Georgia Ports Authority (GPA) and the Virginia Port Authority (VPA) to begin discussion on ways the two ports can share information in certain operational areas to position themselves as the U.S. East Coast’s leading gateways for containerized cargo. A joint application to proceed with development of the “East Coast Gateway Terminal Agreement” was filed by the ports on Feb. 24. The application set into motion a 45-day review period—including a 12-day public comment period—by the Federal Maritime Commission (FMC). The approved agreement encourages the exchange of information and best practices in five areas of operational and supply chain efficiencies, safety, communications and customer service. “Our industry is changing rapidly, and as a result, increased collaboration between ports is necessary to provide the service excellence our customers expect and deserve,” says Griff Lynch, GPA’s executive director. “It is clear that both Georgia and Virginia are East Coast gateway ports, and this step further allows us to create jobs, economic development and improve safety. I would like to thank our respective employees and

Image courtesy of the Port of Virginia Facebook page.

partners in the ILA as we move forward together.” VPA CEO and executive director John Reinhart adds: “The agreement enables Georgia and Virginia to work together to find ways to become more efficient and effective, which will benefit the citizens of our respective states, as well as shippers and carriers. We are making significant investments at our respective ports to handle the larger vessels and cargo volumes coming to the East Coast. Now we will begin discussing how to best leverage these assets collectively and position Georgia and Virginia as the East Coast’s primary cargo gateways.”

DAT SOLUTIONS’ MONTHLY FREIGHT REPORT

Freight Patterns Start to Shift By Mark Montague Mark Montague is industry rate analyst for DAT Solutions, which operates the DAT network of load boards and RateView rateanalysis tool. For information, visit www.dat.com.

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Seasoned produce haulers are accustomed to shifting freight patterns. They make their living throughout the year going from moving oranges and lemons to asparagus and tomatoes to strawberries

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and salad greens. When the trailer is full of potatoes and pumpkins, it’s time to take a break. This year we’ve seen an abundance of reefer freight (relatively speaking).

In April, volumes were peaking in places like Florida, California’s Imperial Valley, and along the Mexican border, and building on March’s positive trends: compared to February, the number of reefer loads jumped 49 percent and truck posts increased 14 percent. The national load-to-truck ratio for the month was 6.2, meaning there were 6.2 reefer loads for every available truck. Compare that to a year ago, when the March reefer load-to-truck ratio was 3.1, and April slumped to 2.8. Freight is moving. A load-to-truck ratio of 12 is considered favorable to carriers, and we’re a long way from that. On average, spot reefer rates are sitting at around $1.95 a mile, up 5 percent from this time last year but not as much as truckers would like considering the demand. So carriers continue to follow the freight even within the same region. As lettuce volumes were crashing in the Inland Empire last month, carriers were hitting the load boards and trucking up to the Huron district near Fresno, which moves about 650 loads of head lettuce a week. Time to get busy.

www.foodlogistics.com

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FOOD ON THE MOVE

EXPANSION IS ON THE HORIZON AS TIGER COOL EXPRESS LANDS FUNDING Tiger Cool Express (TCX), a temperature-controlled intermodal carrier who focuses on the transport of fresh produce and food, has received $15 million in equity funding from its private equity backers Tiger Infrastructure Partners and Barings—much of which will be used to double its number of containers over the next two or three years. “This capital infusion will allow TCX to

LOGISTICS TRENDS IN OUR INDUSTRY

continue its fast growth trajectory and facilitate TCX’s goal of becoming the leading provider of temperature-controlled intermodal service in North America,” says Tom Finkbiner, TCX chief executive officer. In a related development, the company also announced that Finkbiner, who intends to step down as CEO during 2017 pending the recruitment of his successor, has been named chairman of TCX. Larry Shughart, who held roles at Worley Parsons and CSX, and was named TCX’s new president. “Since founding TCX in 2013, we have

built a world class business with almost $100 million in revenues, a fleet of over 700 state-of-the-art refrigerated containers, a diversified group of customers, sophisticated IT infrastructure, and critical long-term rail relationships. It is the right time to plan for an efficient transition to the next leader of TCX,” Finkbiner explains.

UK’S FIRST RAIL FREIGHT TO CHINA CARRIES WHISKEY

Whiskey and soft drinks were among the various food and beverage products aboard the UK’s first rail freight service to China, which traveled through seven countries before reaching its final destination in eastern China on April 27. The 7,500-mile service is part of China’s One Belt, One Road program, which the country hopes will revive the ancient Silk Road trading routes with the west.

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PORT OF PALM BEACH COMMISSION OKAYS TROPICAL SHIPPING EXPANSION

The Port of Palm Beach and Tropical Shipping have taken the next step toward a $4 million project that, if all goes well, will result in the demolishing of an office building to provide Tropical with an additional 3 acres for an expanded refrigerated cargo storage area. The port commission unanimously approved the project as part of a 10-year comprehensive agreement with Tropical with four five-year renewal options. The contract has been under negotiation for months. Tropical Shipping, founded in 1963, is the port’s largest tenant and makes up about a third of its revenues. Tropical’s main business is shipping food, especially perishable, refrigerated and frozen foods, groceries and consumer goods in containers from Canada and southern Florida to the Bahamas and the Caribbean. www.foodlogistics.com

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Fresh COOL INSIGHTS

This article by Alexandra Walsh originally appeared in COLD FACTS, a bimonthly cold chain magazine produced by the Global Cold Chain Alliance.

BY ALEXANDRA WALSH

T

he global demand for fresh produce is growing, which is impacting supply chains. For starters, demographics are shifting. The ways consumers shop, the products they purchase and how they eat are changing, says Jim Lemke, president of Robinson Fresh. Lemke has global oversight of the company’s fresh produce and temperature-controlled supply chain activities.

Young Driving Fresh “Millennials and Generation Z are asking for more fresh products, driving different global trends. This leads to new challenges for our industry and opportunities for us all,” notes Lemke. “They are talking about fresh, tweeting about fresh and taking pictures of their every meal.” Lemke says this demographic drove 20 percent growth in fresh categories over the last decade. “It’s important for retailers, foodservice and wholesalers to address changing tastes and behaviors in order to stay relevant in an increasingly competitive environment,” he adds. Another issue impacting global fresh supply chains is the growth of an emerging middle class, with more disposable income, that demands bigger, higher quality items. Lemke says this is evident in increased interest in wellknown brands from North America, and items like large grapes and avocados. According to Lemke, the distribution

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GLOBAL TRENDS

supply chain has to grow alongside the growth in volume. “In North America, we can take any order and deliver it anywhere because of our intensive logistics networks. In Asia, logistics are less mature, and managing the supply chain is a constant process as we rely on distribution partners and look for new facilities from which to ship.”

Demand in China As the Chinese middle class continues to grow in size and disposable income, more consumers can afford to add more fresh items to their daily diets. China is already the largest international market for U.S. food and agricultural products, accounting for 20 percent of all U.S. farm exports. The resulting demand for fresh is creating new opportunities for suppliers and reshaping global consumption. Lemke also is seeing increased interest in e-commerce in Asia and says it represents a fast-growing business area.

Europe Likes Sweet While normal flows of produce that occur because of seasonal shifts are ongoing and pretty consistent, Lemke says he is seeing an emerging west-to-east movement. For example, he says, over a decade ago, the U.S. focused on sweet potatoes as a dominant commodity in restaurants because of their healthy attributes. In Europe, sweet potatoes had massive growth rates over the last three years, primarily driven by younger consumers. Initially, Europe looked to the northern tip of Africa for sweet potatoes, but because of product

quality and increased consumption, now areas of Europe are importing sweet potatoes from the East Coast of the United States. “This created an increased need for more storage facilities in ports on the U.S. East Coast for exports to Europe—a great example of fresh trends driving supply chain needs,” Lemke points out.

Global Supplements Local The local sourcing demands for produce are seasonal, with harvest schedules ranging from one week to a few months depending on the size of the grower, which in turn, forces the supply chain to move around a lot. This drives additional needs for cold storage capacity in rural cities around the United States and Canada. “The modern-day supply chain has multiple channels of distribution, and in reality, when buyers can’t purchase local and organic products year-round, they look to those who can offer them a consistent supply from all parts of the world as necessary,” he notes. The demographic shifts around the world that are leading to changes in consumer demand for year-round fresh produce and a global shift in supply chains are an opportunity to adopt a flexible mindset, says Lemke. “We have to ensure we are not sitting back and resting on the predictability and consistency of our business’ past. The produce industry has been around forever, but is constantly evolving, along with the distribution infrastructure, consumer demand and consumer confidence in fresh.” www.foodlogistics.com

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COVER STORY

BY KAREN E. THUERMER

CHANGING LAN AMONG CARRIERS, PORTS Challenges lie ahead for both shippers and carriers of perishable cargo as the industry continues to transform.

M

ergers, consolidations and alliances among steamship lines, which will optimize networks and create economies-of-scale, are well underway—and likely to impact shippers of perishables. “Consolidation will result in alterations to the competitive and service network landscape,” reports Anne-Sophie Zerlang Karlsen, global head of reefer management for Maersk Line. Chris Logan, Georgia Port Authority’s (GPA) senior director of trade development, sees consolidation resulting in shipping alliances calling on fewer hub ports where massive exchanges of cargo

with each ship will occur. “This will boost efficiency for the lines, but will require significant landside infrastructure,” he says. “We expect more cargo of all types to gravitate to these hub ports.” James Buck, regional manager for Australia-based AM Logistics, does not see carriers omitting those key ports in established markets where reefer volume is prominent. “Certainly for those closer to second tier ports from a reefer volume perspective than inland, solutions will no doubt need to be sought, as they could well be removed from the service loop. However, this will always be a risk for such geographies,” he says.

MAERSK

While there will be some upheaval, most believe container shipping consolidation is long overdue. “This would have happened earlier if it weren’t for the alliances,” remarks Paul McClintock, senior vice president of sales and marketing, South Carolina Ports Authority (SCPA). “They allowed lines of different sizes and operating profiles to have similar slot costs.” The bankruptcy of Hanjin last year caused massive delays and container pileups at many seaports, especially on the U.S. West Coast. Delays up to six weeks have occurred on routes to the Middle East and Asia. Karlsen stresses, however, that alliances operating in the EastWest trades enable shipping lines to optimize networks and achieve economies-of-scale. “This potentially allows individual alliance partners to provide competitive services that are attractive to customers, including more ports and direct services, better coverage and higher frequency,” she says.

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NDSCAPE

PORT EVERGLADES

Maersk will continue to operate stand-alone services in some main reefer trades, such as North-South. PORTS OF TACOMA “We will choose the network setup most optimal for serving our customers’ needs in each individual trade environment,” she adds. Over time, Karlsen sees consolidation potentially enabling a more sustainable containerized shipping industry in this age of weak demand and deflationary freight rates. “We work hard to drive down operational costs,” she says. “This ensures that we continue to invest in growth, including our fleet, equipment and people. Only with the PORT OF CHARLESTON lowest possible cost are we able to offer our customers Craig Mygatt, SeaLand CEO, competitive prices, invest in fleet sees consolidation as beneficial to and equipment, withstand large shippers, especially cold chain. “It price fluctuations, and ultimately allows carriers to pool resources, deliver value to shareholders and enjoy economies-of-scale, miniour customers.” mize some of the structural issues that plague shipping, and expand network coverage by increasing the amount of port pairing combinations available,” he says. Mygatt warns, however, that those benefits may not be tangible across the board, as the industry is amid the process of integrating at least seven companies. He emphasizes that superior service, attention to detail and delivery capabilities continue to be the major requirements of refrigerated customers across the region. SeaLand has responded to market needs with tailor-made solutions such as its partnership with the www.foodlogistics.com

SEALAND Consolidation will result in alterations

Ports of Philadelphia and Hueneme, improving coverage and product offering for refrigerated customers who source from Latin America and distribute across both the U.S. northeast and California. The carrier also offers improved services, such as SeaLand Atlantico, that focuses on refrigerated cargo from Mexico into the U.S. northeast; NAE extension, which spotlights deploying bananas and pineapples from Costa Rica and Colombia to the northeast; and WCCA that now connects cargo to both Port Los Angeles and Hueneme.

to the competitive and service network landscape.” Anne-Sophia Zerlang Karlsen, Maersk Line

Port Viewpoint While mergers and consolidations are nothing new to the steamship industry, what differentiates today’s trend is the larger concentration of shipping groups. MAY 2017 | FOOD LOGISTICS

17


COVER STORY continued

“Effectively we go from four alliance groups to three beginning in April,” explains Marcel van Dijk, cargo marketing manager, Port of Los Angeles. This can have a major impact on some seaport operations. Considering that together the Ports of Los Angeles and Long Beach have 13 container terminals,

both ports expect to see some shifting of shipping services to different terminals in the San Pedro Bay area due to the new alliances. “It’s possible we will see some cargo delays as the supply chain adjusts,” van Dijk warns. All cold storage facilities in the region are off port property. The five closest to the Port of Los Angeles are within 4 to 8 miles and have 91,000 pallet positions. Currently,

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The purchase of Hamburg Sud by Maersk

Lineage Logistics is building a 25,000 could pallet position reduce facility in Long Beach. “This will port calls provide enough to Latin capacity for the America.” volume we handle Jim Pyburn, at the two ports,” Port Everglades van Dijk says. The Port of Los Angeles has around 4,000 plugs on its eight container terminals, which van Dijk says is sufficient for the current volume of reefer containers handled at the port. “For future increases, we can add reefer plugs without major capital improvements and at a reasonable cost for the terminals,” he adds. Further north, all major shipping lines and alliances are continuing to call at the Ports of Tacoma and Seattle. “We have a sense of the rotations, but not cargo volumes, as BCOs continue to negotiate their contracts,” states Susan Coffey, director of business development, Northwest Seaport Alliance (NWSA). She stresses that the advantage of NWSA, as opposed to individual ports, is its fuller portfolio of options to accommodate any alliance shifts. NWSA, which handles nearly 20 percent of the nation’s chilled exports, has seven international container terminals operating in the north and south harbors. “Our terminals have more than 6,600 plugs for these specialized pieces of equipment. Near our terminals are seven cold storage facilities with more than 2 million square feet of capacity that have the ability to transload from rail box cars or domestic trucks,” Coffey says. In Florida, Jim Pyburn, Port Everglades’ business development director, warns that the recently announced purchase of Hamburg Sud by Maersk could potentially reduce port calls in Latin America. The port does not anticipate an impact from the Caribbean, also a large market for Port Everglades, and overall, Pyburn does not anwww.foodlogistics.com


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COVER STORY continued

ticipate alliance shifts to have a dramatic affect, largely since the port has limited direct access to Asian markets. In addition, its terminal operators continue to enhance and upgrade facilities to accommodate changing trends in the marketplace and prepare as much as possible for future uncertainties.

Port Everglades recently entered into a public-private partnership agreement for a new state-of-theart logistics warehouse facility on port property. SCPA executives also are not overly concerned about carrier consolidations since the trend is being driven by the deployment of big ships, and that several carriers are required to fill these massive vessels. “The move to large vessels

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is being driven by a need to reduce costs, and we do not expect to see a noticeable change in the number of reefer slots available,” comments SCPA’s McClintock. SCPA is investing millions in its landside operations, both in container terminals and reefer container yards, to ensure it has sufficient capacity. “Not all ports will be able to make the required investments to handle the large ships and the surges created by bigger vessels,” says McClintock. GPA also argues that new dynamics in the shipping industry should favor the Port of Savannah, with its 1,200-acre single-terminal design, equipped with 26 ship-toshore cranes, 146 rubber-tired gantry cranes and more refrigerated container racks than any other U.S. terminal. Logan stresses the importance for ports to maintain robust infrastructure to avoid cargo congestion, especially when handling Neo-Panamax vessels carrying cargo for allied shipping lines. “These vessels create special issues for ports that compartmentalize berth space and container yards between the individual shipping lines,” he says. “Smaller terminals struggle with congestion from today’s massive cargo exchanges.” Challenges certainly lie ahead for both shippers and carriers, especially for perishable cargo. “Don’t underestimate the forces of competition, however,” Buck says. “If Maersk and Hamburg Sud alter their routing following their merger activity and omit a certain port in the U.S., it may be the opening and point of difference for one or two of their competitors to enter the trade.” After all, reefer cargo is king for carriers. “It’s where they make strong yields. They will be very considerate about their management of it,” Buck estimates. Karen E. Thuermer is an Alexandria, Virginia-based journalist who has been writing about logistics for several decades.

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3PL/REFRIGERATED LOGISTICS

BY RONNIE GARRETT

LOGISTICS GETS FRESH The rise in demand for fresh food requires the food industry to reinvent food logistics from farm to fork.

22

“O

ver the past five years, there has been a significant increase in overall fresh food offerings as retailers strive to meet rising demand from customers,” according to Duff & Phelps Corporation’s “Food Retail Industry Insights 2016.” Fresh fruit and vegetables, healthy grab-and-go snacks, as well as fresh meats and cheeses are all on the menu today as 99 percent of consumers are reportedly beginning to purchase these options versus the more processed versions of the same foods. Where consumers can purchase fresh food also is changing. While grocery stores are viewing fresh offerings, including choices such as sushi and salads, as a means of

FOOD LOGISTICS | MAY 2017

FLOG0517_22-27_3PL.indd 22

increasing business, pharmacies, gas stations and convenience stores also are getting into the fresh food act, and stocking fresh foods on their shelves. In addition, customers are now demanding fresh foods come to them via online ordering and mobile delivery. Clearly, the trend toward fresh is growing-so fast that the Nielsen Global Health and Wellness Report finds fresh food sales increased by 5 percent in the last four years and predicts these sales will grow an additional 16 percent by 2020. “New consumer trends mean that stores are going to be looking for quality food distribution companies based on their ability to get more fresh produce into stores to efficiently and safely meet growing

1%

Not

99%

OF SHOPPERS ARE BUYING

FRESH FOOD

demand,” reports FreshOne Distribution Services LLC in “What Does the Future Look Like for Food Logistics?” Having more fresh food in the pipeline than ever before could potentially upend logistics and cold storage providers’ processes. Today, the question is: How can these

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5/9/17 2:31 PM


providers meet the demands of a changing landscape, where they must support longer shelf lives, while also complying with the regulations of the Food Safety Modernization Act (FSMA) ?

Segmenting Supply Chains According to MarketsandMarkets’ Cold Chain Report, which forecasts the fresh fruits and vegetables, bakery and confectionary, dairy, meat, fish and seafood markets globally through the year 2022, the cold chain market is expected to grow to $271.30 billion by 2022, with dairy and frozen foods topping the list as the largest segments. However, the report also highlights an increasing focus on the number and quality of fresh products. Better and new logistics processes will be in order to move this amount of fresh product annually, while also addressing the skyrocketing costs of food waste and loss, which is estimated at $940 billion a year. Ralf Seifert, a professor of operations management at the Institute for Management Development (IMD) and director of IMD’s new digital supply chain program, reports that this figure represents a significant portion of shrinkage in retail supply chains and has a direct impact on companies’ triple bottom lines. He suggests there could be a great opportunity here for cost savings, and to reduce environmental and social footprints. Seifert goes on to say that fresh fruits and vegetables are a challenging retail category because of their very short product lifetimes. Research done with Merve Kirci, a doctoral researcher who looks at strategic and operational improvements in food supply chains for the College of Management of Technology at Ecole www.foodlogistics.com

FLOG0517_22-27_3PL.indd 23

FRESH DEPARTMENT GROWTH 7%

DOLLAR GROWTH

9%

VOLUME GROWTH

6% 4%

5% 4%

4%

2% -1% MEAT

-2% PRODUCE

DELI

BAKERY

SEAFOOD

Source: Nielsen Global Health & Wellness Report

MAY 2017 | FOOD LOGISTICS

23

5/9/17 2:31 PM


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Polytechnique Fédérale de Lausanne (EPFL), found that the top three drivers of spoilage are excess inventory, order cycles and variation, and longer delivery times. It is the third item on this list that concerns Dan Vache, vice president of supply chain management at United Fresh Produce Association. He explains that logistics providers, and warehouse, cold storage and distribution center operators, will need to reimagine their processes to deal with this paradigm shift. “When it’s a big distribution center or wholesalers, they’re more focused on the velocity of that product and making sure it flows through their system as quickly as possible,” he says. “Every time there is a delay with fresh produce [and other fresh foods], its quality can diminish.” Andy Moses, senior vice president of global products for Penske Logistics, adds that building demand for fresh foods is increasing segmentation in supply chains. In the past, a grocery chain operated a fleet of tractor-trailers to serve all of its stores, and truckloads were delivered once a day, every other day or even once or twice a week, depending on the size of the store. “There is more frequent replenishment of fresh items today, and it’s causing, in some instances, a need for a portion of the supply chain to be managed separately There is and outside the broader supply chain operation,” he says. “Grocery chains still more frequent operate that large fleet, but then separeplenishment of rately, they operate a smaller network of fresh items today refrigerated straight trucks to frequent- and it’s causing, in some ly replenish fresh items. No one wants instances, a need for a to buy a salad that looks a little brown or portion of the supply chain a sandwich that’s a couple of days old.” to be managed separately These challenges are forcing logistics and outside the broader providers to develop processes for supply chain operation.” front-door deliveries as opposed to Andy Moses, Penske Logistics the traditional back-of-the-store ones where they pull up to a loading dock and unload. “Penske’s drivers are literally coming in the same door to the store that you or I would as consumers. They are probably rotating some stock on the shelves if it’s bakery products or other fresh items,” says Moses. “There is a high-touch labor component that’s very different from traditional truckload warehouse-todock-type delivery. The drivers have to be trained to navigate

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FOOD LOGISTICS | MAY 2017

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By 2022, the cold chain market is expected to grow to

continued

in and around consumers. That is one whole area where fresh food is changing processes from a logistics provider’s perspective.” The other impact, he says, is on the equipment logistics providers New consumer trends operate. Many commean that stores are panies are opting to going to be looking for lease as opposed to quality food distribution buy their refrigercompanies based on their ability to get more ated trailers. Moses fresh produce into believes this is why Penske is flourishing stores to efficiently in this space, stating, and safely meet “We have ready growing demand.” access to this type of equipment, which FreshOne Distribution Services LLC in “What Does the Future for some logistics Look Like for Food Logistics?” providers, would be less standard.” Penske also already upgraded the tools it uses for routing to ensure fresh food is delivered when and

$271.30 BILLION. where customers want it. “We serve one convenience chain that has to be delivered by 4:30 a.m.,” Moses says. “In other instances, we’re only able to deliver at times when stores are open and not all stores are open 24 hours a day. We needed software that enables us to accurately capture the nuances of the store environment, and then, be able to route efficiently and accordingly based on these requirements.”

Focus on FSMA The FSMA adds another layer of logistics complexity because meeting this mandate needs to be top of mind. “Everyone is feeling more accountable and understands they have a role to play in food safety,” Vache says. “Even the harvesters

are feeling this. If you go watch lettuce being harvested in Salinas Valley, you’ll see field workers wearing latex gloves and hair nets. Everyone is involved, educated and reminded frequently that they have a role in keeping our food supply safe.” Making sure the cold chain is never broken is a critical element that goes hand in hand with food safety, Vache points out. For facilities handling fresh food, this is leading to altering building designs, adding multiple temperature zones and adding technology to better monitor product temperature. Shipping docks, for instance, used to be open to the elements; now they are closed. Trucks now pull in under canopies to keep sunshine off of their roofs.

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Truckloads also are being monitored in real time. “It used to be if a truck left with a load of strawberries, or whatever the product was, they would have a device in the trailer recording temperature, but it only captured temperature at the beginning and the end of the trip,” Vache says. “Now we have real-time monitoring that gives an alert to the drivers, so if the temperature falls below what’s required, they know they have a quality issue.” Penske already added technology to track temperature while products are on the move. The company receives alerts whenever temperature falls out of tolerance. Says Moses, “We can be sitting in our office and checking on the temperature of freight that’s out on the road with the technology we use today.” Real-time monitoring changes everything, Vache says, because now delivery decisions can be made on the fly. If a load goes above or

below a specific temperature cut the cool from the time food is threshold, it can be diverted to a harvested until it gets to a facility. closer market to avoid condition At the facility, we need to take the and freshness issues. “We know heat out of it and get it down to we’re going to have condition temperatures below 40 degrees issues if we don’t get the product Fahrenheit [for produce]. This gets into the distribution system more the respiration down so we can quickly,” he says. “This technology maintain the food’s quality because allows companies to be proactive the food’s freshness never gets versus reactive.” better, it can only get worse.” Penske also operates more warehouse facilities with multiple temperatures, to keep each type of fresh food fresh. These facilities offer ambient cool and frozen sections to handle the wide variety of fresh food and the FRESH FOOD segmentation of SALES ARE the supply chain, EXPECTED TO GROW Moses says. “This is incredibly IN 2020 important,” adds Vache. “We have to

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SECTOR REPORTS WAREHOUSING

BY MINDY LONG

PALLETS AND TOTES IN THE FOODSERVICE INDUSTRY P

Pallet and tote manufacturers are facing new challenges in an evolving food safety landscape.

allets play a key role in the supply chain, and food safety concerns have resulted in new expectations for the pallet and tote industry. Manufacturers have responded with hygienic, cleanable products with improved durability. Food Logistics caught up with two of the industry’s leading pallet manufacturers to learn more about the challenges they face and how they’re responding.

Paxxal Inc.

 Paxxal Inc.’s newest pallet is resistant to extreme temperatures, corrosion, ultra-violet light and bacterial growth.

28

Paxxal Inc. recently launched its newest North American pallet to the U.S. market. The new platform, which is part of a series of solutions from Paxxal, is made from 100 percent recyclable patented composite material and uses an automated rotational molding process to improve durability, making it stronger than wood or plastic, says Ben Stoller, executive managing director of Paxxal Inc. Paxxal’s new pallet weighs less than 50 pounds and is 30 percent lesser in weight than wood. It features reinforced blocks, 95 percent top deck coverage, a solid core and internal reinforcement for better rackability. It also has wider four-way entry, rubber inserts to prevent slippage, a onepiece top and bottom deck design and hand holds. “The unique, leading-edge design of the Paxxal pallet is specifically tailored to today’s changing pallet

FOOD LOGISTICS | MAY 2017

FLOG0517_28-29_SECTORWarehousing.indd 28

market. It is produced by exceptional engineering and design, revolutionary materials and patented roto molding technology. It is the most durable, lightweight, cost-effective pallet available in the multi-use plastic pallet market,” Stoller says. The pallet also has stretch-wrap corners and chamfered undersides and decks for easier pallet jack and forklift use and is exempt from fumigation requirements. Paxxal’s pallet has an indefinite life span and longer life cycle. The pallet is resistant to extreme temperatures, corrosion, ultra-violet light and bacterial growth. Hygiene is critical to food safety in the supply chain. “That’s why there are no hidden spaces in our pallets where germs can hide. Even if the outer layer is punctured, the pallet is designed with a material that prevents contamination,” Stoller explains. Paxxal anticipates increasing demand for track and trace capabilities in the food supply chain, and its pallets have capabilities for both radio frequency identification (RFID)

and barcode tracking. “In adjacent supply chains, like pharma where the average item price can be much higher than grocery, we see track and trace being deployed sooner,” the Paxxal executive says. Retrieving pallets is always concern, making leakage a major challenge for poolers and others in the pallet business. “The key to eliminating leakage is to have great controls in place that provide incentives for all trading partners to maintain the integrity of the system,” Stoller adds.

ORBIS For totes and pallets used in the food service industry, there is a significant focus on cleanliness, and ORBIS has designed its products for cleanability, says John Ledwith, national account manager for the company. The 2017 trends in food processing operations report from

www.foodlogistics.com

5/9/17 3:58 PM


PMMI, the Association for Packaging and Processing Technologies, reports 73 percent of surveyed food processors desire the ability to clean products the most. “Standardized, cleanable reusable packaging keeps plants and equipment clean,” Ledwith says. ORBIS’ hygienic reusable packaging has several unique characteristics, including onepiece design and an  With a open deck for flowgrowing focus through for easy on cleanliness cleaning and fast in the foodservice drying. They also industry, feature minimized ORBIS has areas for contamdesigned inants to collect, its latest with no hidden products for cleanability. cavities or hollow

areas, as well as contoured surfaces and corners that reduce the risk of product damage from punctures or snags. Within foodservice, it also is important that pallets and totes are non-porous, don’t absorb moisture or odor and are non-rusting. Asset tracking has taken on greater importance within the food industry. “In most food segments, we are finding that food processors are looking to track entire pallet loads, not necessarily at the case or tote level,” Ledwith says, adding that an exception includes high-volume segments, such as a bakery, where it is critical to keep trays in use at all times. Most successful pallet retrieval programs are based on a very tight, controlled loop where all supply chain partners have collaborated on the packaging program and understand the benefits. “These companies take the time to train their associates to properly manage packaging assets, including receiving, handling and return,” Ledwith says.

Reusable totes can be used for home grocery delivery as well as online grocery pick-up applications, which is a growing segment of the foodservice industry. “In this application, retail associates use picking carts and totes to pick merchandise. Consumer orders are staged in totes and transported to the consumer pick up area with mobile pallets or dollies,” Ledwith adds. Some of the benefits of reusable constrainers include the cost savings and reduced environmental impact. Ledwith suggests food processors conduct assessments to see the cost savings and environmental improvements, which help them understand the savings related to transportation, product throughput, and reduced solid waste and greenhouse gas emissions. “Long service life, combined with cleanability, make reusable packaging an economic and environmentally strong solution for today’s food processors,” Ledwith concludes.

Mindy Long is a writer specializing in transportation and logistics. She has been writing professionally for more than 15 years.

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MAY 2017 | FOOD LOGISTICS

29

5/9/17 3:59 PM


SECTOR REPORTS TRANSPORTATION

BY AMY WUNDERLIN

THE FOOD AND BEVERAGE INDUSTRY

LOOKS TOWARD RAIL AS AMERICAN ROADWAYS CONTINUE TO DETERIORATE Rail freight finds a seat at the table, thanks to old roads and highways, and its own environmental efficiency and consistency.

U

nion Pacific’s acquisition of Railex LLC’s refrigerated and cold storage distribution assets in January shook up the way the food and beverage industry looks at moving goods. The oldest form of transportation, rail freight has always played an important role in the supply chain, but a report, “Rail Freight Transportation Market in North America 2017-2021,” released by Research and Markets in January, forecasts the market in North America to grow at a compound annual growth rate (CAGR) of 5.57 percent between 2017 and 2021. The momentum is thanks, in part, to increased congestion on roads The Association of American and highways due Railroads estimates that, from to inadequate 1980 to 2016, the U.S. freight infrastructure, making the railroad system reinvested transportation of more than $630 billion, over North investing $26 goods American roads billion annually more difficult. The in the last five result is a delay in years alone. deliveries, high fuel consumption—and for the rail and intermodal sector—a flood of shippers making the switch to rail transportation as it proves to be increasingly cost-effective and reliable. Taking advantage of this surge in rail transportation, startup Tiger Cool Express saw a gap in moving fresh produce, opening its doors in 2013.

30

The rail freight market is expected to

FOOD LOGISTICS | MAY 2017

FLOG0517_30-33_TRANSsecRPT.indd 30

grow by almost

6% by 2021.

“The business plan was designed around food stuff, specifically produce and processed foods, because produce was the last commodity that had very long lengths of haul because it is grown in places that are geographically and seasonally advantageous, but it is consumed where the people are,” explains Tom Finkbiner, CEO of Tiger Cool Express. “It’s grown in California, Washington and Mexico, and it is consumed in the upper Midwest and the Northeast. It is the last commodity with a long length of haul—averaging over 2,000 miles— that the rails did not really address. It was our idea to fill that gap.”

Invested in the Future And though he agrees the condition of American roadways play a part in rail’s rebirth, he believes the growth rail and intermodal are seeing in the food and beverage industry is largely due to the transportation mode’s consistency of service, which stems, ironically, from the rail network’s large invest-

ment in infrastructure over the last 40 years. “The condition of the road service in the United States is poor, but the condition of the rail beds and the railroad lines is better than it has ever been,” he says. “A steel wheel and a steel rail ride is much better than a rubber tire on a badly pitted concrete road.” The Association of American Railroads (AAR) estimates that, from 1980 to 2016, the U.S. freight railroad system reinvested more than $630 billion, investing $26 billion annually in the last five years alone. It’s important to note, however, that unlike alternative modes of freight transportation, which are maintained with taxpayer money, the vast majority of U.S. rail infrastructure is privately owned and preserved by the rail industry. The privatization of the railroad can be traced back to the deregulation of rail freight under the Staggers Rail Act, which was passed by Congress in 1980. Free from government price setting, railroad

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SR: TRANSPORTATION continued

Rail freight has a lower

impact on the environment and provides 55 percent more fuel efficiency.

32

companies were able to find new customers and charge higher prices if they could promise reliability. They set about investing in their infrastructure in order to provide it.

Environmental Impact Another major driver for the transport of food via rail is its environmental efficiency. Compared with other modes of transportation, rail freight has a lower impact on the environment and provides 55 percent more fuel efficiency. In addition, transportation through rail freight reduces highway congestion, which directly results in lower greenhouse gas emissions and pollution levels. Energy efficiency and speed appear to be a significant factor in Union Pacific’s acquisition of Railex, a refrigerated rail service and third-party logistics leader that will play a key role in Union Pacific’s

FOOD LOGISTICS | MAY 2017

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Food Network, transporting fruits, vegetables and other temperature-sensitive cargo across the United States. “The Railex team developed a fantastic business changing how fresh food arrives on America’s tables, offering food shippers fast, reliable door-to-door rail-based transportation solutions,” says Brad Thrasher, vice president and general manager of agricultural products at Union Pacific. “The integration of [Railex’s] highly efficient cross-dock

facilities and logistics capabilities into Union Pacific’s broader Food Network allows us to offer our customers increased access to a wider range of capacity and service solutions in a rail-centric cold chain.” Cost is the most obvious benefit of rail’s efficiency, but not the most important, according to Finkbiner. “Steel wheel on steel rail is the most efficient form of transportation, so you have a definite price advantage. But secondly, you have an environmental and safety advantage.”

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Finkbiner adds that “on a carbon dioxide or fuel basis, intermodal is four to one,” meaning you use 4 gallons in the trucking business to every one in the intermodal business to move traffic on a comparative basis.

Gaps Left to Fill Railroads carry huge amounts of corn syrup, French fries, canned goods, pasta, fresh fruits and vegetables, corn and soybean oil, frozen chickens, sugar, beer and wine. Additionally, they carry several hundred thousand carloads of soybean meal, dried distillers grains, and other types of animal feed and pet food. The AAR reports that, in 2015, U.S. Class I railroads carried 1.4 million carloads of grain—5 percent of total rail carloads—or 139.1 million tons. Despite these numbers, railroads are still far from the food and beverage industry’s favorite mode of transportation, facing strong competition from trucks and barges to carry grain. According to United States Department of Agriculture (USDA) data, the truck share of total U.S. grain transport was over 60 percent in 2013 [most recent data available], compared with just 25 percent for railroads and about 10 percent for barges. Railroad revenue from grain in 2015 was almost $5.3 billion—7.5 percent of total revenue. Unsurprisingly, the Research and Markets report states that one of the major factors hindering the growth of the market further is the increase in rail freight congestion. Increased transportation of freight volume of commodities across the United States, and the growing trade activities between the United States and Mexico are resulting in an increase in the volumes of freight being carried across railroads. This, in turn, results in increased traffic on the rail freight lines. A gap also exists in the length of haul. Something Finkbiner doesn’t see changing anytime soon www.foodlogistics.com

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because of constraints in service and geography. He adds that rail works best for anything with a long length of haul. “Currently, with the very low cost of trucks, rail really works best with over 1,500 miles in length of haul.” But if people are able to understand those challenges and the requirements of what they are shipping, significant cost savings can be

had using rail freight transportation. “Using rail, intermodal or a box car is different from using a truck, and people need to understand that. It’s not difficult; it’s just different,” Finkbiner explains. “If people recognize the differences and utilize them properly, they can get a better quality delivery at a lower cost to them and that really is what everybody is looking for.”

Fresh? How fresh? Whether you are farmer, fisherman, trucker, or chef; or an exporter of food to the US, change is all around you. Air and water temperatures are rising. US FDA product safety regs are kicking in. Young buyers are spurring a fast-paced movement toward freshness, transparency and trusted high quality. Freshtime. Sensor tags. Software. Analytics.

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SECTOR REPORTS SOFTWARE & TECHNOLOGY

BY AMY WUNDERLIN

ERP IN THE CLOUD The comfort of on-premise ERP is making way for the low infrastructure costs and improved accessibility of cloud-based technology.

T

he implementation of an enterprise resource planning (ERP) system is becoming a necessity for many companies throughout the food supply chain as the impacts of the Food Safety Modernization Act (FSMA) continue to ripple through the industry. Now more than ever, companies are looking to their ERP to maintain compliance with FSMA requirements—though that system may soon take on a new shape. ERP systems have come a long way since their first implementation in the early 1990s, when the only choice was an on-premise solution. The majority of companies still prefer the original, but as the technology evolved over the last 20 years, vendors are marketing more and more options, such as cloud-based systems that can be distributed through the Internet and accessed by end users via web browsers. According to an Oracle + NetSuite article, “How Cloud ERP Compares to On-Premise ERP,” the basic difference between on-premise and cloud ERP is all about location. “On-premise ERP solutions are installed locally on your company’s hardware and servers, and then managed by your IT staff, while cloud ERP—also called software-asa-service (SaaS) ERP—is provided as a service. With this type of deployment, a company’s ERP software and its associated data are managed centrally (in the Internet cloud) by the ERP vendor, and are accessed by customers using a web browser,” the article explains.

For Your Benefit Cloud-based ERP solutions offer four key advantages, including

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FOOD LOGISTICS | MAY 2017

FLOG0517_34-37_Software.indd 34

cost, customization, performance and accessibility, and deployment speed: ❶ Cost. On-premise ERP systems usually require a large upfront cost to purchase and manage. And without a large or experienced IT staff, additional investment in personnel and training can add up quickly. According to the Oracle + NetSuite article, initial costs for cloud-based ERP typically are much lower because you simply implement the software to your requirements and then access it through your computer’s Internet connection. “The cloud ERP provider hosts and maintains all of the IT infrastructure for you, and ensures the system is always running, and the data is secure and that product enhancements are rolled out painlessly without breaking your previously implemented customizations.” Over time, those IT savings add up. When comparing the total cost of ownership (TCO) of the two solutions, a study, “The TCO of Cloud Computing in the Small and Medium Business (SMB) and Mid-Market Enterprises: A Total Cost of Ownership Comparison of Cloud and On–Premise Business Applications,” by Hurwitz & Associates, found that cloudbased ERP can cost 50 percent less than on-site ERP for a 100-employee company over a four-year period. ❷ System upgrades and enhancements. On-site ERP software can be customized, but those customizations often are tied to a company’s current software deployment and are not easy to re-implement with future versions, explains “How Cloud ERP Com-

pares to On-Premise ERP.” “As your ERP provider releases new product updates and enhancements, your previously implemented customizations will be wiped out when you upgrade and your IT team will have to start customizing from scratch again. That’s the main reason many companies simply avoid upgrading their on-site ERP software and just settle for running their business on out-of-date technology,” the article explains. Black River Produce, a fresh food distributor, fell into the second scenario before transitioning to a browser-based system by VAI, a software developer that specializes in ERP. As the business quickly expanded, its original ERP could not keep up with the business’ growing demands. “We scouted out different software systems for about a year and a half before choosing VAI S2K Enterprise for Food,” says Sean Buchanan, the president of Black River Produce. “Our goal was to really transform the way that we do www.foodlogistics.com

5/9/17 3:19 PM


business, to be more efficient, to be able to service our customer better, to be able to manage our product and quality better, to get a real-time accurate inventory count, to gain online portal access. Everything that our business wanted to do, we felt confident that, with VAI guiding the software programming, it was going to get there.” One of the most innovative tools S2K’s browser-based software provides is mobile access, which enables every user in the organization immediate anytime, anywhere computing on any device. By delivering software by browser via the

cloud, VAI can provide the user with a single sign-on of all web applications, which simplifies the user experience, increases productivity and minimizes training costs. Additionally, cloud ERP solutions continually are upgraded by the provider, so a business is always using the latest, most advanced version of software, and any implemented customizations and integrations automatically carry forward. ❸ Improved system performance and accessibility. Cloud ERP often delivers better performance than on-premise solutions, which can mean better application availability. For example, Oracle + NetSuite commits to 99.5 percent availability for its customers, has a 99.97 percent average uptime performance over the past 12 months and makes uptime performance information available at all times online. “Typically, companies in [the food and beverage] segment are a little slow in adopting technology, but we are seeing companies move to

Vormit ag Associates, Inc.

the cloud more and more, taking advantage of the built-in infrastructure that the cloud provides,” adds Joe Scioscia, vice president of sales at VAI. “One of the things the cloud provides that is very attractive is high availability and disaster recovery, meaning that, by being in the cloud, they can really improve their uptime and have less of a change for any type of system outage.” There is, however, some Cloud-based ERP can resistance from companies cost 50 percent that are 24/7 operations, beless than on-site ERP cause being up and running is for a 100-employee critical to them. Scioscia says company over a some companies feel that, if four-year the server is on premise, period. there will be less chance for downtime related to an Internet outage. Black River Produce is one example of a 24/7 operation that saw how the benefits of a cloud-based system may outweigh the risks. “The food distribution model is changing at a very fast pace and the technology for it is changing very

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SR: SOFTWARE & TECHNOLOGY continued

biggest restriction

The

on moving to the cloud is still the availability of

high-speed Internet.

quickly. VAI has been able to keep up with those changes and keep us ahead of the curve,” Buchanan says. ❹ Deployment speed. Because cloud ERP requires no additional hardware, deployments usually take three to six months, compared to the 12 months it typically takes to implement an on-premise solution. Black River Produce, which Buchanan says is one of the most complicated food distributors in the market, implemented its VAI solution from the ground up in about 10 months. The seven-daya-week operation was able to remain open throughout the entire process and the president says “customers didn’t notice any large hurdles” while Black River Produce adapted to the new system. “From an implementation standpoint, cloud solutions let you get up and running a little quicker than an on-premise because, basically,

you’re plugging into an infrastructure that already exists and you can get started right away,” states Scioscia. “When you deal with on-premise servers, you have to set up the servers, load the servers, integrate your network with the server, so from an infrastructure standpoint, on-premise takes a little longer to get up and running.”

There’s No Reward without Risk The benefits of a cloud-based system are significant, but many companies remain concerned, especially in those areas where high-speed Internet is limited, notes Scioscia. “The biggest restriction on moving to cloud is still the availability of highspeed Internet in a location,” Scioscia says. “Obviously in major cities, high-speed Internet is readily available, but as we span out across the United States or North America, there are still locations that don’t have good, reliable high-

speed Internet. So if you don’t have it, cloud is not really an option.” Another fear many companies have in regard to cloud-based solutions is the protection of data. “Some people don’t like to put things in the cloud because they are afraid of moving their data out to the open world,” notes Scioscia. “But security has really evolved in most cloud solutions, where companies today are much more protected from a data standpoint than they’ve ever been in the past.” Because it’s their core competency, solution providers like Oracle + NetSuite make securing their systems a top priority by providing strong, industry-standard data security certifications, such as compliance with the Payment Card Industry Data Security Standard (PCI DSS) and Statement on Auditing Standard No. 70 (SAS 70). Moreover, they follow other rigorous security, disaster recovery and backup procedures that would be cost-prohibitive with on-site ERP solutions.

The Software Used By Successful Food Distributors

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FOOD LOGISTICS | MAY 2017

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MAY 2017 | FOOD LOGISTICS

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5/9/17 3:20 PM


SECTOR REPORTS OCEAN PORTS & CARRIERS

BY CARRIE MANTEY

WHAT’S ON THE

OCEAN HORIZON? There are plenty of promising omens and technologies to help ocean carriers come out on top.

38

W

hile the shipping news of the day may revolve around ocean carrier alliances and pricing, it fails to report on all of the optimistic harbingers on the ocean horizon.

Maersk Setting a New Course In 2016, A.P. Moller – Maersk set a new course for the future, determining to focus on container shipping, logistics and ports. Its top priorities for 2017 were integrating its transport and logistics businesses, trimming costs in APM Terminals and Damco, and closing the Hamburg-Süd acquisition. In December 2016, Maersk Line announced its intention to acquire Hamburg-Süd, the German container shipping line, and in March 2017, Maersk Line announced the signing of a sale and purchase agreement with the Oetker Group, owner of Hamburg-Süd. At the end of April, the sale and purchase agreement for Maersk Line’s acquisition of Hamburg-Süd was approved by the boards of Maersk Line and the Oetker Group. “Today, we have taken a decisive step toward the shared future of Maersk Line and Hamburg-Süd.

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We have confirmed the anticipated synergies, and we are convinced that our plan to maximize customer retention is the right path forward. I have no doubt that together we can develop new competitive products to the benefit of our customers and exploit operational synergies. The acquisition is cementing our position as the largest and leading carrier in container shipping,” says Søren Skou, CEO of Maersk Line and A.P. Moller – Maersk. The acquisition is in line with the Maersk Line’s growth strategy. Combined, the two companies may be able to realize operational synergies in the region of $350 to $400 million annually over the first couple of years following completion of

the transaction. The cost synergies are going to primarily be derived from integrating and optimizing the networks, as well as standardized procurement. In addition, APM Terminals’ global portfolio may benefit from increased volumes, specifically the many investments made in the Latin America region. Hamburg-Süd is going to maintain its own structure hereunder its separate brands and is expected to deliver high customer retention, adding to Maersk Line’s growth agenda. The combined network is going to include more weekly sailings, faster transit times, more port calls, more direct port-to-port calls and less need for transshipment, to the benefits of both Maersk Line and Hamburg-Süd customers. With the acquisition, Maersk Line and www.foodlogistics.com

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Hamburg-Süd have a total container capacity of around 3.9 million 20foot equivalent units (TEUs) and an 18.7 percent global capacity share. The combined fleet consists of 743 container vessels. Maersk Line expects to close the transaction by the end of 2017. Until then, Hamburg-Süd and Maersk Line plan to continue business as usual as separate and independent companies.

Crystal-Clear Transparency in Ocean Freight Delays are not uncommon in the ocean freight market. According to an iContainers study, around 20 percent of containers fail to load on time, and 70 percent of shipments arrive late. Such incidents affect the competitiveness and reputation of companies to whom maritime goods are entrusted. In an effort to stem those delays, iContainers, a 100 percent online freight forwarder, unveiled the latest digital extension to its online www.foodlogistics.com

FLOG0517_38-41_OceanPorts.indd 39

Direct Keep it simple. Long Beach is the fastest, most direct way to move goods between the Far East and most of the U.S. That’s all you need to remember: Port of Long Beach. polb.com/trade

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5/9/17 4:21 PM


SR: OCEAN PORTS & CARRIERS continued

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platform. The new enhanced feature, Track & Trace, enables shippers to pinpoint the exact location of their cargo 24/7 in real time, and injects a new level of efficiency and transparency into the ocean freight industry. With Track & Trace, shippers may be able to make better decisions because real-time shipment status updates allow them the flexibility to adjust their logistics chain accordingly. The service provides real-time container tracking, status updates via push notifications, depicting a more accurate overview of their logistical timeline. Track & Trace combines extracted data from iContainers’ data and integrates them with data from other third-party information providers. This data is then consolidated, sorted and displayed on a user-friendly interface and fed to shippers via Track & Trace. From inland pickup to arrival at destination, shippers can keep up with their shipment’s status changes at any time, granting them greater control of their logistics chain from start to end. Track & Trace works with any shipping carrier. Shippers no longer have to contact corresponding carriers to locate their cargo. That way, they are able to see which carriers can better fulfill

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ADVERTISER INDEX ADVERTISER.................................................PAGE

their needs as they may have the capacity to review potential delays. Additionally, via their iContainers account, they can access information, such as shipment documentation, contracting rates and booking history, and obtain personalized shipping statistics. “Our commitment is to give as much transparency as we can to help shippers make the best decisions for their logistics,” says Carlos Hernández, iContainers co-founder. “With this enhanced version of Track & Trace, we expect to obtain an improved understanding of the shipping status, which will help us comprehend which carriers provide better services. We’re pursuing the dream to have an index of punctuality like the airlines industry.”

Predicting the Stormy Weather of Container Supply and Demand and Customer Behavior NileDutch, a container and breakbulk shipping company that provides liner services between West African ports and Europe, South Africa, South America, North America and Asia, sought to improve its container flow and vessel fleet utilization. With predictive logistics from ClearMetal Inc., a company that uses machine learning and artificial intelligence (AI) technology to unlock efficiencies for global trade, NileDutch was able to access advanced predictions of customer bookings and container flow movements. “Managing fleet and container utilization against a backdrop of fluctuating demand in today’s highly complex market can be challenging,” says Mark Kraaijenbrink, director of information and communications technology for NileDutch. “We are always seeking innovative solutions to gain a competitive edge, www.foodlogistics.com

FLOG0517_38-41_OceanPorts.indd 41

 With the acquisition, Maersk Line and Hamburg Süd have a total container capacity of around 3.9 million 20-foot equivalent units and an 18.7 percent global capacity share.

and ClearMetal’s machine learning technology for predictive logistics appears to provide advantage over any other industry methods and tools we’ve seen.” NileDutch will leverage ClearMetal’s Data Intelligence Platform to: • Make better sense of its supply chain data. • Deploy industry-tailored machine learning-based technology to predict logistics based on granular supply chain performance history, data and patterns. • Leverage deep simulation outputs to predict container supply and demand and customer behaviors on the part of freight forwarders and shippers, earlier and with far greater accuracy than ever before. “ClearMetal’s approach to harvesting data and overlaying advanced technology will quickly move us to the forefront in applying predictive logistics and AI to our commercial and operational activities,” continued Kraaijenbrink. “This results in better service for customers and greater opportunities for us to grow.” According to Adam Compain, CEO of ClearMetal, “We’re excited to partner with NileDutch to deliver differentiated technology that further accelerates the company’s growth and profitability, while becoming a more effective partner to its customers. NileDutch is a very forward-looking company that shares our belief that the future of the supply chain will be about data intelligence over scale.”

Cabka North America............................................ 24, 40 Choptank Transport....................................................... 32 Columbia Machine Inc......................................................8 Cubic Designs Inc............................................................ 27 Ford Motor Company.................................................. 2, 3 Great Dane Trailers........................................................ 44 Infratab Inc.................................................................. 33, 40 KINEXO................................................................................ 15 Lineage Logistics.............................................................. 21 LoadExpress....................................................................... 20 NECS Inc.............................................................................. 36 ORBIS Corporation................................................ 29, 40 Penske Truck Leasing........................................................5 Port of Long Beach.......................................................... 39 Q Products & Services................................................... 23 SICK....................................................................................... 37 Smith Corona..................................................................... 25 South Carolina State Ports Authority....................19 Swisslog................................................................................ 13 TMW Systems Inc............................................................ 18 TODCO................................................................................ 26 TranSolutions Inc............................................................. 41 United States Cold Storage........................................ 12 Utility Trailer...................................................................... 31 Viking Cold Solutions..................................................... 11 Vormittag Associates Inc. (VAI).................................35 WITRON................................................................................. 7 Yusen Logistics..................................................................... 9

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FOOD (AND MORE) FOR THOUGHT

BY ROBERT A. NORTON, PH.D.

If Tension Between the U.S. and North Korea Escalates, How Will Food Logistics Be Impacted? BY ROBERT A. NORTON, PH. D.

T

NORTON

ensions between the United States and North Korea seem to be escalating as fast as the rhetoric, and the two are not disconnected. So what might be the effect on food logistics if hostilities intensify? Change will be the constant. In all scenarios, shipping likely will be negatively affected, and food ingredients and commodities coming from the area of potential conflict could be interrupted, perhaps significantly. Companies would be wise to prepare for the potential interruption sooner rather than later. So what are potential scenarios, their likelihood and the possible outcomes on food logistics? Let’s look at these from worst-case scenario to best:

SCENARIO ❷ Robert A. Norton, Ph.D., is a professor at Auburn University and a member of the Auburn University Food Systems Institute’s core faculty. A long-time consultant to federal and state law enforcement agencies, the Department of Defense and industry, he specializes in intelligence analysis, weapons of mass destruction defense and national security. For more information or for more detailed discussions about specific security-related needs, he can be reached at nortora@ auburn.edu or by phone at (334) 844-7562.

42

War between the United States, its allies and North Korea breaks out. Even if the conflict remained conventional, South Korea’s capital of Seoul could suffer millions of casualties. The effect on the world economy would be beyond massive. In the event of nuclear war, casualties and economic effects would be magnitudes greater. Regardless of the rhetoric, the nuclear option is still remote. Such a scenario would dramatically affect maritime activities in the Sea of Japan, the Yellow Sea, into the Korean Bay and perhaps as far south as the Philippine Sea, as well as far into the Pacific. Maritime companies involved in sea trade likely would be kept from entering the war zone, significantly disrupting operations. Those caught inside the war zone might suffer losses of ships and personnel. Companies depending on

FOOD LOGISTICS | MAY 2017

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food ingredients and commodities from the region would certainly be impacted negatively. Is this a high-probability scenario? No, because both the United States and China know the potential for disaster.

SCENARIO ❶ China topples the North Korean government, replacing Kim Jongun with someone more palatable to its leadership. China has been playing a dangerous game for decades, enabling some of the arms development by North Korea in an attempt to curry influence. That strategy is starting to backfire as North Korea is showing a propensity for ignoring China’s wishes. China’s patience for this is growing short, making the likelihood of something happening soon more probable. China’s collaboration with North Korea is far deeper than the American public is aware, so the Chinese will want to keep past relationships with North Korea hidden. A coup will be swift, with evidence destroyed. In some ways, this scenario might be the most desirable, but would confront the world with a massive humanitarian problem. China and other nations would have to contend with a population of immense dichotomies: those in the military and political leadership are well fed, while everyone else suffers. Starvation and deprivation are very real in North Korea, and fixing the problem

requires a long-term, expensive effort.

SCENARIO ❶ The status quo is maintained and no hostilities break out. In this increasingly unlikely scenario, the rhetoric would continue for a while, then slow down and reappear at some later date as it has for decades. North Korea would continue to pursue nuclear weapons and a functional intercontinental ballistic missile that could deliver a nuclear weapon into North America. Eventually, the situation would degrade into either scenario No. 1 or 2, so long-term effects would be significant. The new American administration is making clear that the status quo is no longer acceptable. There is an emphatic demand for change and the world is watching every move. The next likely event would be a shoot-down of a North Korean missile, leading inexorably toward scenario No. 1 or 2. The world economy also will most assuredly be impacted, in addition to food supply chains. The magnitude and longevity of that impact is entirely dependent upon decisions now being made in Washington, Pyongyang, and perhaps most importantly, in Beijing. We can only hope the decision will promote a peaceful resolution, with minimal economic and social impacts. Few ever win in a real shooting war. Everybody loses in a nuclear war. www.foodlogistics.com

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Food Logistics May 2017  

Food Logistics is the only publication exclusively dedicated to covering the movement of product through the global food and beverage supply...