Global Cold Chain Alliance

But are infrastructure and transportation up to the task?

Cold chain logistics are hot in the Asia Pacific region. Accounting for around 60% of the global population, the region represents a huge consumer base. Catalyzed by rising disposable incomes and a shift in dietary patterns, demand for premium products is increasing. So is the transportation to convey these products.

Of course, COVID-19 has impacted cold chain operations in Asia, including increasing concerns over food safety. This has accelerated already shifting consumer habits towards buying fresh and frozen food products from organized retail channels such as supermarkets rather than the traditional wet markets. The growth of e-commerce and online food retail has also catalyzed the demand for frozen food. These trends have driven the demand for cold storage facilities in the region and bolstered further investments in infrastructure and transportation improvements. 

View from Japan

Japan is regarded a mature market for cold chain logistics and is dominated by several players. One is Tokyo-based Nichirei Logistics Group Inc., which began business in 1945 as Nippon Reizo Inc. Today the company provides warehousing, low-temperature storage and transportation services in Japan and abroad. Its low-temperature logistics services are provided to customers in a variety of industries such as restaurants, retail stores, food manufacturers, trading companies and wholesalers. 

“The total number of facilities in Japan and overseas is 128,” says Hiroshi Goto of the company’s Overseas Business Development Division. “Currently, we are expanding our overseas business in a total of 12 countries in Europe, China and ASEAN.” As of 2021, this included Thailand and Malaysia. Like the rest of the world, Nichirei Logistics was impacted by the COVID-19 pandemic. Goto says due to the disruption of the global distribution network (shortage of empty containers, delay in arrival, accelerated arrival), there were many cases where the arrival of cargo at the company’s warehouses was delayed. “In addition, we received many inquiries from customers regarding securing containers and booking ships, and we handled them while sharing information with our overseas subsidiary,” Goto says. “We exchanged information closely with customers, secured storage space, and adjusted the container delivery schedule so that we could be flexible in dealing with problems such as ship arrival delays.”

Aside from the challenges imposed by COVID-19, Goto reveals that Japan’s overall infrastructure poses challenges for cold chain operators. “In Japan, the ‘upper limit on overtime hours in automobile driving operations’ will be applied from 2024, so there are concerns about the impact of this regulation on the transportation and logistics industries,” Goto adds. “In order to deal with these issues, we are trying to reduce the burden on the transportation company by taking measures such as introducing a ‘truck berth contact time reservation system’ and ‘pallet transportation.’” Goto explains that his company believes that technological innovation plays a very important role. “We are currently promoting the automation of operations by utilizing advanced technologies such as AI and robotics,” he says. “Technological innovation is also expected to be effective in terms of improving work efficiency, reducing work mistakes and preventing accidents.” In addition, the company would like to use the human resources freed up by technological innovation to enhance the value of the user experience. “This is what we call the added value that brings excitement and pleasant surprises to customers who use our services,” he says. The company is currently building a system to visualize the data and follow the instructions so that even newcomers can work with a certain level of efficiency. “Since it is impossible to fully automate warehouse operations, we are developing technology to reduce the percentage of work that people have to do,” Goto says. Like so many companies, Nichirei Logistics faces labor shortages because of the pandemic. “By utilizing advanced technology, we are trying to reduce the work burden on employees,” he says. The evolution towards ecommerce has also had a big impact on Nichirei Logistics and the cold chain throughout Japan. “Currently, we operate a delivery base for the cold-required goods of a courier company,” he explains. “But due to the recent expanded demand for e-commerce, we are required to expand the base.” Goto says in the future, there is a possibility of expanding in the business-to-business field by providing transportation and temporary storage from local food production areas to the company’s bases, and then delivery to the courier bases.

China’s National Plan

In recent years, the scale of China’s cold chain logistics market has grown rapidly. The construction of national major cold chain logistics bases and cold chain facilities at the place of origin and sales has been steadily promoted, and the level of cold chain equipment has been significantly improved. According to the Cold Chain Logistics Committee of the China Federation of Logistics & Purchasing, in 2020, the scale of the cold chain logistics market exceeded CNY 380 billion yuan. The capacity of cold storage was nearly 180 million cubic meters, a year-on-year increase of 17%, and the number of refrigerated vehicles was about 287,000, a year-on-year increase of 34%. According to the Federation’s incomplete statistics, the capacity of cold storage under construction in the first quarter of 2021 was 5 million cubic meters, the capacity of cold storage under construction in the second quarter was 3.85 million cubic meters, and the capacity of cold storage under construction in the third quarter was 3.02 million cubic meters. When all counted, however, the Federation predicts the capacity of China’s cold storage will exceed 195 million cubic meters and the number of refrigerated vehicles will exceed 320,000 in 2021. Given the continuous improvement of living standards in China, the scale of the fresh food market continues to grow steadily. Consequently, the Federation reports that the total volume of China’s fresh food retail market is predicted to exceed $846.8 billion in 2021, with a year-on-year increase of 8%. The market of ready-to-cook vegetables and quickfrozen food is developing rapidly. “At the same time, the new consumption model of a membership system that provides fresh retail plus catering is sought after by current consumers, which has brought broader development potential to the cold chain logistics industry,” says Qin Yuming, Secretary-General of the Cold Chain Logistics Committee of the China Federation of Logistics & Purchasing. In March 2021, China implemented mandatory traceability requirements for all food products transported through the cold chain, including dairy products, fruits and drinks. It was an expansion of efforts to prevent COVID-19 from entering the country via imported foods.

In December 2021, the General Office of the State Council issued its “Fourteenth FiveYear” Cold Chain Logistics Development Plan. The plan requires focusing on outstanding bottlenecks and pain points to smooth distribution channels. This will be accomplished by building four “horizontal” cold chain logistics channels in the north (Shandong, Shaanxi, Tibet, Yangtze River) and in the south, and four “vertical” cold chain logistics channels will be built in the west (Erguang, Beijing, Hubei, Fujian) as well as eastern coastal areas.

“This marks China’s cold chain logistics officially entering the stage of high-quality development,” Yuming says. Both the horizontal and vertical national cold chain logistics backbone channel networks will have internal and external connections. To enhance cold chain international transportation capabilities, the plan relies on the China-ASEAN multimodal transport alliance base to expand the new western land-sea channel, sea-rail combined transportation, international rail combined transportation and cross-border highway shuttle international cold chain logistics business. One major train route has already opened between China and Laos. The China-Laos railway, which began operations in late 2021, is regarded as an important part of the panAsian railway network. According to China Daily, it will ultimately connect Kunming in Southwest China’s Yunnan province with Bangkok and Singapore. It will also allow Thailand to transport goods to China, Central Asia and every European nation that is taking part in China’s Belt and Road Initiative. Yuming emphasizes that in 2021, information, digitization and intelligence also became critical to China’s cold chain industry. “This shows that technology has imperceptibly affected the cold chain logistics industry,” he says. “Whether it is the improvement of cold chain transportation efficiency and the maximization of inventory turnover, or the realization of multilevel, multisystem and cross-regional cold chain logistics traceability closed loop by 2025 proposed in the 14th Five-year Cold Chain Logistics Development Plan, they are both inseparable from the support of technology.”

KAREN E. THUERMER is a freelance writer based in Alexandria, Virginia, who specializes in economic and logistics issues.

EMAIL: kthuermer@aol.com

Source: Cold Facts  March/April 2022 issue