Cold Storage Warehousing: Development, Safe Operation, And Growth

Supply Chain and Logistics 9 min read
Cold Storage

All over the globe, supply chain companies are changing their way of working to include the use of cold stores. A dual-pronged attack on the norms of international logistics has caused this: the fragility of COVID-19 vaccines and new interest in on-demand fresh food. This is set to continue for the foreseeable future, too. While the continued need for vaccines is a clear priority for most countries, the most pressing need comes from the food industry.

Research conducted by industry consultants McKinsey reveals the scale of demand. The food delivery industry typically grew by eight percent per year leading up to 2020. Since then, revenues have doubled year on year. It's noted that this includes hot food delivery, such as fast food and takeout; but, remember, those industries rely on an efficient fresh produce supply chain too. As a result, the pressure for cold stores in the supply chain has never been greater.

Investment opportunities

The value of cold storage warehousing has ballooned to the point where the industry is seen as an investment opportunity. Commercial real estate typically focuses on mixed-use commercial/residential lots, and tech industry focused office developments. Wholesale change has been affected by the need for more cold storage.

A Wall Street Journal profile of one cold storage company put into focus just how much extra investment the industry is receiving. Growth forecasts designed to attract investors to the company put yearly revenue at $200 million; by the end of 2020, that had more than doubled to $461 million. The country cannot get enough of the food delivery industry, and it shows.

Simply put, any business involved in the business of food needs cold stores as part of its supply network. There may be opportunities for companies outside of that sector to be had too; supply chain businesses included, who can do a handy job in providing services to the food industry. Establishing a cold store does require some thought, however.

Costing the operation

It's important first to consider the cost of establishing a cold store warehouse. The need for refrigeration, often sub-zero, at scale, can be prohibitively expensive. It will typically cost three times more to establish a cold store warehouse than the alternative with less precise climate control, so this needs to be factored into any business plan. According to one New York Times report, storage is placed at roughly $150 per square foot within cold storage. However, there is sense in this investment; frozen food sales were up 21% in 2020. This shows that consumers, and the market, will make use of the space, and it is a worthwhile long term investment.

Costs aside, there is the matter of logistics. The USA has faced supply chain problems in the construction industry since the pandemic's beginning. While this is now easing, there will be delays in getting any construction project off the ground. Where possible, adapt existing spaces to become cold stores; this will enable the use of modern technology, rather than the need for ground-up building, and provide resilience against wider supply chain problems.

Understanding cold storage warehousing

Given the precise temperature control required by cold storage warehouses, it's important to understand exactly how they operate. According to industry veterans Dexion, this can be separated into two main factors: the cold storage building and the racking within. How these are arranged is crucial to the operation of the warehouse. It needs to be kept in mind when establishing the purpose of the cold store. Typically, warehouses fall into one of two categories:

- Refrigerated storehouses, with temperatures ranging from 32 to 50 degrees Fahrenheit

- Frozen storehouses, with temperatures between -22 and 32 degrees Fahrenheit

Freezer Food Storage

Some stores fall outside of these ranges, but these are typically quite specialized and unsuited for general market service. Indeed, freezer warehouses need to operate at strict temperatures to ensure absolutely no spoiling; refrigerated operations generally are a little less fine-tuned and can have more day-to-day variation. But, again, this can help to cut costs, especially in hotter states where daytime temperatures can put stress on cooling systems.

Understanding the distinction in what your warehouse can provide is crucial in promoting the cold storage warehouse to potential partners. For example, a frozen food business will require absolute climate control to ensure the food doesn't spoil. Similarly, a fresh food business - dairy, for instance - will require temperatures within a defined range. On the other hand, a company dealing in dry goods, or niche food industry products like cured meats, may have less strict requirements.

Achieving food safety

Maintaining proper temperatures will, in turn, help to maintain food safety within the warehouse environment. However, there are certain threats posed to this crucial part of the process, specifically in climate regulation.

A good first step to take is the installation of sensors. Having temperature sensors throughout the warehouse operation and running them not just where the food is stored but also at key areas can help regulate temperature. Doorways provide a good example of where climate control can be at risk. Many warehouses have 'airlock' style systems, where moisture and temperature will find it more difficult to permeate. Still, there remains the risk of temperatures moving to unacceptable levels wherever there is outside airflow. Having a proper sensor system will enable the warehouse operator to have complete confidence that the climate is being maintained.

This level of climate control is important for product quality but essential for frozen goods and fresh foods. Therefore, maintaining the correct temperatures is the most important factor in a cold storage warehouse. What's also important is how the warehouse manages personal health risks; cold storage often carries an enhanced risk level that doesn't solely concern the dangers of cold.

Risks to personal health

Cold storage warehousing poses several challenges when it comes to personal safety:

- Protection from cold; temperatures inside warehouses are significantly below comfortable and can be dangerous

- Fire risk; cold storage warehouses carry the same fire risk as other stores, despite the advantage the cold offers.

- Chemical hazards; most cold storage warehouses rely on the use of ammonia and other coolants, which are often hazardous

Effectively meeting each challenge will ensure the warehouse provides a safe working environment. This will give employees assurance, meet regulatory demands, and ensure the business can operate healthily.

Appropriate wear

The most fundamental and perhaps easiest step is to provide workers with the correct apparel. This can either be in-house equipment designed for the working environment or high-quality third-party equipment. Once again, having intimate knowledge of the warehouse operation, the temperatures it uses, and an in-depth sensor network to monitor conditions will help to protect workers and provide a fine-tuned approach to workplace apparel.

It's important to get the balance right. Working in a cold storage warehouse can be difficult and physically taxing work. However, putting workers in too many layers of clothing can raise the risk of overexertion and dehydration; it's better to provide breathable clothes that allow workers to stay safe from the risks of cold and frost within the warehouse while still being comfortable.

Minimizing fire risk

This also ties into minimizing fire risk. Cold temperatures are a good prevention and mitigation tactic against fires, but the warehouse will still operate with many of the same threats that conventional storage has. One article by the National Fire Protection Association highlighted the disaster that saw one facility in Hammonton, New Jersey, incur $3.5 million in damages and the complete destruction of the facility. The facility was undergoing expansion related to the rapid growth of the business - conditions familiar to those seen today. The message is one of safety - don't cut corners, and put proper quality fire prevention measures into place.

Cold storage chemicals

Like the residential refrigerator, commercial cold storage warehouses rely on chemicals to enable large-scale cooling. Most commonly used is ammonia, according to the ISHN. Ammonia is a hazardous chemical. It is corrosive to the lungs, skin and eyes, and becomes flammable if it reaches between 15% and 28% concentration in air. For this reason, OSHA maintains a strict set of guidelines on its control, which makes the risk clear while also providing guidance to warehouse operators.

Technicians that work directly with the substances, PPE is essential. For everyone else, it can be beneficial to have clothing and eyewear to help protect against potential chemical leaks and issues. As with protection from the elements, the proper apparel can make a big impact. Also, looking at early warning systems, sensors and alarms that detect chemical leaks and alert the workforce will greatly benefit.

Preserving quality

Safety comes first in the warehouse, but the fine-tuning of your climate controls can also impact the quality of goods being stored and issued from the operation. For example, foodstuffs don't have a universal point when they freeze or spoil; this is the biggest challenge to cold storage warehousing. Developing an awareness of what levels foods can take and then building your warehouse climate control system to match that can help to give you an edge versus competitors.

Refrigerator Cold Storage

Take, for example, fruit storage. More sturdy fruits like apples, pears and peaches will have lower freezing points than small berries. They will also have longer shelf lives. Despite that, what constitutes freshness may differ and can often be linked to humidity. Being flexible, and offering a range of different sub environments to partners, can help develop the reputation and ability of your cold storage operation. You can also access a larger range of potential clients who appreciate the flexible nature of your operations.

Growing the business

Sticking to the food market is an effective way to grow a cold storage warehouse operation. With the sheer variety of products demanded by the market, whether from fast-food delivery logistics or fresh grocery deliveries, there's clear growth that will only continue to rise as more people get on board with the delivery economy. Furthermore, as fluctuations and waves of coronavirus rise and fall, and people return to self-isolation and require on-demand food, the logistics industry will have an important part to play.

However, what about those businesses who are looking to other sectors? Vaccine delivery is an obvious one. Even with first and second dose vaccines administered, booster jabs are likely to be a feature of the landscape in years to come. Given the nature of many vaccine types, which require sub-zero temperatures and just-in-time delivery, cold storage warehousing is a focal part of the supply chain. For example, Reuters recently reported that Moderna was developing a yearly 3-in-1 booster for COVID, flu, and the respiratory syncytial virus (RSV) that would require these conditions - that's a perennial demand that needs to be met.

Charting the future

There are challenges to the future of cold storage warehousing on the horizon. Climate change is one area of focus, given the relatively high level of stress that warehousing puts on the climate due to energy and chemical demands. In addition, with The White House recently announcing its 2030 carbon net-zero challenge, the cold storage warehousing industry faces an existential challenge to clean up its act. Companies need to find alternatives to processes that currently generate large amounts of pollution.

Furthermore, the advent of farm-to-table food and a focus on local eating poses a risk to the need for large-scale cold storage warehousing. While the risk is minor at this time - the need for timely food delivery is at a far greater scale and far more pressing - it's worth bearing in mind.

As a link in the supply chain, cold storage warehouse operators are nevertheless best placed to meet these challenges. Developing close links with partners throughout the logistics industry and looking for ways to innovate and put your operation ahead of the others will help foster long-term and sustainable growth. The nation wants quality goods delivered promptly and stored in a safe and assured manner; cold storage is there to provide.

Supply Chain and Logistics