Insights on the Temperature-Controlled Shipping Market

If you follow the surface transportation market, you know it’s actually a collection of markets, including truckload, less-than-truckload, dry van, and temperature-controlled. Each of these segments is impacted by varying trends and challenges related to demand, capacity, seasonality, regulations, and other factors. Here we’re putting the spotlight on the temperature-controlled segment of the market. 

What are the current top trends for temperature-controlled transportation? How is the produce season impacting this segment? How can shippers find efficiencies in their temperature-controlled supply chains? Those are some of the key questions I discussed with Trevor Funk, General Manager, Temperature-Controlled LTL Solutions, and Mike Moyski, Director, North American Surface Transportation-Temperature-Control at C.H. Robinson on a recent episode of Talking Logistics

Top Trends in Temperature-Controlled Transportation

For those who may not be actively involved in the temperature-controlled market, we began our discussion by exploring the current trends in this specialized market. Mike began by explaining that, like with other segments, shippers are looking for ways to improve efficiency and service levels. But Mike notes that, “A lot of these commodities are perishable, just-in-time, with a shelf-life component which adds another layer of complexity.” With that in mind, Mike says there are four key trends they are seeing.

The first is increased demand for refrigerated drop trailer. “We’ve seen at least 50% of the lanes that come through on large RFPs requesting drop trailer, which is a significant shift,” says Mike. This requires special monitoring, keeping reefers fueled, and controlled yard handling.

The second trend is in service metrics and retail compliance. Mike states that these have become table stakes for service levels in the refrigerated marketplace. Trevor adds that it goes beyond On-Time In-Full to retailers expecting “pallets to show up in a pristine, ready-to-display manner.” “During the pandemic some of these requirements were relaxed but that environment doesn’t exist anymore, so those expectations have returned” he says.

Watch short clip on forward deploying inventory.

Another trend Trevor mentions is continued SKU diversification and order size changes, especially in LTL-sized orders. Shippers are looking to find a balanced approach to meeting retailer requirements efficiently through consolidation, multi-stop truckloads, and other options. “That will set you apart in a tight market,” he says.

Finding Efficiencies

Where are companies looking for greater efficiencies? Trevor comments that it starts with retail compliance. “If you’re not meeting retailer expectations for delivery and product quality, that can represent 1% to 5% in costs from chargebacks,” Trevor says. “You’d be surprised how many companies aren’t measuring that today.”

Trevor notes the second area to look at is accessorials, especially for LTL. He says these can be “death by a million cuts.” “If your accessorial spend as a percentage of your total freight spend is in the high single digits or more there is room for improvement there.”

The third area Trevor mentions is end-to-end visibility. “If you have a single platform to view the order lifecycle through complicated supply chains it will allow you to do root-cause analysis faster and give you better piece of mind that you know where everything is.”

Mike adds that the drop trailer function he mentioned earlier is both a service and cost efficiency factor, as well as it gets buy-in from carriers for their efficiency. 

The Impact of Produce Season

One factor that impacts temperature-controlled transportation is the surge in demand caused by produce season, which Mike notes is roughly April through July 4th. He explains that there is a big surge in a 9-day window around Mother’s Day when 70% of the flowers come from South America through Miami and up through the country. However, Mike indicates that pricing is running about 8% below the five-year average due to over-capacity in the marketplace from the pandemic. Check out this short clip for some additional insights.

Warehouse Capacity Crunch

Finding enough warehouse capacity is a growing issue for cold-chain operations. Trevor mentions that growing demand goes beyond normal population growth. He explains that factors such as the need to get products closer to markets and product diversification trends are driving this capacity crunch. 

Trevor also notes that the increased demand for value-added services such as case-picking within the warehouse requires more space within already limited cold-chain facilities. “The good news is there is a lot of capital willing to invest in this space, but building temperature-controlled warehouses is more complicated than other warehouses. There is a high degree of capital and expertise that goes into it.”

Finding the Right Partner

Finding the right partner, whether that’s for warehousing, transportation, or technology, is a big challenge in this space. Trevor and Mike had some great insights and advice on this topic, as well as on how to approach the marketplace for the rest of this year. For all of their insights and advice, I recommend that you watch the full episode. Then keep the conversation going with your questions and experiences.