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Cooling has become a weak link in the global commodity chain

The ways in which cooling has become a weak link in the commodity chain and how production processes and value chain analysis help your business reforge it.

Modern life relies on the supply chain. The transport of goods and the accompanying services they enable are the cornerstone of international trade and the world economy. Even years into the COVID-19 pandemic, the severing of linkages to the supply chain in 2020 still affects the world economy profoundly, from inflation to political stability. 

Nowhere is the importance of the supply chain more acute than in the shipping and storage of items reliant on refrigeration, a process also known as the cold supply chain, or cold chain. As globalization increases and global supply chains modernize, the products moved through international trade, and the cold chain have become more critical. Notably, the rapid advancement of the global market, in addition to the economic progress of the third world, particularly in South and East Asia, profoundly changed what people eat and how they purchase industrial and agricultural commodities.

While this world systems theory symbolizes safer, more economically egalitarian power relations within the world economy, hard to imagine even 20 years ago, they are not without drawbacks. As humanity approaches a critical mass regarding the climate crisis, the increased reliance on the global commodity chain and the refrigeration requirements to transport perishable commodities to consumer markets poses a more existential quandary. Namely, how do we reconcile the linkages between the well-being of humanity with the destruction of the planet and its resources?

Economic development in the third world

Economic development in the Asia-Pacific (APAC) region and the emergence of the global middle class as part of the broader world economy play a significant role in upgrading the cold commodity chain and the broader global supply chains. This increased economic activity typically comes with a broader upgrading of consumer habits. With financial stability comes increased reliance on luxury goods and services and a restructuring of how buyers access them, according to some commodity chain analyses.  

The expected growth in the value of the frozen food market in APAC over four years (In billions of dollars)

The expected growth in the value of the cold chain over six years (in Billions of dollars)

One of the most emblematic shifts has occurred in sourcing groceries and the raw materials used in the production process of finished commodities like frozen food items. Middle-class consumers in these regions are increasingly transitioning from a tradition of sourcing raw materials and food from local vendors, otherwise known as “wet markets.” In contrast, the “supermarket” model of economic activity, in which consumers drive to a retailer, source and purchase a finished commodity and drive home, is becoming more prevalent, increasing, according to some value chain analysis, by 7% a year.

The expected growth in the value of the frozen food market in APAC over four years (In billions of dollars)

The expected growth in the value of the frozen food market in APAC over four years (In billions of dollars)

Given that the majority of the world’s population lives within the broader APAC region and that some commodity chain analysis projects the Asian middle class to grow 75% in the next ten years, reliance on the global commodity chain should increase in tandem.

Climate change and the global commodity chains

While supermarkets and global production have enabled the new middle class to enjoy healthier, fresher food consistently, there is an environmental price. What was once grown and transported locally must now be shipped through a global commodity chain and be constantly refrigerated. In turn, the supply chain requires increased use of diesel fuel, refrigerants, and electricity to ensure quality and consistency. 

Extrapolating the current model as it is in the west, the growth and consequences of the cold supply chain, or cold chain, becomes a paradox. Items shipped through the cold chain lead to better outcomes and quality of life while exasperating the factors that made life more dangerous and less stable in the first place.

Consider this case study: Cooling is more of a necessity when elevated temperatures are a constant rather than an anomaly. While cooling provides solutions to the problems posed by climate change, it’s also a significant contributor to those same problems. According to some economists, cooling consumes nearly 20% of electricity worldwide and is responsible for over 10% of global greenhouse gas emissions in some global value chains. Due to the consistently higher temperatures caused by power and cooling, those numbers should increase accordingly, creating a feedback loop where the solution is the problem. 

The same principle applies to linkages within the cold supply chain. The more reliant the world becomes on items shipped through the cold chain, the more the climate will be affected, even in places that do not experience extreme temperatures, such as New York.

Improving supply chain management

Everyone in the world deserves a safe, comfortable, and healthy existence. The difficulty becomes providing that comfort and convenience without exasperating the symptoms that created the climate crisis. Solving this paradox requires better supply chain management. There may be some short-term solutions to the cold supply chain’s climate problem with enhanced supply chain management techniques.

Cooling as a Service (CaaS) 

Cooling as a Service is a commodity chain approach based on the concept of servitization. By providing inexpensive short-term cold storage linkages in areas that lack start-up capital or infrastructure for industrial cooling, producers and consumers both benefit.

Local retailers reap higher returns for their agricultural commodities because cold storage allows them to preserve their products for much longer than they otherwise would, wasting less. With the increased amount of raw material, prices fall, making it more accessible to the consumer. Further, because the operator stored the item correctly, the quality and safety of the items also improves. 

The added benefit of CaaS is that it preserves traditional supply chains, production systems, and production processes. Instead of restructuring the production processes used by local farmers and wet markets for centuries in favor of transnational grocery stores, CaaS maintains the historic sourcing methods of retailers while optimizing them.

Natural Refrigerants and the global commodity chain

While cooling is responsible for 8% of emissions total, the fluorinated gasses used to power Heating, ventilation, air conditioning, and refrigeration (HVACR) systems represent 2% of global emissions. Gas leakage is common in all HVACR systems used in the world economy, particularly in older ones, due to the deterioration of the machine’s hardware over time. 

Since the mid-20th century, real-world manufacturers throughout the global economy have relied on various gasses that, while non-flammable, have massive global warming potential. Many people remember the public outcry over the refrigerant Freon in the 1990s age of globalisation. While the UN gradually fazed our Freon, the chemical industry replaced it with other similar gasses such as HFCs and HCFCs.

However, In a nod to the early days of refrigeration, retailers and transnational logistics providers are turning to natural refrigerants such as CO2 and Ammonia to improve their carbon footprint. New compression technology has allowed engineers to create systems that utilize these (relatively) more environmentally friendly gasses without sacrificing safety.

Upgrading to real-world wireless monitoring solutions in production networks

Implementing natural refrigeration is infrastructure-intensive and often financially inaccessible for small to medium-sized businesses, individuals, and production networks, as opposed to the multinational corporations that can afford such projects. Wireless monitoring solutions offer a stop-gap by indicating refrigerant leakage and excess electricity use, allowing the opportunity for improved efficiency and reduced food waste. Remote temperature monitoring systems function as sensors or nodes that operators install within cold storage equipment to measure temperature, humidity, or any other designated metric.

To understand the potential impact of remote monitoring, we must first understand its methodology. When a component of a refrigeration system breaks down, the unit will generally start to warm. Therefore by monitoring that equipment digitally, operators know if their units are breaking down and can rectify the problem before they waste electricity or leak refrigerants.

Hope for improving globalization and the supply chain

The problems presented by cooling-related emissions are numerous. Due to various degrees of industrialization throughout the global economy, alleviating them will require a multi-pronged approach. Therefore, while the innovations listed above are a step forward, they represent just the beginning of what will be necessary for the final product. More supply chain research must be done as soon as possible. Better attribution models must be built. Better types of governance must be created to hold irresponsible international corporations to account.

At the end of the day, reforming the cold supply chain is a dependency for solving the climate crisis.