Towards the end of last year, Steve Banker and I met with Greg Lehmkuhl, President & CEO, Sudarsan Thattai, CIO, and Chris Timmer, SVP Sales and Value-Added Services from Lineage Logistics. The name Lineage Logistics may not be a household name, but that is something the leadership team is used to. However, Lineage, a mid-cap company based in Detroit, Michigan, is one of the world’s largest and most innovative temperature-controlled supply chain providers. The temperature-controlled supply chain, also known as cold chain, is used to keep products at specified temperatures to preserve food safety and, generally increase shelf life. The company operates over 120 facilities in four countries, with over 700 million cubic feet of storage. The company’s solutions include warehousing, managed transportation, re-distribution, high pressure processing, packaging, and more.
According to Lineage, one of the interesting components of the cold chain is the size of the market. While the market itself is huge, cost barriers make it difficult for new entrants to the market. Cold storage is significantly more expensive than dry storage due to energy, equipment and specialized insulated construction materials required to maintain ideal temperatures. The growth in demand for frozen and perishable foods has been rising for a decade, but investments in the cold chain were historically low due to the recession. With the economy recovering and demand rising, the industry is seeing more capital inflows – and people are paying attention.
One of the major challenges facing companies is the fact that it is difficult to achieve consistent utilization in warehouses due to the seasonality of food. In the warehouse, space is money, and operations need to be sustainable. The solution for Lineage was for its applied sciences team to take on the task of making the warehouses more efficient with the goal of driving sustainability. Namely, the applied scientists team created highly accurate models of the inside of warehouses, providing a sub-millimeter-accurate measurement. Using that data along with other inventory data, Lineage is able to optimize use of the warehouse resulting in both better utilization of the limited space along with more accurate movement of product to better serve customers.
Greg Lehmkuhl pointed out two distinct areas where Lineage was able to use its applied sciences team to improve operational efficiency and profitability: Sustainability and Energy.
Not surprisingly, in the cold chain, energy is a huge expense. The solution was to put sensors in their cold storage warehouses to monitor the temperature throughout. Using the sensors, Lineage was able to build a model to more accurately determine, track, and optimize the way energy is used to cool the warehouse. Lineage is working to take that knowledge a step further to automate, centrally control, and optimize energy use throughout its facilities to further maximize efficiencies.
The result was a solution that maximized energy consumption and reduced the total cost of energy to operate cold storage warehouses. Lineage has been able to do this by adjusting energy consumption based on energy prices while still ensuring that the temperature in the warehouse maintains compliance with customer temperature requirements. So how effective is this method? Last year, based on the amount of cold storage Lineage provided, energy costs should have risen 8 percent. Instead, due to their warehouse models, the company reduced its average cost per KWh by almost 10 percent.
Such energy optimization also helps Lineage better utilize intermittent, but renewable sources of electricity, such as wind turbines and solar panels.
The Lineage team shared one other interesting anecdote about how their applied sciences team was reducing energy consumption. Lineage stores more of the strawberries in the United States than any other warehouse. Historically, the strawberries have been put in a blast freezer to rapidly freeze them for an extended shelf life. With the 2015 bumper crop coming in, they simply couldn’t handle the increased capacity and freeze everything in time. So, they put the applied sciences team on the task again. The team created thermodynamic and aerodynamic models normally employed in the aerospace industry, creating new proprietary blast freeze technology in the process. As a result, Lineage was able to freeze strawberries in approximately 60% of the time as before, with commensurate energy savings and capacity increases.
The cold chain is a vital component to the food and beverage supply chain. With increased demand comes increased opportunity. However, much like every other market, technology innovation becomes a critical component to seizing these opportunities. Lineage is using a data-driven approach to improve efficiencies for how products are stored and how energy is consumed. The results speak for themselves, Lineage has managed to reduce energy costs while increasing throughput and density. This is a reminder of the importance of a data-driven approach to business.