Delegates attending the second Cool Logistics Asia conference in Hong Kong during early September may have wondered whether the perishable supply chain is reaching breaking point. Shippers, carriers, freight forwarders and customers were all still reeling from the news of Hanjin’s bankruptcy, after the South Korean carrier filed for receivership on 31 August, just a week before.
Although it was too early to fully assess repercussions on perishables, such as fruit and vegetables, the failure of the world’s seventh largest container line was inevitably a key topic of debate. The Hanjin receivership was causing short-term havoc in the market, affecting shippers and alliance partners alike, said Thomas Eskesen of consulting firm Eskesen Advisory, former head of reefers at Maersk Line, and one of the conference moderators.
Reefer container trade
Coinciding with the opening of the annual Asia Fruit Logistica Exhibition, delegates heard about the dismal financial performance of the container shipping sector, with “everyone losing money”, coupled with the warning that “[shippers] get what they pay for”, according to Eskesen.
Apart from Wan Hai, which chalked up a small operating profit, all the other lines – including the market leader Maersk – have plunged into the red in the first half of this year.
According to Ronald Veldman, maritime consultant at Seabury Group, reefers remain “the positive exception, growing at over five per cent, and will keep growing at a steady pace of about market average.” Veldman said that global reefer cargo volumes grew by 163,000 TEUs from January to June 2016, compared to the same period in 2015.
Isabella Hu of COSCO Container Lines was even more positive, expecting that container rates would go up in the second half of the year, buoyed by intra-Asia demand. This was largely driven by China and would impact reefer volumes, she argued.
From trade lane to demand chain
While the growth rate for perishable cargoes as a whole remains relatively healthy, at least compared with the rest of shipping, retail supply chain consultant Simon Pearson challenged delegates to take a fresh look at the business of perishable logistics.
“The logistics sector needs to leave behind the tramlines of trade lane thinking and embrace the new reality of the demand chain”, the former Asda Walmart executive said. That includes understanding the changing needs and behaviour of the end consumer, said Pearson, including the trend for Chinese consumers to shop in small amounts, “but more often.”
This chimed with comments made by Clark Meng, general manager project development – Fresh Business Unit for e-commerce giant JD.Com, who warned producers and exporters that the customers “won’t be educated.” According to JD.com, fresh produce still represents one per cent of the total online market, and just three per cent of China’s US$2 trillion fresh produce market.
Meng also observed that e-commerce cannot be treated as a ‘like for like’ replacement for traditional retail outlets and the company is now pursuing more of an omnichannel strategy with investment in physical stores.
IoT and farms-in-a-box
In his shipping summary, Eskesen proclaimed “the end of the lone wolves” in container shipping and that only carriers “with a scale can survive”. This view was supported by Ole Schack-Petersen, chief strategy officer of perishable logistics provider LCL, who was chairing one of the break-out sessions on perishable product solutions and innovation. Petersen observed the remote container management (RCM) system recently deployed by Maersk Line across its entire fleet of reefer containers was fast becoming a new industry standard that smaller lines would have to follow sooner or later.
Living up to his image as an innovator, Alfred Cheung of the JC Food Republic and former head of reefer trades at OOCL, aired his new concept of using maritime containers as an environment to grow fresh produce using hydroponics technology. Old reefer containers are already being repurposed for urban farming by a number of start-ups and collectives around the world, as reported recently in the Wall Street Journal.
Cool Logistics Asia returns to Hong Kong alongside Asia Fruit Logistica on 6-8 September 2017.