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Survey says PRW operations still strong regardless of troubled global economy: 2009 IARW-QFFI trends report shows that cold storage operators are concerned about energy and efficiency, mergers and regulatory issues, as well as the world market situation.

It's the economy. The message was loud and clear among respondents to the annual refrigerated warehousing survey conducted by Quick Frozen Foods International (QFFI) and the International Association of Refrigerated Warehouses (IARW).

Some 59% of all survey respondents--and that percentage holds for both North America and the global sample that also includes Europe and the rest of the world--say that the economy is the most important issue facing the refrigerated logistics industry.

When the economy is good, this industry, like any business, is usually happy. When times are tough? The answer may be surprising.

"The industry is still robust and better off than many sectors," observed one operator responding to the invitation for general comments and observations.

The preponderance of those surveyed report that current business, and the industry as a whole, remains strong. Many believe that in the present climate, their third-party services may be more important than ever. There is some apprehension, however, about the broad impacts of a shaky economy on any industry, including their own.

Some 30% of all respondents in North America and overall say business has been average over the past 12 months, and 47% (44% in North America) report that it has been somewhat or significantly better than average, compared to only 23% that say it has been worse than average. Moreover, 39% project 2009 revenue to be higher than 2008 revenue, versus only 32% that expect this year's revenue to be lower and 30% that expect it to be the same.

These statistics are in contrast with respondents' views on the effects of the economy: 66% (73% in North America) report that the economy has had a somewhat or significant negative impact on their business. Furthermore, 58% (53% in North America, 81% elsewhere) forecast that the economy will stay the same or get worse over the next couple of years.

One possible explanation for this seeming contradiction is that psychological factors are at play. Some of the negative impacts of the economy may be perceived as more potential than real. Overall, it seems that while the slumping economy may in fact pose certain benefits for third-party refrigerated logistics operators, it is creating a posture of prudence and caution among the industry.

Some third-party operators expressed concern about rising competition from peers, but they remain confident about the industry's place within the broader food universe.

Fully 59% (64% in North America) thought expansion by competitors in their own territory might hurt their business. Consolidation among PRW competitors is a greater concern in North America (58%) and the mostly developing world (66%) than in Europe (43%)--probably because merger activity there has been maxed out. Yet 33% of operators in Europe, versus 29% in North America and 20% elsewhere, think their business has been hurt by the consolidations.

The possibility of consolidation by customers was viewed ambivalently: 37% think that it would help business (27% in North America), 24% that it would hurt (27% in North America), and 35% that it won't make any difference (45% in North America).

PRW operators like their position relative to private warehouses. Only 28% worry about potential competition from private warehouses, with the highest rate (38%) in the mostly developing world. Most operators state that PRWs are maintaining or expanding their base--80% in North America, 100% in Europe and 76% elsewhere. Since the totals add up to more than 100%, it would seem that the threat from private PRWs is perceived as more potential than real.

Business health and revenue projections vary by region. Business during the past 12 months is rated better by 57% in Europe, versus 44% in North America. In the mostly developing world, it is 63%--but that includes 25% "significantly" better, a higher rate than for other regions. Impact of the economy, moreover, is rated as negative by only 12% of mostly developing world operators, compared to 43% in Europe and 73% in North America.

Revenue projections for 2009 compared to 2008 are especially optimistic in the mostly developing world, where 74% anticipate an increase--versus 57% in Europe and 32% in North America. Only 12% in the mostly developing world forecast a decline, compared to 43% in Europe and 35% in North America.

When it comes to capital investment, 89% of the PRW operators in the mostly developing world plan to add space within the next 12-18 months, compared to 38% in North America and 29% in Europe. That is despite the fact that half the operators in the mostly developing world report costs of construction rising, versus 39% in North America and only 14% in Europe. But the situation may be more volatile in the developing world, because 11% there anticipate closing space, compared to eight percent in North America and none in Europe.

There are indications that PRW operators are trying to maximize use of their space. When it comes to lift trucks, for example, 30% are looking to buy narrow aisle trucks to navigate narrow aisle racks--that includes 29% in North America and 36% in the developing world, but only 17% in Europe.

Double deep racks are favored by 35% worldwide in purchasing plans, including 50% outside North America and Europe, but none in Europe itself. Chances are that leading PRWs in Europe already have them, along with narrow aisle trucks. Drive-in racks are being sought by 21% in North America, 17% in Europe and 12% elsewhere.

"Although 35% of North America indicated two deep, 27% said single deep," observed Hank Bonar, president of Bonar Engineering & Construction, Jacksonville, Florida, USA. "This could, I suspect, represent narrow aisle, 'medium height technology'--and a trend. North America had only 12% doing order picking, whereas in developing countries and Europe it was more. That tells me that private industry does more order picking in North America."

Energy-saving technological fixes are getting a lot of attention from PRW operators, but the emphasis varies by region. In both Europe and the mostly developing world, for example, 71% of the operators already have new lighting systems and 14% plan to get them. But in North America, 57% already have them and 24% are seeking them.

Energy-saving door units are already in place at 62% of the operations in North America and the developing world, and 24% and 14%, respectively, plan to acquire them. But only 14% in Europe have them, with 29% planning to install them. Paying more attention to defrosting coils is popular everywhere--67% in North America, 83% in Europe and 62% elsewhere. European operators that aren't already doing so all plan to get on board. However, commitment isn't unanimous elsewhere.

Energy purchasing programs have been implemented by only 38% in North America (and only eight percent are seeking them) versus 67% of European operators. The haves and the would-haves account for 14% each in the mostly developing world. Energy management systems are services that are more broadly popular--49% in North America, 57% each in Europe and the mostly developing world. But only 11% of operators in North America without such systems plan to get them, versus 29% elsewhere.

Raising storage temperatures may be a touchy issue, but in North America 45% have already raised the bar. Only five percent, however, plan to do so. Fifty percent of the operators in the mostly developing world have raised their temperatures and 12% plan to do so. In Europe, the percentages are 33% each. Solar panels are not too popular in North America: only five percent have them and only 11% want them. In Europe, none report having them, but 40[degrees]/5 say they plan to get them. The percentages were 14% each for the mostly developing world.

Only 12% of operators in North America and the mostly developing world consider energy-green-sustainability matters the most important issue facing the industry--for 59% in North America and 75% in the mostly developing world, it's the economy. But European PRWs are evenly split at 29% on whether economic or environmental issues are paramount.

Only in Europe do most operators--71%--consider green-energy-sustainability issues a medium priority, as opposed to 47% in North America and 38% in the rest of the world. Still, 25% in the mostly developing world and 23% in North America consider them a high priority (for Europe it's 14%), and only in North America (15%) are they not considered a priority at all. And relatively few North American operators (16%) are looking to buy insulation this year, versus 67% in Europe and 87% in the rest of the world.

"Energy costs are generally lower in North America in than other areas of the world," said Bonar, who has given a lot of thought to the issue. "Some areas in the Caribbean operate at 16 cents and up to 26 cents a kilowatt hour. The sad part is many of the developing areas--some with stable governments less than four years old--are installing Freon with air-cooled condenser systems as fast as they can. In North America, if a Freon plant came on line, it might last three to five years before a central ammonia or now more 'green' closed loop ammonia/C[O.sub.2] would put it out of business and force it to convert to a central system in order to stay in the market.

"When you get to three or four kilowatt hours per cubic foot per year, you must have some very good salesmen or a captive market to compete. With 63% of PRWs providing freezing services, the energy and risk for it becomes a major consideration. Again the greener NH3/C[O.sub.2] could become a factor. Lighting is another area which has changed dramatically; new T-5 and LEDs are being used and considered for fixtures--and I have seen my first skylight in a cooler area. While raising temperature may not be seriously considered, some developing countries do store at higher than 0[degrees]F for freezers. If it is low sugar or low fat, it may have a 'manageable' shelf life."

Thoroughly Modern Media

Are they playing catch-up, or are they ahead of the game? Some 83% of European PRW firms plan to purchase new computer installations or servers within the next 12-18 months, compared to 52% in North America and 38% in the mostly developing world.

Desktops or laptops are part of purchasing plans for 39% of North American operators, versus 50% for the mostly developing world and 67% of European operators; 23% in North America are looking for other computer hardware versus 25% in the mostly developing world and 23% in North America.

Electronic data interchange (EDI) is in place at 71% of the PRWs in North America and the mostly developing world, versus 57% in Europe--but 43% of the European operators said they plan to install EDI, versus eight percent in North America and none in the rest of the world. Europe is also slightly in front of North America, at 57% versus 54%, in use of hand-held lift-mounted terminals--12% in the mostly developing world have them and 25% want them.

Advance shipping notices and radio frequency communication are favored channels of data transmission in PRWs, averaging 62% and 51% worldwide with the highest rates in Europe (67% and 57%). Voice systems are in place at only 14% of warehouse operators worldwide, and sought by 14%.

Europe appears to be a leader when it comes to the latest management systems. Every operator there responding to the survey reported having warehouse management system (WMS) already in place, versus 85% in North America and 71% in the rest of the world. Bar coding and scanning are the rule at 86% of European PRWs; in North America, the rates are 58% for bar coding and 66% for scanning; in the mostly developing world, 38% and 25%.

Perhaps the biggest surprise is the lack of interest in radio frequency identification (RFID) systems--a mere seven percent in North America reported having them in place, and none at all elsewhere. In the mostly developing world, 14% plan to acquire such systems, while in North America the rate is a paltry five percent--and none of the European operators express any interest. Electronic logistics management (ELM) is getting even less attention--only two percent each in North America report having it or wanting it; interest elsewhere is nil.

Automated handling systems and equipment are also attracting little interest--17% in Europe and 14% in the mostly developing world have automated storage/retrieval systems in place, but none are looking to add them. Nobody outside North America reports any interest in automated guided vehicles, and only the mostly developing world (17%) report having automated truck loading/unloading systems.

Transportation management systems (TMS) are a more recent trend; 50% of European operators have them already and 33% plan to get them. In North America, only 15% have them and only seven percent want them. For the mostly developing world, the response is 29% for both the haves and the wannabes.

PRW operators are choosy when it comes to basic equipment, and they are more choosy now in a time of budget constraints. Except for narrow-aisle models, there isn't much interest in new lift trucks. But trucks have to be kept running, so 70% are in the market for batteries, and 27% are seeking rechargers.

Order pickers are sought by 50% of the PRWs in the mostly developing world, but only 17% in Europe and 14% in North America. At 12%, the developing region shows the only interest in cranes. As for racks to pick from, single racks (27%) are popular in North America but get the cold shoulder in Europe. Mobile racks attract 17% purchasing interest in Europe and 12% in the mostly developing world, but only two percent in North America.

There is considerable variation in door purchasing plans; 16% of North American and 12% of developing world operators plan to buy overhead doors, but none of those in Europe. Europeans aren't interested in high-impact doors, either; but 25% in the developing region and 21% in North America want them. Air curtains are sought by 33% in Europe and 25% in the developing world, but only five percent in North America. Dock locks are in some demand in North America and the mostly developed world, but not in Europe.

About This Survey

The 2009 International Association of Refrigerated WarehousesQuick Frozen Foods International Refrigerated Warehousing Trends Report provides a candid profile of the trends, opportunities and threats within the international refrigerated warehousing industry.

The Trends Report is based on survey responses collected by IARW and QFFI in April and May of 2009. The survey was made available to all IARW warehouse operators worldwide. Some 81 companies, representing over 400 facilities globally, participated in the survey; 65 of these operators were based in North America, seven in Europe, and nine in the rest of the world (Latin America, Southeast Asia, South Asia, Australia and Africa).

The respondent pool covers a broad cross-section of the refrigerated warehousing industry (e,g. large, medium and small warehouses, distribution, commodity storage, and production warehouses, etc.) Each region of North America is represented. All survey responses have been kept confidential.

Survey questions addressed many of the topics of greatest interest to the members of the IARW, such as inventory levels, energy savings, construction and spending. Particular focus was given to the current economy and its impact on business.


QFFI Associate Editor
COPYRIGHT 2009 E.W. Williams Publications, Inc.
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Title Annotation:Warehousing World
Author:Pierce, J.J.
Publication:Quick Frozen Foods International
Date:Jul 1, 2009
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