As fresh produce markets continue to expand and the need for efficiencies and analytics grow, retail distribution centers are at the center of a technological renaissance.
Overlooked but essential
Retail distribution centers, or RDCs, are a crucial part of the produce supply chain. With increasing consolidation, heightened demand, an expanding global distribution network—and food safety considerations—the importance of efficient grocery RDC operations shouldn’t be underestimated.
Surprisingly, however, these facilities are often overlooked or taken for granted by the very people who depend on them the most.
These busy complexes have witnessed a shift in produce distribution from traditional national and regional grocery chains to primarily nonfood retailers such as Walmart, Costco, and dollar stores.
In the last decade alone, Walmart has surpassed Kroger Company with 47 food-only RDCs in the United States and Canada to Kroger’s 34, comprising a whopping 38.5 million square feet of storage space.
But don’t count Kroger out—the national chain’s partnership with British supermarket etailer Ocado is ramping up its ecommerce footprint, along with the building of several high-tech RDCs in the United States.
The growth of RDCs has required additional layers of transportation, handling, packaging, marketing, and, of course, cost, to the retail model, as well as additional contracts and much more logistical detail. These factors are offset by savings in real estate, labor, shipping, and storage. Fortunately, the wave of technological innovation that has swept the industry has not left RDCs out in the cold.
Tricks of the trade
Cold is very much on the mind of many companies building efficiencies into their RDCs. Numerous warehouses relied on by major grocers were built prior to 1980; they often lag behind in technology and have operational issues.
In some cases, older facilities are unable to keep up with the demand or high-tech needs for refrigerated goods, so it can often be more cost effective to send business to an entirely new facility than to rebuild or refit existing ones.
New cold storage capacity in RDCs has increased by 43 percent since 2007, and 56 percent of revenue comes from value-added nonstorage services such as logistics management, repacking, labeling, and even light processing for ready-to-eat products and meal kits.
Many of the technological innovations in the RDC world are centered on cold storage capacity. Because many are new facilities, they’re built with cold solutions in mind, to aid retailers with just-in-time strategies and inventory turn times. Centers that can ensure same-day delivery of highly perishable foods provide a significant competitive advantage.
New buildings often include smart energy meters and are designed for minimal heat loss, reducing dependence on refrigerants and lowering overall energy loss. Other innovative practices include the use of alternative refrigeration such as low-charge and NH3 (ammonia)-based systems, multitemperature floor plans, motion-sensitive and auto-dimmer lighting, and more efficient coolers and freezers that use 30 to 50 percent less electricity.
These and other revolutionary green-design features, such as taller buildings that increase airflow and energy efficiency, can have a significant impact on spoilage, cold and heat damage, and loss of product quality and safety.
Such innovations will likely continue at a faster pace as consumer demand, more reliance on online shopping, and consolidation drive up the need for cold storage. Nielsen predicts growth in suitable warehouse space valued at up to $100 billion within the next four years as occupancy rates max out.
This is multi-part feature on retail distribution centers adapted from the January/February 2020 issue of Produce Blueprints.