Food, flowers, pharmaceuticals, chemicals – perishables are high-profile, potentially high-profit products. But reaping their rewards requires special attention and if managed right, the “cold chain” can make a company’s fortune.
But serious problems exist in the processing, packaging and transportation of perishable goods in China.
Packaging of fruits and vegetables for example is low quality and suffers from a high decay rate during transportation. Even if fruits are packed in cartons, the appearance, specifications and solidity of the cartons has still to be improved.
Storage and transportation after packing doesn't meet actual requirements. There are altogether 30,000 cold stores with a total capacity of 6 million tons, and air-conditioned stores of 2 million tons, insufficient to match China's fruit and vegetables production.
Secondly, vehicles carrying fruits as well as vegetables are generally freight carts or trucks without refrigeration or just normal vans with ice. Vehicles equipped with refrigerators or freezers account for only 10%. At present there are over 5,000 refrigerated vans, almost 100 refrigerated ships, and over 57,900 refrigerated freight cars of which more than 5,000 are iced.
The status of fruit transportation is no better than storage, the damage during transportation is estimated at a high rate of up to 15 to 30%. It is estimated that the total losses is large enough to feed a population of 150 Million people each year.
Cold chain hold out lucrative business opportunities for logistics service providers in China. As competition reduces supply-chain lead times and product life-cycles, and health regulations become stricter in China, the shippers of these products, particularly those in the pharmaceuticals sector, are prepared to cough up extra money for quality.
Similar opportunities exist in the food industry, driven partially by Chinese consumer preferences for fresh imported food products, out-of-season fruits and vegetables in select markets.
Recently, China's Ministry of Commerce has been urging farmers to raise production standards following stricter standards on chemical residues issued by Japan for example. China, Japan's largest source of farm produce, exported nearly US$8 billion worth of agricultural products to Japan last year.
Many companies seem to struggle to find good third party logistics (3PL) providers even in a place like Shanghai.
Sinodis, a distributor of food products such as cheese, ham and chocolate imported from Europe, Australia and New Zealand, has hunted for a 3PL for three years. They finally gave up and was forced to handle its own logistics.
The top domestic cold-chain 3PL in Shanghai is Speed Fresh Logistics which was set up in 2004 by parent Bright Diary and Food, the largest diary products company in Shanghai.
China's cold-chain infrastructure is still fragmented, under-funded, and scrambling to keep up with soaring demand. With several upcoming events, including the 2008 Beijing Olympics and the 2010 Shanghai World Expo, the need to move quickly is growing.
Watch out for the major workgroup discussion planned in October 2006 in Shanghai and the follow-up to the first Cold Chain China Summit to be organized in spring 2007.
Both events provide an invaluable low-cost opportunity for logistics executives to discuss the challenges involved in the cold chain process and understand best practice for handling, transporting and storing temperature-sensitive products in China.