Download ReGlobalization White Paper 
Changing Consumer Demands Require Innovations, Distributed Logistics
Quick, what are you having for dinner tonight? Did you cook up a meal kit? Grill steaks from an online butcher shop?
Notice how I didn’t ask whether you bought supplies from a grocery store. While trips to your local grocer still dominate, more home cooks are relying on direct-to-consumer food distribution.
Such changing consumer preferences are disrupting cold chain logistics, the fastest-growing segment of the 3PL (third-party logistics) market. But future cold chain logistics will differ from current 3PLs and transportation services.
Traditional cold chain logistics moved pallets in and out of cold storage. But eCommerce, meal distribution services, subscription food delivery and even cell therapies are forcing paradigm changes.
These new business models require more complex and flexible cold chain solutions. They demand real-time temperature monitoring, advanced thermal packaging and efficient last-mile delivery. The cold chain logistics industry must change to embrace this new paradigm.
In the last couple of decades, Amazon has forced retailers to develop distributed logistics networks. That paradigm change is coming to cold chain.
What Is Cold Chain Logistics?
Cold chain logistics is a critical component of the global supply chain. It ensures the integrity of temperature-sensitive products from production to consumption.
Historically, most transportation and storage, of course, happened between production, warehouses and stores. Delivering individual meals would require extras like coolers, dry ice and gel packs. Few consumers wanted to pay extra to keep individual packages in the right temperature range.
But that has changed.
The growth of eCommerce has included direct-to-consumer food products, particularly post-COVID 19. Personalized medicine and consumer demand for fresh food also has changed the landscape.
Legacy networks cannot deliver smaller, personalized packages quickly and cost-effectively. Amazon spent years developing a distributed logistics network to preposition inventory closer to consumer populations.
To compete, other retailers followed. Smaller concerns had to join multi-enterprise networks to achieve such scale.
That same paradigm shift – B2B and B2C merging into B2ME – is hitting the cold chain logistics sector. Distributed logistics is an integral business strategy that, as Amazon has proved, drives growth.
New eCommerce Paradigms Force Chilly Deliveries
Cold chain is facing the same paradigm shift that Amazon forced on retail logistical processes. Few retailers can survive without B2B and B2C fulfillment. Retail 3PL and transportation systems must deliver pallets, cases and individual units (eaches, in supply chain parlance).
These eCommerce type trends require a more nuanced approach to cold chain logistics. They demand precise temperature control, real-time monitoring and traceability.
Technology has allowed for this evolution. Internet of Things (IoT) devices and data logging tools have improved tracking and temperature control. Great logistics systems can now maintain product integrity even in complex end-to-end supply chains.
Cold chain third-party logistics (3PL) providers have always kept pallets and cases at the right temperature. Now, these 3PL services can partner with transportation and final mile services to deliver those goods safely to consumers.
That final mile is crucial in maintaining the cold chain and ensuring product quality.
Because quick delivery is important for two reasons:
- Reason No. 1: The Amazon effect applied to cold chain. Just like Amazon’s drive toward two-day, next-day and same-day delivery, cold chain consumers expect their orders quickly.
- Reason No. 2: Perishability. Steaks, chicken, fish and produce go bad quickly when temperature and humidity are out of whack.
Late copier paper deliveries are inconvenient. A four-day old meal kit from HelloFresh, Blue Apron, Home Chef or Hungryroot just doesn’t sound enticing. Two-week late frozen deliveries are rotten.
This expectation puts pressure on cold chain logistics to be more efficient and agile.
Despite these challenges, the impact of eCommerce on cold chain logistics is not all negative. It has also opened up new opportunities for innovation and growth. It has driven the industry to develop more efficient and sustainable logistics solutions.
Meeting the Demands of Meal Distribution Services – and Beyond
Meal distribution services have become increasingly popular. They deliver fresh, ready-to-cook meals directly to consumers.
These services require strict temperature and humidity control from harvest until ingredients reach the consumer’s kitchen. This ensures meal safety and freshness.
Beyond meal kits, consumers are turning more to subscription food services. Omaha Steaks now faces competition from ButcherBox, Good Chop, Rastelli’s and others.
Have a hankering for fresh, in-season food? Or perhaps you want a more curated, specialized selection. These days, consumers can select specialty mushroom services or buy shares of produce direct from local farms.
You get regular shipments of whatever is in season – without having to trek to your local farmer’s market.
Such varied groupings require carefully engineered systems to maintain proper temperature controls, according to the Industrial Engineering and Operations Management Society. Their research advises cold chain services to maintain:
- Dairy products at 4 degrees Celsius,
- Leafy vegetables and citrus fruits at 0-2 degrees C,
- Tropical fruits at 5-13 degrees C,
- Frozen vegetables at -18 degrees C and
- Ice cream products at -29 degrees C.
Some products may require different conditions. Those specialty mushrooms I mentioned earlier? Beyond keeping their temperature just above freezing, you have to keep those fungi at a low humidity level.
All these options are driving a direct-to-consumer food market that is exploding. Some analysts peg market size at $195.39 billion by 2031, a compound annual growth rate (CAGR) of 18.7%
Cold Chain Logistics in Cell Therapy: A Specialized Niche
Cell and gene therapy involves using living cells to treat diseases. This growing healthcare field has created a specialized niche within cold chain logistics.
In a way, these cell and gene therapies mandate a closed loop system. The therapies manipulate and modify a patient’s cells to combat disease. Such personalized treatments can combat cancers, cystic fibrosis, heart disease, diabetes, hemophilia and AIDS, according to the Mayo Clinic.
Medical personnel first collect cells. Labs process and genetically modify the cells. The modified cells must return to the patient’s treatment site for administration.
The global market for cell and gene therapy is also exploding. One projection expects the market to hit $23.3 billion by 2028, a compound annual growth rate (CAGR) of 26.4%. Another estimate totals $42.56 billion by 2030, a CAGR of 39.42%.
Either way, cold chain logistics operations are key to making such therapies work. These extremely sensitive cells require precise temperature control during storage and transportation. Any deviation can compromise their viability and effectiveness.
We’re talking cryogenic freezing and liquid nitrogen – a few steps beyond keeping those mushrooms fresh. Any deviation could threaten both the effectiveness of the therapy and the patient’s life.
Legacy Facilities and Networks Still Lag
Growing and diverse consumer preferences are drastically disrupting the requirements for cold chain logistics. Beyond food producers, grocers/retailers and food services, challenger brands are providing specialty products.
And the medical and cell/gene therapy market requires even more specialized solutions.
3PL and transportation services are adapting. Innovations include specialized packaging and advanced monitoring systems to maintain temperature and humidity levels during transit. As mentioned above, Internet of Things (IoT) monitoring and data logging help improve tracking and control.
These advancements allow for immediate action when deviations occur. They ensure the integrity of temperature-sensitive products throughout the supply chain. They also help with regulatory compliance.
But while technology has made cold chain logistics more efficient and reliable, the network overall is still lacking.
Beyond food producers, grocers/retailers, food services, challenger brands and niche markets add to the logistical complexity. Many new brands are digital native – they don’t even require retail store fulfillment.
Legacy facilities often have trouble with today’s complex logistics. As mentioned earlier, they want to ship boxes and pallets.
They don’t want to break open a box and ship one box of ice cream, one container of butter. They don’t realize that delivering to zip code X requires five pounds of dry ice. But delivering to zip code Y needs 10 pounds.
Most cold chain companies cannot handle that kind of granular detail.
Some markets are still materially underserved. Warehouses are in the wrong places. Storage is far away from consumer markets.
But some in supply chain are rising to meet these challenges. New 3PL and transportation services are making use of distributed logistics.
Cold chain is following the Amazon effect, increasingly transforming from B2B and B2C into the new paradigm of B2ME. That is the only way to deliver smaller orders fast and cheap.
The Future Presents Market Changes – and Opportunities
Face it, delivery and consumer desires are changing.
More people want fresh fruit, vegetables and meats. Meal kit services are proliferating. Many consumers eschew brand loyalty. Smaller operators could make inroads while the big guys sit there.
And cell and gene therapy present another market opportunity to cold chain 3PL and transportation services.
Yes, advanced solutions ensure the safety of life-saving therapies, your portobello mushrooms and prime rib.
But challenges persist. Future markets need high-performance facilities across a national network. You need non-legacy providers who can leverage their expertise to manage complex logistics operations.
These facilities need to cater to unique needs of food manufacturers, retailers and food service providers. And, of course, the medical industry. This network needs to add relevant value-added services
Whether you’re a retailer, food manufacturer, healthcare provider or logistics professional, navigating these changes is crucial for success.
Are you grappling with cold chain logistics challenges in your business? I’d love to hear about your experiences and offer insights. Reach out and let’s discuss your cold chain operations and the future of logistics.
Related Reading
- Drones Get Fed OK to Take Final Mile Deliveries Out of Sight
- Supply Chain Resilience Requires Amazon + 3PLs
- 4 Ways 4PLs Cut Your Logistics Costs – No. 3 is Gold!
- Avoid 3 Common Mistakes When Creating a 3PL Relationship
Jim Tompkins, Chairman of Tompkins Ventures, is an international authority on designing and implementing end-to-end supply chains. Over five decades, he has designed countless industrial facilities and supply chain solutions, enhancing the growth of numerous companies. He previously built Tompkins International from a backyard startup into an international consulting and implementation firm. Jim earned his B.S., M.S. and Ph.D. in Industrial Engineering from Purdue University.