Facing a deflated labor market and rising costs, cold storage warehouses are using efficient automation to keep up. Dense storage and happy employees are essential to success as the cold chain climate keeps changing.
As winter approaches, so does the timeless tradition of complaining about it. We’ll need to keep coats and mittens handy, leave time to warm up the car, and re-learn how to walk carefully in heavy boots.
It must take a lot of patience for cold storage freezer employees to tolerate all this griping.
For them, -20 degrees is a daily fact of life. The conditions for workers in freezers and coolers also take a toll on their managers, who desperately want employees to stick around and help meet growing demand.
“Labor is the most expensive component, and it’s extremely hard to come by,” says Matt Rivenbark, Food & Beverage Sales Director for the Logistics Solutions division at Schaefer Systems International. In this climate, many cold storage facilities are considering automated storage and retrieval systems (ASRS).
For years, he adds, every prospective customer was concerned with return on investment (ROI). Most U.S.-based companies once aimed for returns within one to three years, but most automated projects pay out somewhere between three and seven years. “There was a lot of consideration that went into whether or not to automate, and it was all about ROI, ROI, ROI,” Rivenbark recalls. “Over the past 18 months, what I mostly hear from customers now is they can’t even get people to meet their demand.”
SSI_GCCA_1: Cost Shares of North American Refrigerated Warehouses, based on FY2019 IARW Productivity & Benchmarking Survey. Source: GCCA
Automated storage reduces staffing requirements for cold storage facilities, but an AS/RS is rarely intended to displace existing workers. Rivenbark explains jobs aren’t designed out, they’re designed up. People still do these activities, he says, but from the comfort of a goods-to-person (G2P) workstation in an above-freezing or even ambient environment.
“People are more likely to stay working with you,” he suggests, “when they don’t come out of the freezer with frozen mustaches.”
Aside from retaining labor, reducing energy costs is a top concern for cold storage warehouses. Energy is the second highest expenditure in a cold storage facility, Rivenbark says, and automation allows very strict separation of temperature zones. By comparison, conventional product storage requires aisles for people and equipment, a room for pallet storage, lift-off clearances for each storage location, and massive air loss each time a forklift enters and exits a space. Condensing all of that in a rack-supported high bay automated solution creates a very dense footprint that limits the amount of energy needed to keep it cool.
According to data from the Global Cold Chain Alliance’s Cold Chain Index (CCI), electricity costs are up for the second consecutive quarter, at 9.8% in Q2 2021 over the same quarter in 2020. In the past year, 23 states saw electric power cost increases of more than 10%. Six states are up by more than 20%, and two states (Montana and Louisiana) spiked by more than 30%.
Because every penny counts, automated storage and retrieval systems have several new features designed for added efficiency. Counterweights in crane masts augment their lifting power, which reduces the amount of energy needed while reducing the amount of heat generated. Similarly, the system will adjust its speed -- and therefore its energy consumption and heat production -- according to demand. “When you run equipment in a cold environment your HVAC system has to work even harder against that to keep air cool,” Rivenbark says. “That’s why our products have some pretty nifty green tech built into them.”
Although managers are empowered to control operational expenses inside the building, they are also subject to trends throughout the cold chain. By pushing the cold chain to achieve greater accountability, the Food Safety Modernization Act (FSMA) is another factor that makes an AS/RS appealing.
Automation can track and authenticate products, Rivenbark says. For example, say a product has to be back in storage within 45 minutes after an AS/RS brings it from the freezer to a picking activity in a cooler. The moment it enters warmer air, the clock begins ticking. As soon as it even gets close to that 45-minute limit, the system will start routing it back to the freezer.
“In general, there’s been a stigma around frozen food for so long, whether it’s seen as not fresh or not of good quality,” Rivenbark observes. “But as companies have worked to maintain that cold chain from the packaging line all the way to the store shelf or doorstep, it has made frozen food a more viable and more respected commodity.”
Of course, this comes at a time when consumer habits have shifted drastically. Consumer preference for frozen food is now in high demand since the pandemic. Frozen food has now become a much bigger commodity at the storefront.
“For distributors that deliver to restaurants, that channel obviously changed a bit,” Rivenbark says. “For those who distribute to supermarkets, that’s really where the tectonic shift has happened to reroute that volume through different channels that aren’t really built to sustain that level of demand.”
Meanwhile, the North American cold storage market size is expected to more than double, topping $86 billion by 2028 while expanding at a CAGR of 10.7%, according to Research And Markets.
“There’s insane growth happening and it’s pushing a lot of companies to automate to create more capacity where it’s really lacking,” Rivenbark says. “If you follow this at all, basically all the major 3PL players are investing in automated solutions because there is simply not enough capacity.”
SSI_GCCA_2: Cold Chain Index by Quarter during 2019-2021. The percentages are growth rates in the quarter relative to the same quarter in the previous year. Source: GCCA
Food is a low-margin business, and Rivenbark says some manufacturers are considering serving clients directly from their manufacturing facilities or warehouses. “They are tired of paying a middleman and wonder how to bring this channel into their own distribution network,” he says.
It’s hard for manufacturers to change their processes so radically. Instead of shipping bulk chicken to restaurants, for example, a facility must support much more complexity in order to process, package and deliver to a grocery store.
“Everybody is still trying to figure out -- and I don’t care for this term -- what’s the ‘new normal’ going forward. How much will these trends stick?” Rivenbark wonders. “So many people were hesitant to shop online, like my parents who prefer to write checks at the grocery store. But now they do basically all of their grocery shopping online and I don’t think many of them will go back.”
Fill out our contact form to speak with an automation expert.
Additionally, download our best practice guide to learn more about getting started with automation!