Michael Lassner CEO, Allied Steel Buildings speaks with Bill Harms CEO, Cool Runnings International about today’s cold storage, cold chain industry, the effects COVID-19 had on the industry, and how they are being resourceful, thinking outside-the-box, and honing in on their values to overcome the struggles.
Cold Storage Collaboration, Partnerships & Synergies
What we always talk about with Allied is collaboration, partnerships, synergies. What does that mean? Today, we’re going to share some of that with you. I’m here with Bill Harms, CEO and President of Cool Runnings international, an expert in the global supply chain, cold chain business, and we’re going to talk about a lot of things today. We’re going to talk about, what does collaboration mean? How do you do it across trades, across consultants, with your clients? How do you deploy human capital around the world to come up with the right solutions? You can’t do it at your desk, Bill, and I know that, it doesn’t happen. So you’ve got to get out there. You’ve got to see it. You’ve got to understand what’s happening in your client’s world. We always talk about it at Allied, but I don’t know if there’s anybody who does it better than Cool Runnings international, who has a smaller US based team and a large international team. The reason why is, their philosophy. You have to be in the room, you have to be in the store, you have to be in the distribution center to understand what’s happening, to provide the right solutions for clients.
So, Bill, we’re talking about global developers and or the corporations. List five bullet points you want them to understand when entering a new market.
Cold Storage In New Markets, With a Broken Supply Chain
Well, the first challenge is once we find out the needs of the customer, we have to look at the entire supply chain logistics of components, engineering, design, deliverable goods and procurement of all those goods and put them into a package that is a turnkey-solution. Where they don’t see the complexity of the dynamics of importation, factory delays. And then you have the human capital side where it dictates what kind of talent you need in that country. Are they able to get visas, work visas? The challenges, maybe the technology in the country might not exist. You might be bringing in new technology that requires training as well. So it’s the full supply chain from concept to a working product that has to be delivered to the customer. It could take months or years.
On a side note, I was told the other day by our largest customer PriceSmart, it’s taking two years to deliver forklifts to them now. Two years for forklifts, they can’t acquire forklifts for the stores. That’s just one item that nobody thinks of, the supply chain logistics. The questions we get every day now, from our clients that are just staying within the building materials, but outside the scope of the building envelope that we provide, are extraordinary, and of course, in our own way, we’re trying to help them as well. But on another note, they’re also looking at purchase orders for equipment due to the one to two year backlog in some of these factories, cases, equipment evaporators. So PriceSmart’s new solution is to rent warehouses and preorder this stuff prior to projects even being delivered. So we may not see a contract for a new project for six, eight months, but they’re going to go ahead and cut a PO for the generic equipment a year ahead of time, just to make sure they have it when they go to do the project, which is a nice solution, but it’s also going to involve logistics of storing the equipment to deliver the project on time.
So one of the major changes that you’ve seen coming out of the pandemic was, prior, you may have a customer that says, I want to be in business within one year in X country. Now what you’re seeing is the timelines have extended where they said I need to start working with you today to design, to plan for a solution. That the reality is they’re not going to see that facility built for two to three years now because of the backlog of all the equipment and the supply chain and movement.
Thinking Outside-The-Box
Yeah. It’s because every piece of equipment relies on the other equipment to perform their duties. In this case, whatever’s the longest lead time, cases for grocery store meat cases and produce cases are now 32 weeks. And then maybe the equipment is available sooner, but you’re not going to be able to run any equipment. So you really have to find your weakest link in your supply chain. The critical components is what I’m talking about, some items you can do without. But the majority of the long lead time items are critical to the function of the entire project. So it might just be a computer chip that’s not available for some controllers. Well, that might go back to reengineering, maybe we go back to the old school mechanical valves and stuff like that, just to get the project up and running. We’ve done that recently. They have these components, the computerized pulsating, and energy efficient systems to just deliver as much refrigerant as needed. But they’re not available. So they’re saying it will be a year before we can provide this product. Well, then you go back to old school and say, well, they should use mechanical valves because they’re readily available.
Well, that’s where the expertise comes in, right? That’s where the clients are hiring you for solutions. Not just what you can pick out of a catalog, but what you can create for them in the moment or the environment that they’re sitting in.
So, Bill, Cool Runnings has a very interesting perspective. From the places I know, you’re on the ground in South America, of course you’re on the ground in the US, South America, we’ll come back to the US in a moment. You’re on the ground in Africa and Asia. More broadly, what are some of the trends that your team is seeing? Like, if we look through the world from the Cool Runnings lens and their teammates around the globe, what are some of the things that you can share with us in terms of maybe aftermath, let’s say, even though we’re still managing through COVID-19, but maybe we’re getting to the aftermath in different markets or maybe it’s a market by market perspective. How did that affect food security, food supply? How might it have transitioned businesses from one model to another? It would be interesting to hear from you on that.
Supply Chain Deficiencies & Shifts
Well, one thing the pandemic exposed was the deficiency in cold chain logistics relating to deliveringy distribution centers, the transportation of products and goods, especially perishables like fruits and vegetables. What I’ve seen, the bigger companies are now driving to control their own logistics. We’re doing a number of produce distribution centers in the farm areas, regions of South America. We’re currently finishing one up in Southern Colombia for the customer so they can control their quality of product right out of the field into their own packaging, kind of miniature packaging plant and storage so they can have some control of keeping stuff on their shelf. Because one thing with the pandemic, there were a lot of companies that just came to a grinding halt, there was a rhythm prior to the pandemic, the world had a rhythm to it with making sure the real-time supply chain was working, well the pandemic rocked that world, and it still hasn’t come back to a common ground on that.
A supplier of commercial & industrial cold storage and refrigeration products, energy management systems, service & maintenance, design, and engineering.
So the dynamics are shifting in the way companies are securing and procuring their own goods and products for delivering to the customer, that’s more on the retail side. On the industrial side, I think really the demand is the demand. We’re coming into the pre-pandemic with a global shortage of cold chain, globally. I mean, in the US, there were markets where you couldn’t even get frozen storage for all the shipping ports, that was existing prior to pandemic and that hasn’t changed.
Food Waste
The world kind of got put on pause for a couple of years here. But the problem is the growth continued and a lot of that is driven by population growth. What I’m seeing from a global perspective, there’s such a huge waste of product they call farm to port and it’s throughout the entire supply chain. You’ve got products and goods that are rotting in the field. You’ve got waste there, you’ve got waste in the delivering it to the markets and supermarkets and other distribution routes don’t get delivered in time. There’s spoilage.
I know there’s a lot of it, it varies throughout the world too. What I’m saying doesn’t necessarily exist in all markets. There are some markets that are better. The emerging markets have no cold chain logistics. A lot of Africa, their delivery of the product is harvested, they put it in the back of the truck, they leave at three or four in the morning to get it to market, and throughout the day the product decreases in value because it decreases in quality. By the end of the day, they’re feeding it to the farm animals. So there’s a lot of waste there.
I think the biggest impact we as a company can have on the world is not the more elaborate distribution centers or large manufacturing plants, although that’s needed. I think it’s the simplest thing we do, it’s just a little cold storage box scattered throughout all of Africa and Asia to help the locals keep what they produce and get it distributed. I’ve seen a couple of articles, one read that it requires two tons of food to be produced in the world to sustain one human being on the planet. When you add that to about a quarter million people a day, and it’s going up, being added to the planet. That means today versus yesterday, we have to have a quarter million tons of food produced that we didn’t produce yesterday and throughout the entire cold chain delivered to them. And that doesn’t mean everybody eats or consumes two tons of food. It’s accounts for probably 30 – 40% waste by the time it even gets to the market. That’s the market we’re in.
With the combination of the expansion of the global population, the needs, the hunger, I perceive huge impact on the global hunger because the population is growing faster than our industry is able to keep up with. Good opportunities for companies like Allied and Cool Runnings to continue to develop, especially in the emerging markets. Some of the areas are saturated. There’s a lot of companies in Europe that do what we do. I believe our specialties are in those out-of-the-box thinking opportunities. What can we do in emerging countries? That’s where we thrive and that’s where our expertise comes to bear.
The Global, Interlinked Supply Chain Broke Down & Localized
Some good follow ups from those comments… For one, we had a globally connected supply chain. But from your view, what you are seeing is, it worked, but it had to work perfectly at the time. The minute a kink entered the market, and more than a kink, COVID-19 affected all of our lives, because the globe all had to manage it independently, that supply chain quickly broke down. All of a sudden you were relying on certain goods coming from Asia, certain goods coming from Latin America, and that was all part of what ended up on the shelves. And now we’re saying, geez, it won’t work anymore, I can’t get goods out of this country or out of this region, so I’ve got to think differently now. What you’re seeing are the trends that it’s starting to localize, that companies are going vertical and then growth, production and food supply is becoming more local.
Yes, that is correct. I’m seeing they’re relying on the regions they’re in to supply their own markets and there’s still some global markets that need products. It’s a hub and spoke, so a lot of these companies are developing their regional supply chain to support their regional market, but they’re also then shipping some of those products into their own distribution centers. One of our largest customers in South America really shifted their capital growth to a lot of supply chain with these distribution centers, primarily because of the perishables there, but then they’re also doing it for exporting, global. It’s a twofold market plan.
Allied Steel’s Cold Storage, Distribution Centers
You know, it’s interesting. I think, you know, we have a large presence in Panama and we had tremendous growth over the last decade as Panama grew and all that was in supply chain right, in cold chain, supply chain. Boats coming in, boats going out, goods going everywhere. And then it slowed down right before COVID and just normalized to typical regular GDP growth and now the growth has returned post COVID because everyone is saying we are in a different world today, and I think we’re both seeing where a lot of it was, “how many supermarkets can we build?” And those plans have now gone off on the shelf or perhaps in the fireplace, but it’s now, “how many distribution centers can we build to get smaller footprints?” Because now we’re seeing a lot of goods go from the distribution center or the cold storage warehouse to the home. And I think you’re seeing that trend happen in Latin America as well.
Spotting Supply Chain Trends
There has been substantial improvement directly from the field to the fork. Instead of going through multiple distribution centers and through retail locations, they’re going straight through maybe a processing center, straight to the consumer. That’s a trend we see, the online shopping that’s going on in the United States. Not all markets, but a lot of these markets are really coming to bear. The automation, the computerized ordering systems are now really filtering into the perishables, too. There’s a lot of companies in the US that do that very well. A lot of the companies that deliver fresh foods to your doorstep by the next day.
The emerging markets don’t quite have that kind of logistics, but there are large companies like Amazon Investing, I think, a $4 billion new Amazon headquarters in Southern Africa. So those markets are going to develop, just as the US and European markets have. It’s an interesting dynamic where you can look at one part of the world as being 40 – 50 years behind, say, the US and Europe, and you can see the trends happening there. And then you look into Latin America, which I think is a little further advanced than some of these other emerging markets. But it’s almost like time snapshots of the world have the same problem. Sustainability, cold chain deliverable products to the consumer, and they’re all just a little behind the times. But fortunate thing about our business, working globally, is you can see the more advanced segments of the market, and the ones that are just now starting, and you can kind of foresee the needs of the future. And if you’re savvy enough, I think, to really get into those markets and really develop them. I think it’s a real key aspect for future growth and future stability of any company.
Entering New Markets
Let’s talk about that for a moment. People have a hard time working out of their state or out of their region. You use the word savvy and getting into those markets. How do you do it, especially in such a specialized trade? Well, we’ll talk about our own perspective on that in a moment. But how does Cool Runnings circle the globe and get into these markets?
Yeah, I don’t know, we just stumble forward a lot of it. You look at opportunities. It’s always opportunity driven. Some of it is customer driven. Some of these customers have marketing plans and move around. Our largest customer in Latin America has looked at a couple other countries in South America that they’re moving into. So you tend to organically grow with your existing customer base. Well, through that, you also get a referral base. We are doing our first project for an Argentinian company, a fish supplier. I’ve got crews in Argentina now, brand new country we’ve never worked in before. Getting through the visa process to even get our guys into the country was challenging. You kind of learn and develop, and we’ve got some expertise because we’ve done this for a long time. There’s the same kind of dynamics that goes into trying to get goods and products into countries just from a logistics standpoint, the exportation and just the travel logistics as well. But what we found is most of these countries, one thing about mechanical and refrigeration, every project is pretty much custom engineered because it requires almost like having to keep it fine-tuned like an automobile. It’s not like air conditioning, where you have a package in a certain size fits all, it really is designed towards the customer’s needs. That’s where I think Allied does a great job too. You’re not trying to sell them a box, you’re selling them a solution for what they’re looking for.
One-Size Doesn’t Fit All
That’s the difference between a lot of companies. They provide a package. This is it, take it or leave it. In our case, we’re looking at what the challenges are and what the needs are for the customer, same as Allied. And then we’re trying to develop a product or deliver something that will achieve those goals for the customer. And I think that’s a different dynamic than a lot of companies that get larger. They can’t be that agile. But what I’m seeing, like in Argentina is the expertise doesn’t exist. It really does take about, in the mechanical refrigeration market, ten years, a decade to create a decent technician with the human capital. So one of the biggest challenges for any company’s growth, I think going into the next decade is human capital. Developing it, having enough human capital, I think those who have the talent will prosper in the markets. And an example down there, the equipment that was provided by another company was installed by locals in three of the locations we’re working right now. And they didn’t know what they were doing. And there’s catastrophic failure. They didn’t even hook up the heating systems within the cases and stuff that require anti sweat, not understanding the dynamics of altitude and humidity and stuff. An example where the store increased their air conditioning to keep the temperature at 61 degrees. So when people come in and out of that tropical air, they’re freezing, they don’t even want to shop in there, but they’re doing that, they think they’re keeping the frozen, frozen. Reality is, the air blowing is changing the dynamics of the equipment. So it’s very complicated. So what Cool Running’s, I think biggest challenge moving forward is to continue to build and develop technicians that understand the dynamics, the training. That’s probably the biggest challenge for our growth in the next ten years, finding the quality and the technicians. They’re out there, but it’s going to be challenging.
Allied University
We’re big proponents of training. Actually, Cool Runnings did an Allied-U for us a few years back. It was just as we were embarking on cold chain for our clients, we wanted a better understanding of the building we were designing and constructing for them, and we felt like we needed Bill’s team to come in and talk about what happens after. What are they doing inside the building so we could have better expertise in terms of designing the building for the solution that they’re looking for. That’s critical. I think the other aspect that Bill and I learned ten years ago when we met was there wasn’t a collaboration. Even though we were working with a sophisticated client, we were at separate tables or separate meetings when we should be working together from the beginning in order to construct the correct solution for the client. Of course speed to market is huge, especially in the retail industry, and we’ll be able to build the right solution for the need. When you collaborate with all the trades, you get to design it once, you get to put it together once and come up with the right solution for them. So I think we’re big believers in the collaboration and then finding companies you could have synergies with to make it happen more expeditiously and correctly for our customers. By the way, I like what you said. Stumble forward, it sounds like a good book we can write together.
Leaning Into The Problems
It’s amazing what you get yourself into. One thing, kind of in that analogy, I think what I’ve enjoyed about the relationship with Allied and Cool Runnings is, it’s as simple as leaning into a problem.
Every project has problems. It’s construction. It’s not necessarily glamorous. I think what I’ve admired about Allied is I believe you’re kind of a fashion trendsetter in the steel industry, which is kind of an oxymoron if you think about that, and the innovation. I think what we share is common values with customer centric, about the customer and about the relationship and about making sure that at the end of the day, these are buzzwords that are used for a lot of companies, but a lot of them preach it, not all of them practice it. Moral integrity. I think that what I’ve seen and I admire with Mike and Allied is they’ll do whatever it takes to deliver what they promised, I think we feel the same way.
Innovative, I think the things that I’ve seen with your team is you were, before Pandemic, you guys were looking at automation, innovation and software and what you’re doing now with your own supply chain. I think some companies vapor, lock and froze during the Pandemic. Some of them aren’t even around anymore because of that. The ones that really hunkered down and got busy and survived and some prospered. I think the global supply chain that Allied had developed over the last decade plus, I think you guys are almost 19, 20 years old now. Lean on that wisdom and experience a lot. You might talk quite a bit about the market and the trends and the customers and stuff, and that helps me go back to my team with a different perspective at times. But I think the solution oriented companies and the value I think what I’ve seen is the companies that really got down and got, rolled up their sleeves, are now prospering and developing. I believe, if I’m not mistaken, your team and organization grew and expanded during the Pandemic where most companies froze. It was a hard shutdown in the world. And for our company, being an international company like yours, it was a hard shutdown of construction. We had projects in 14 countries and they were shut down instantly. That was a hard pill to swallow as to everybody. But we did what we had to do. We got busy and started thinking what we could do. It expanded our US operation, which now is thriving and blossoming in its own light. That’s like stumbling forward. We stumbled back into the United States because we couldn’t travel.
Allied opened a factory during the pandemic, to service it’s clients:
Making It Over The Hurdles
Cool Runnings like Allied, we have great teams and we have team members that we believe in. And certainly this wasn’t our first crisis. Right. And in our 19 years, I can name three major crisis and two minor crisis. So five, a lot of the same teammates are here and it was easy. And you see the pattern across each one. None were easy, I should say, but it was easy to look around the room and say, okay, here’s what’s happening. What should we do? And the collaboration across our team set us off in the right direction. And sure, we were able to capitalize on solutions we’ve been working on over the years and we were able to grow and find like-minded people that had the same philosophy. And of course, if you always do that with your customers’ needs in mind, it works.
Bill, as always, great to be with you. Sometimes we’re here on videos, sometimes we are together. We had Bill’s team down here last month talking about new collaborative projects that we can do for certain client’s needs. Sometimes we find each other in different countries. We ask where we’re going and we will meet there and just find time to collaborate, and I will gain wisdom and advice from Bill on our company and I share my thoughts with him as well on his and it’s always a pleasure.
Bill, really appreciate being with you as always and thank you for the wisdom you’ve been sharing. I think I’ve asked you about your business and your industry but I think if you take the category of business outside of it and just look at the business principles, morals, ethics, strategy I think what you shared is really meaningful to anyone in the business world so thank you.
Peace be the journey. Thank you, Bill. Look forward to seeing you soon.
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