The concept of offsite cold storage was simple: when manufacturers produced more than they could store in their onsite coolers and freezers, they needed somewhere to put their excess inventory. It made sense that they’d seek out cold storage facilities in their immediate area to minimize time and transit cost while continuing business more or less as usual. That solved the problem of how to store excess inventory, but it didn’t offer much beyond that.
As supply chains have evolved and business processes have become more efficient, savvy manufacturers and distributors are adopting a more strategic model that is less focused on proximity to the production site and more focused on speed and fulfillment efficiency.
Let’s take a closer look at the three key segments of the cold chain that carry products from production to point of sale: the first mile, mid-mile, and last mile.
The first mile, where you move full truckloads from your plant to cold storage, is both predictable and efficient because you control production volumes and shipping schedules. The last mile, where products ship from retail distribution centers to stores, is complex and expensive, but it’s also beyond the point where products pass into the retailers’ control.
In the mid-mile, customer demand drives your output — and that’s where your distribution strategy has the greatest impact on service and profitability.
Even though mid-mile shipments often move by the truckload, their frequency and direction are constantly changing based on product orders, promotions, and seasonality. This unpredictability makes the location of your cold storage facilities crucial.
By positioning your perishable products close to your high-volume customers, you reduce the distance of your outbound hauls, stabilize freight costs, and allow your company to respond more quickly to orders coming from any direction.
That’s why the best cold storage strategy is less about proximity to your plant and more about aligning your mid-mile network with the areas where your customers’ demand is greatest.
Moving products from their point of manufacture to facilities closer to your customers gives you significant advantages, including:
Reduced freight costs. Shorter on-demand hauls with fewer partial loads are more cost effective than longer hauls.
Faster delivery. Having shorter distances to travel reduces lead times and gets products to distribution centers sooner.
Fewer stockouts. Having reduced lead times increases your customers’ ability to place smaller, more frequent orders, allowing you to have more stock on the shelves at all times.
Nimble response. Faster lead times also allow you to respond more quickly to your customers’ changing needs.
If you’re considering holding perishable inventory closer to your customers as part of your new distribution strategy, the specific facilities that you choose will have a major impact on your bottom line. Here’s how to make an informed decision:
Want to find out if your business would be a good candidate for forward positioning? Take a close look at your product demand.
See if the strain on your current cold storage capacity is because of high overall volume relative to capacity or if it’s due to high pull-through volume, where certain high-volume customers consistently order and “pull” products through the supply chain by demand.
Companies with high overall volume may find that expanding onsite or local storage may be the right choice. But if your company has high pull-through volume, positioning high-volume SKUs closer to major retail distribution centers can create a more responsive, demand-driven supply chain that supports faster fulfillment and improves customer service.
Find the distribution centers of your existing customers with high pull-through volume on a map, and draw a circle around them to identify areas within an acceptable delivery radius. The places where these areas intersect will be your most strategic zones for forward-positioned inventory.
Eliminate locations affected by geographic obstacles such as mountains, canyons, and waterways which can add to transportation time and distance. Research traffic congestion, freight bottlenecks, crime rates, and other hazards that drive up freight costs and/or increase risk to further narrow the field.
Focus your search in the remaining areas near major freight corridors with reliable carrier capacity, easy highway access, and minimal traffic congestion. Look for established bulk cold storage providers in these regions that support high-volume, truckload-based distribution and have both available space and a proven history of performance and customer satisfaction.
Make sure that you’re getting a quote for total costs based on your specific needs. If a facility gives you a quote without considering factors such as your finished pallet height, lumping services, and seasonal fluctuations, you won’t have the data you need to make an informed decision. You may also be setting yourself up for an unpleasant surprise when it comes time to pay the bill.
Make sure you consider factors that will help streamline your operations as you find the cold storage providers at the top of your list. The right 3PL cold storage partner should offer:
Choosing the right 3PL cold storage provider can remove obstacles from your processes and make a big difference on your bottom line.
Interstate Cold Storage sets your business up for success with:
Contact us today and find out how Interstate Cold Storage can help improve lead times, strengthen your retail relationships, and take your business to the next level.
