The Australian and New Zealand Cold Chain Sector – The Road Ahead

WRITTEN BY NICK GREENWELL DIRECTOR OF PROPERTY, TMX

The ANZ Cold Chain sector is integral to the region’s food and pharma supply chain.

It plays a critical role in feeding the population and supporting broader responses to health initiatives, like vaccine rollouts, by ensuring that perishable goods are transported and stored at the appropriate temperature from the source to the consumer.

In 2023, the sector is likely to face several challenges, but the opportunities for those willing to innovate and thrive are many. Here are a few key challenges and opportunities that TMX sees as critical for the sector in the future.

Challenges

Labour shortages:

The ANZ cold chain sector relies heavily on manual labour, so with the NZ Government describing labour shortages as “the biggest issue facing New Zealand businesses” and an unemployment rate of only 3.5% in Australia, we are likely to see a continued shortage of workers in 2023 impacting the sector.

This could lead to increased labour costs and difficulty finding and retaining employees. However, there may also be opportunities to use automation and other technological solutions to improve efficiency and reduce the reliance on labour. TMX recently supported Teys Australia in designing and managing the delivery of a 12,340sqm fully automated cold storage facility at the Port of Brisbane, which included the installation of a high-bay automated storage and

Australia is already experiencing the impacts of a changing climate, with every decade since 1950 being warmer than the one before it, and our average temperature already up by around 1.44 degrees Celsius since records began in 1910. The story is similar in New Zealand, where extreme weather events have occurred four to five times more

We live this reality through more frequent and severe heatwaves, bushfires, floods, and droughts, and we have seen a range of these impact our supply chains in recent months and years. These events can disrupt the cold chain by damaging infrastructure, reducing the availability of refrigerated transport,

Now, more than ever, there is a concerted push from investors and consumers for the sector to adopt more eco-friendly practices and technologies;

To help address these issues, many organisations have recently made significant investments in renewable energy sources to power their new cold storage facilities, improved insulation in warehouse design and implemented more efficient packaging and transportation methods.

Opportunities

Locally produced and sourced food products:

As consumers become more concerned about the environmental impact of their food choices, there is a growing preference for locally grown and produced products. This presents an opportunity for the cold chain sector to support and facilitate the distribution of locally sourced products.

Trade & export:

As the cost of diesel continues to rise, the sector will need to find ways to reduce its reliance on fossil fuels and adopt alternative energy sources. Additionally, the cost of refrigerants, essential for maintaining the temperature of goods during transportation, has increased in recent

As the world's population continues to grow, there is an increasing demand for high-quality food products, and Australia is well-positioned to meet this demand with its abundance of natural resources and a strong reputation for producing high-quality food products. Throughout 2022 we have seen significant growth opportunities for the Australian cold chain sector to tap into emerging markets, such as Asia and the Middle East, which are experiencing rapid economic.

Online grocery shopping and home delivery:

With the rise of eCommerce and the growing trend of online grocery shopping, there is a need for longer shelf-life products that can withstand the rigours of transportation and storage. It is estimated that up to one-third of all food produced globally is lost or wasted. In Australia, this is due to a variety of factors, such as overproduction, inadequate storage and transport, and consumer waste. Part of the solution requires the industry to drive innovative packaging and storage solutions, and adopt advanced

It is anticipated that we will continue to see growth in this sector in 2023, leading to an increased need for cold chain logistics to support the transportation and storage of perishable goods.

Technological innovation:

To improve efficiency and reduce costs, many organisations are now implementing sensors and data analytics to monitor temperature and humidity during transportation and storage. This allows them to reduce waste and ensure that goods are maintained at optimal conditions.

The ANZ cold chain sector will continue to face challenges in 2023, including the need to address sustainability concerns, the increasing demand for locally produced and sourced food products, and the potential for export growth. To take advantage of future market opportunities, it will be important for the sector to adopt innovative technologies and practices and work closely with stakeholders across the food industry to continue to play a vital role in the country's supply chain and support the growth of these economies. ●

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Inflation Uncertainty, Profit Warnings and Excess Inventory: What’s Next for Supply Chains?

Supply Chain Insights Feature

asks: how can a unified supply chain help weather the storm?

Early economic predictions for this year are urging consumers, investors and businesses to brace for another turbulent year as financial pressures accelerate in early 2023.

The most recent Australian Bureau of Statistics’ consumer price index (CPI) revealed headline inflation rose to 7.3% – a 32-year high. According to Michelle Marquardt, Head of Prices Statistics at the Australian Bureau of Statistics, the latest data demonstrates there are still ongoing inflationary pressures in the economy. “Increasing operating costs, including wages, electricity, and weather affected reductions in food supplies continue to drive prices up,” Michelle said.

Ongoing disruptions since the onset of Covid-19 and rising energy and food costs originating from Russia’s invasion of Ukraine are continuing to push inflation even higher. According to NAB forecasts, inflation is expected to peak higher and persist for longer, with headline inflation to peak at 8% this year.

While the greater impact of rising interest rates and tighter household budgets are not yet clear, here we discuss some of the key themes and coping strategies with ANZ’s supply chain leaders.

Rising markdowns, falling profits

Largely driven by a shift from a ‘just in time’ to ‘just in case’ mindset that dominated supply chain strategies since the onset of the pandemic, retailers are now carrying more inventory than ever before.

According to Pas Tomasiello, Senior Director –Integrated Systems at Dematic, there are difficult decisions ahead as retailers need to decide what to do with excess inventory.

This inventory stockpiling of the past two years was not unique to the Australian market. Data from the US Census Bureau revealed in August last year, clothing retailers were holding US$58 billion in inventory – a 28.4% increase on August 2021.

In a low-growth economic scenario, businesses may be forced to sell their inventory at discounted prices or even write it off to free up pressure on their balance sheets. However, Royston Phua, Vertical Practice Lead, APAC Supply Chain for Zebra Technologies says this may not provide the necessary liquidity for targeted investments or operating activities.

“Businesses will have to weigh their options carefully and act quickly to take advantage of any opportunities in a year of uncertainty,” he says.

According to Travis Erridge, Co-Founder and Chief Executive Officer of TMX, while Black Friday sales were strong across the board in Australia, at a closer look there’s a different story behind the sales figures.

“Black Friday sales were up in most segments, but what’s interesting is discounting rates almost doubled during that time,” he says.

Raghav Sibal, Managing Director – ANZ at Manhattan Associates says retailers have had to get ahead of the predicted pull back in consumer spending and think strategically about how they can shift large amounts of stock as a recession looms.

“Many of the retailers who accumulated more stock than they needed have had to offer prolonged periods of discounting during peak sales periods,” Raghav says.

Similarly, sports retailer Nike recently reported a rise in earnings and revenue for its second quarter ending 30 November 2022 – however the retailer spoke of the need for “aggressive markdowns” in an attempt to liquidate inventory.

Many retailers worldwide are on the same journey, and locally in Australia e-commerce retailer Kogan revealed as of June 2022 its inventory levels reached $227.9 million – compared to $160 million the previous year.

However, Manhattan’s Raghav Sibal points out discounting inventory as a way out of this situation requires a delicate balance.

to a more connected and self-orchestrating supply chain ecosystem.

“Many supply chains have traditionally been ‘broken’ through inefficient operational methodologies, lack of visibility and resistance to technology deployments and partnerships etc., and this continues to be one of the key challenges for supply chain operational excellence during and post pandemic,” Zebra Technologies’ Royston Phua says.

Similarly, Raghav Sibal at Manhattan Associates notes that the organisations who came out of this period profitably have managed the supply chain effectively and digitally. “They know where their inventory is, they have visibility across their network and they are making stock available at the right time, and at the lowest cost to the consumer,” he says.

In a survey conducted by PwC, which featured responses from 1,600+ executives across seven industry sectors in 33 territories, the companies who were identified as “Digital Supply Chain Champions” were well ahead of the curve when it came to supply chain excellence.

Those identified as “Digital Champions” by PwC achieved strong cost savings and sharp revenue increases across the board. They also benefited from more reliable delivery, reduced inventories and benefits beyond the numbers including strong collaboration and partnerships.

Retailers will need to look at which categories, which brands and think opportunistically to free up cash flow and working capital,” he says.

According to TMX’s Travis Erridge, by heavily discounting, retailers dodged a bullet this year.

“During Black Friday, Cyber Monday and early Christmas sales retailers were clearly desperate to clear stock and get their inventory down. Selling large amounts of stock to free up warehouse space and capital is likely to help avoid some of the difficult inventory decisions retailers would have been facing in the first quarter of 2023,” he says.

Creating a supply chain ecosystem

Volatility, uncertainty and disruptions are driving companies to shift their supply chain strategies and the key to success lies in the transformation

The report, titled Connected and autonomous supply chain ecosystems 2025, identified four areas that organisations need to develop: crossfunctional organisation, digital supply chain upskilling, technical enablement and collaboration with ecosystem partners.

TMX’s Travis Erridge says the term ‘ecosystem’ is going to be a key theme for supply chains this year.

“In low capital environment business there is not as much opportunity to invest, so you have to innovate. For me, that means people working together and partnering up to share infrastructure, resources and developing supply chain ecosystems that benefit everyone,” he tells Supply Chain Insights.

However, long-term investment still has a major role in supply chain success. “By partnering and clustering to create ecosystems, businesses can facilitate short-term developments but they still need to continue to invest in the longer-term as soon as the capital becomes available,” Travis says.

While automated warehousing has been the focus for many businesses in Australia, businesses now have more of an urgent need to look at areas such as sales and operations planning (S&OP) planning, integrated business planning and end-to-end supply chain monitoring,” Travis says. “These are typically the boring, nerdy parts of supply chain management – they’re not as exciting as large-scale automated warehousing, but we need to get back to basics as we continue to navigate this unsettled environment.”

Volatility, uncertainty and disruptions are driving companies to shift their supply chain strategies and the key to success lies in the transformation to a more connected and self-orchestrating supply chain ecosystem.

Manhattan’s Raghav Sibal agrees that unification will play a key role this year. “The unification of the supply chain is going to be the next critical area for larger multi-channel retailers to focus on. Not only do we need a unified supply chain –unification across the distribution and transport and warehouse systems - but also unification on the order management side. We need more and more visibility for the customer regardless of whether they are interacting online, in-person or at a digital selfserve kiosk,” he says.

Trends for 2023

According to Zebra Technologies’ Royston Phua, supply chain 4.0 will be the vision and mission for businesses this year. “Businesses will likely continue to explore and adopt cloud computing technologies and AI to improve decision-making and streamline operations. Digitisation and partnerships will also be critical for businesses looking to modernise and adapt to the new normal,” he says.

For TMX’s Travis Erridge, 2023 will be all about datadriven supply chains. “While we’ve had access to data for a long-time now, it was often data which looked backwards and not forwards. The difference this year will be using data to predict what’s going to happen, rather than analyse what has happened,” he says.

Dematic’s Pas Tomasiello predicts that customers will favour retailers with a reputation for fast and accurate delivery, alongside seamless returns. “There’s likely to be a shift in consumer behaviour, especially with online shopping, as customers can easily shop around and look for the best priced item online,” he says.

Zebra Technologies’ Royston Phua agrees.

The curse of high inflation

The International Monetary Fund’s (IMF’s) October 2022 outlook warned: “the worst is yet to come and for many people, 2023 will feel like a recession.”

Australia is a key player in the global economy, both as an exporter and consumer of goods and services. As such, global issues have a significant impact on Australian businesses.

“Industries such as timber, agriculture, and fossil fuels are particularly vulnerable to disruptions in global trade, geopolitical conflicts, supply chain constraints, and natural disasters. These disruptions can affect the ability of Australian businesses to sell their products and access the resources they need to operate, potentially impacting their financial performance,” Zebra Technologies’ Royston Phua says.

TMX’s Travis Erridge shares this view and says this year will be testing for many Australians and Australian businesses.

“Interest rates will continue to rise until inflation goes down, which is unlikely to be this year. With thousands of ultra-low fixed-rate loans expected to expire in mid 2023, the real economic hardship will be in the second half of 2023,” he says.

With so much uncertainty around capital and the economy, there is naturally a growing concern and caution around business investment. However, Travis warns that organisations still need to think long-term.

In addition, Manhattan’s Raghav Sibal says improving the customer journey will be critical this year. “No retailer wants to put consumers in a position where they don’t have flexible choices around buying online, returning in store or through any channel they wish. Going beyond good customer service will be essential this year,” he says.

In line with TMX’s Travis Erridge’s thoughts on data and predictive analytics, Dematic’s Pas Tomasiello says AI diagnostics and predictability will be central to supply chain operations this year.

“Scenario planning in consideration of volatility and unknowns, alongside data and information, will be key to managing volatility and disruption this year,” he says.

“The big watch this year will be ensuring that businesses don’t stop investing in their future. We’ve seen the pandemic cause 10 years of supply chain pain in a two-year period and this need to adapt, change and innovate to survive does not go away just because there is an economic downturn,” Travis concludes. ●