The growth in popularity for online grocery shopping during the COVID-19 pandemic has left many e-commerce food retailers struggling to meet increased logistics demands. While consumer demand for fast shipping and reliable delivery is high across virtually all e-commerce segments, the capability for same-day and next-day delivery is essential for perishables and frozen foods. Online food and beverage sales have increased nearly 85 percent year-over-year, driving an increased need for cold storage space. In addition, online sales are expected to hold onto at least 21.5 percent of all total U.S. grocery sales by 2025.
To accommodate growing demand, many online food sellers have turned to third-party logistics (3PL) companies for help. An experienced 3PL will provide the cold storage assets, experienced labor, and transportation network necessary to safely handle, pack, and distribute food products. This article offers tips on sourcing a 3PL that can effectively store, handle, and distribute food products.
Three Factors to Consider in a Food 3PL
Unfortunately, however, not every 3PL is equipped to properly handle the unique storage and fulfillment procedures for food and grocery products. It’s essential that e-grocers carefully evaluate potential logistics partners to ensure that they won’t mishandle products and cause damage to the seller’s brand. Here are some factors to consider when shopping for a food 3PL.
1. Cold Storage Footprint
One of the largest challenges facing online grocery retailers right now is a lack of cold storage space. The average American cold storage facility is about 34 years old, and the temperature-controlled warehousing sector was widely underprepared for pandemic-driven growth in online grocery sales. With refrigerated and frozen facility assets at a premium, the sourcing process for a food 3PL should consider whether the provider can bring cold storage real estate to the table.
If you need to reach multiple markets, then make sure that the 3PL can provide cold storage space in each area to facilitate quick deliveries to your customers. In addition, make sure those facilities can meet the specific temperature storage requirements of your products.
2. Regulatory Compliance
All logistics providers that handle food must comply with stringent U.S. Department of Agriculture (USDA) and U.S. Food and Drug Administration (FDA) regulations. When vetting a 3PL, make sure that all food warehouses have been inspected by the FDA for compliance with the Food Safety Modernization act within the last three years. Each facility should also have its own FDA identification number and an approved risk management plan for all issues that might compromise the safety of your food products. If your logistics partner fails to comply with FDA or USDA regulations, that can blow back on your business as well in the form of brand damage, lost or seized inventory, and possibly financial penalties.
Also look for Good Manufacturing Practices (GMP) certification for food-grade warehouses to ensure that your 3PL operates at a level well above the government’s regulatory baseline. A GMP warehouse operates at the highest cleanliness and sanitation levels to mitigate the risk of food product contamination.
Online grocery sales require fast and accurate picking capabilities to ensure that your customers receive all of the goods they’ve ordered. With numerous competitors seeking market share in the grocery e-commerce space, its essential to your brand and repeat business that customers get everything they ordered. Any modern food-grade warehouse relies heavily on a comprehensive warehouse management system (WMS) to translate online orders into picking, packing, and shipping instructions. An advanced WMS can also help to efficiently manage returns, recalls, batch and lot tracking, and more.
About Phoenix Investors
Founded in 1994 by Frank P Crivello, Phoenix Investors and its affiliates (collectively “Phoenix”) are a leader in the acquisition, development, renovation, and repositioning of industrial facilities throughout the United States. Utilizing a disciplined investment approach and successful partnerships with institutional capital sources, corporations, and public stakeholders, Phoenix has developed a proven track record of generating superior risk-adjusted returns, while providing cost-efficient lease rates for its growing portfolio of national tenants. Its efforts inspire and drive the transformation and reinvigoration of the economic engines in the communities it serves. Phoenix continues to be defined by thoughtful relationships, sophisticated investment tools, cost-efficient solutions, and a reputation for success.