What s Your Total Cost of Ownership?

Transcription

1 A publication for the seagoing container transport temperature control industry. Spring 2004 What s Your Total Cost of Ownership? Although it s tempting to focus on initial purchase price, smart shipping lines are evaluating the various costs associated with operating their refrigerated container fleets more thoroughly. They are changing the purchasing process from being driven by initial purchase price to being driven by Total Cost of Ownership (TCO). When employing the TCO method of purchasing, previous perceptions of real costs are changing, because all costs and attributes associated with ownership must be considered. These costs include purchase price, power consumption, maintenance cost and cost of downtime, and claims that could be prevented by having the correct equipment. Additionally, one needs to consider the opportunity cost. If a reefer unit is proven to protect and gain market share, this must be considered in the TCO calculation. When beginning the TCO evaluation, the assumption is made that all reefer units have the same value. Parts and Service Availability Lack of adequate global parts availability with well-trained local service support can cause unnecessary downtime for even the smallest problems. Increased downtime means lost revenue loads. Thermo King has strategically located parts warehouses capable of delivering parts anywhere in the world. It has extensive corporate services and training support strategically located. In fact, Thermo King has the best support available in South America. Other manufacturers, with the exception of Carrier, have yet to begin developing an adequate parts, service and training network.... continued on page 6 I N S I D E How to Add Value to Your Loads Page 2 Playing the Length of the Cold Chain Page 3 Two New Unit Options Page 8 New Red Warranty Tag Page 8 Thermo King Names Ansaldi Field Service and Parts Manager Page 8

2 How to add VALUE to your loads When evaluating a new technology, process or package for a salmon product, it is often helpful to conduct a costbenefit analysis to determine its commercial payback. Some technologies are expensive, but they more than pay for themselves with an increased return on investment. Others provide great improvements in convenience or quality, but may not have enough market value to justify the cost. Some just don t make good commercial sense. Below are several cost versus benefit discussions on common options in the salmon industry: value-added processing, color enhancers, gas freezing, special packaging, deep-frozen cold storage and deep-frozen transit storage. Cost vs. Benefit Analysis Processing: Salmon products that have been vacuum packaged in convenient sizes bring more money than does block-frozen product. The cost of this processing varies largely according to the country doing the processing. Consumers don t buy and prepare a whole salmon. Consumers buy a filet or individual steak or loin for immediate consumption. Convenient packaging in consumable quantities is a trend that originated in the United States and is quickly being adopted throughout the world, especially in areas where there are ever-increasing numbers of two-income families. Analysis: Medium to High Cost. Big Benefit. Color Enhancers: The price of salmon products is directly related to the color of the meat. Large investments are made to enhance this color. 65 percent of the cost of raising salmon is food and 25 percent of that cost is colorant. While the benefit is big today, pressure to reduce the amount of color enhancers in salmon feed is growing. Some countries are requiring product to be labeled as color enhanced, a potential negative in the eyes of the consumer. In the future, other means of maintaining color will be needed. The most obvious solution to maintain the color is colder transit and storage temperatures. Analysis: High Cost. Big Benefit. Gas Freezing: An important part of processing is flash freezing. Air or tunnel freezing is an inexpensive way to get the product down to a temperature at which bacterial growth will stop. However, to get the smallest ice crystal size and the highest consumer quality, gas freezing is necessary. Gas freezing uses nitrogen or carbon dioxide and, while inexpensive from an equipment standpoint, is costly from a production standpoint. Analysis: High Cost. Big Benefit. Special Packaging: Packaging also plays a big role in adding value to salmon products. Packaging can reduce dehydration or freezer burn in frozen products. It also protects the product during transit and can improve the salability of the product at market. Packaging can provide brand recognition and enhance customer loyalty and consumer convenience. Analysis: Medium to High Cost. Big Benefit. Deep-Frozen Cold Storage: The colder the storage temperature, the longer the quality shelf life. By storing at temperatures of 30 degrees C ( 22 degrees F) or below, salmon will better maintain its texture and color. Color is one of the most important consumer indicators of quality, and proper storage temperatures are needed to maintain this quality. The higher the perceived quality and the better the color of the fish, the higher the price the consumer is willing to pay. Analysis: High Cost. Big Benefit. Deep-Frozen Transit Storage: Where does most temperature abuse occur? Typically, it occurs during transit from the producer to the consumer. Reefer units can be without power for several hours while being loaded on the vessel and during trans-shipment. This coupled with the fact that standard refrigeration equipment cannot maintain adequate storage temperatures, especially in high ambient, results in significant temperature fluctuations. By using the Thermo King MAGNUM refrigeration unit, products can be held at a constant 35 degrees C ( 31 degrees F). Any temperature fluctuation that occurs during power off has less of an effect at lower temperature. Additionally, steady storage at or below 30 degrees C can extend shelf life and better maintain color and texture. With the MAGNUM s revolutionary digital scroll technology, the MAGNUM unit uses about the same power at 35 degrees C as a standard refrigeration unit at 18 degrees C. This means that 35 degrees C set point can be achieved with only a modest investment. Analysis: Low Cost. Big Benefit. When reviewing the results of the cost-benefit analysis, the only option providing both low cost and big benefit is deep-frozen transit storage. It is a technology whose concept is so simple that the producer, the receiver and the consumer can all immediately understand its benefit. And it is something that can be implemented immediately to deliver its benefit to the consumer: a technology whose benefits significantly outweigh its cost. The MAGNUM can protect the significant investment that producers make in proper production methods and vacuum packaging and can provide additional revenue for shipping lines, producers and shippers. 2

3 Playing the Length of the Cold Chain Ingersoll-Rand (IR) Climate Control Sector is composed of two leading companies: Thermo King, a transport refrigeration company, and Hussmann, a world-leading company in refrigerated display cases. What is not generally known is that the Climate Control Sector is expanding through the entire cold chain on a global basis. The expansion of cold chain facilities on a global basis has been dramatic and will continue for years to come. Fresh fruit and vegetable growers, wild catch fisheries and aquaculture operations and food processors around the world understand that getting the product temperature right, fresh or frozen, as quickly and consistently as possible after harvest is THE key element in preserving product quality at the beginning of the cold chain. These two companies have developed highly flexible solutions for point-of-harvest fresh and frozen cold-storage facilities. These facilities are relatively inexpensive compared to conventional coldstorage facilities and can be shipped and constructed in short time frames. This model is ideal for the development of growing and harvest areas with limited resources. Thermo King and Hussmann have developed highly flexible models for point-of-harvest fresh and frozen cold-storage facilities. Getting properly conditioned products from the point of harvest and/or processing to points around the world has long been Thermo King s forte. Thermo King has been the world leader in transport refrigeration since it was founded in With leading technology, Thermo King container, truck and trailer refrigeration equipment operates in all climates and conditions in every corner of the world, providing reliable temperature protection for every perishable product transported. The global service and parts network supporting these products is second to none. During transport from point of harvest to point of consumption, refrigerated products can see many other Hussmann and Thermo King products and facilities. Major cold-storage facilities, long established in the industrialized world, are experiencing demands for new services. Colder temperatures to support high-value product quality, such as ice cream and fish, are being sought by cold-storage customers. Thermo King has the ability to build a cold store within a cold store, providing a cost-effective way for existing cold-storage facilities to expand service offerings to meet customer demands. In emerging economies, large cold-storage facilities are being constructed, but the distribution facility link in the cold chain is lacking. Once again, the two companies have the ability to quickly and economically construct modular hub and spoke facilities that fill the gap between the large cold store and local customers who are distant from the larger facilities. In the retail facility, Hussmann products are able to provide a complete array of refrigerated display cases, ranging from traditional fresh, frozen and dairy display cases to bottle coolers, specialized fish display cases and the new Tuna Pot deep-frozen case. The Tuna Pot deep-frozen case is capable of maintaining temperatures to 50 degrees C ( 58 degrees F) to protect the highvalue frozen tuna in sushi and sashimi condition. The two companies are proud of their roles in developing a reliable and effective cold chain to bring growth opportunities to developed and developing regions of the world as well as highquality refrigerated products to consumers worldwide. See the Cold Chain illustration on the next page 3

4 The Cold Chain Thermo King provides seagoing container refrigeration systems, including the new MAGNUM unit that provides 35 degree C temperatures for high-value frozen fish and seafood. Hussmann provides custom blast freezing and frozen cold-store facilities for all frozen-food applications. Hussmann provides small, medium and large cold-storage facilities in all temperature ranges. Hussmann is the world s leading supplier of chill and frozen display cases for the supermarket industry, including the new Tuna Pot system for temperatures down to 50 degrees C. Hussmann provides post-harvest cooling and cold-storage facilities for fresh fruits and vegetables. 4

5 Thermo King has created specific products to serve the growing grocery home-delivery industry. Thermo King provides refrigeration systems for even the largest modern refrigerated boxcar applications. Thermo King is the global leader in trailer refrigeration systems; both single- and multi-temperature zone systems are available. Thermo King supplies a wide range of products for straight truck refrigeration requirements. 5 Hussmann supplies standard and custom walk-in cooling equipment for the restaurant and institutional food business sector.

6 What s Your Total Cost of Ownership?...continued from cover Energy Consumption Energy consumption is a major portion of the TCO of refrigerated containers. Electrical power costs can be dramatically reduced by utilizing new technology. If a container operates for 3,500 hours per year over a 12-year period, it will consume as much as $17,000 in electrical power at 6.7 per kw. Maintenance and Repair / Unit Simplicity Maintenance and repair (M&R) costs are a big factor in TCO and refrigerated containers. Although refrigeration machinery has become more reliable over the years, M&R costs are still considerable. Refrigeration systems with high complexity, involving many functioning parts, will logically experience higher maintenance costs over the life of the unit. The simpler the operating system, the lower the expected maintenance costs will be. Another consideration is the term of total life the container can perform at as new levels. The number of mechanical devices in a system relates directly to the lifetime maintenance costs. Systems that use hot gas to defrost and heat add significant complexity. Scroll units with suction modulation add complexity. Scroll units with digital modulation are simple, reliable and will have less downtime. Even with extended warranties, downtime costs money to the shipping line. Unit Degradation All containers experience a degradation of insulation effectiveness over time. Recent testing reveals that a seven-year-old container has lost 28 percent of its insulating ability, or four percent per year. The refrigeration machinery capacity remains fairly constant over time with proper maintenance, but with limited capacity, the box/unit combination will lose its ability to reach deep-frozen temperatures over time. The impact on TCO is that the container becomes limited in application, experiencing lower annual loadings and causing relocation of newer units for deep-frozen loads. Although difficult to put a value on, this factor is definitely involved in the TCO model. New technologies are providing higher capacities that are capable of overcoming this degradation effect and should be considered as value-added, providing as new performance over the entire life of the container. Higher Value Loads Another factor to be considered in the TCO model is differentiated performance. If a machine provides exceptional temperature pull-down or lower deep-frozen temperatures, it can differentiate a shipping line s performance from competitors. There are many products that gain in quality and shelf life at lower temperatures and many of the shippers and consignees of these items view colder temperatures as a value-added service. They will certainly switch carriers to get these colder temperatures, and in some cases are willing to pay a premium for value-added service. If market shares in high-revenue shipments shift in the direction of the differentiated carrier, the impact on the bottom line is considerable. Although difficult to factor into a TCO, this factor could be the biggest of all. The MAGNUM The MAGNUM unit plays well in all of these TCO areas. It uses the smallest amount of energy of any container refrigeration unit built today, over the entire range of operating conditions. This also results in the lowest CO 2 emissions, a factor that is not yet TCO-related, but could be someday if CO 2 emissions tax becomes a global factor. The MAGNUM has the simplest design of any container refrigeration unit built today, with fewer moving parts and fewer mechanical or soldered connections in the system. Simply, it has fewer failure points, fewer failures and lower M&R costs. Faster Pull-Down Although shipping lines are contractually obligated to deliver goods in the same condition received, product is not always at temperature. A faster box temperature pull-down will protect pre-cooled products from temperature variations. When box temperatures are maintained in a tighter range, the optimal shipping temperature of the product is more likely to stay constant, reducing costly claims. And even though pull-down is a small portion of unit run time, faster pull-down will result in lower overall power consumption. Capacity Low End Improved capacity at deep-frozen set points will result in less temperature fluctuation and improved product quality. As container insulation degrades and air leaks increase with age, greater capacity is needed to maintain deep-frozen set points. Units with high low-end capacity are not limited to fresh-only application. TCO models place increased value on units that can perform at all temperatures through the entire life of the asset. 6

7 35 Degrees C The MAGNUM has 22 percent higher capacity than the nearest competing product at 29 degrees C ( 20 degrees F) and 38 degrees C (100 degrees F) ambient temperatures. This would provide adequate cooling capacity to maintain 29 degrees C box temperatures through the entire life of the container. In terms of differentiated performance, the MAGNUM is the only standard container refrigeration unit capable of maintaining 35 degrees C box temperatures in ambient temperatures of 50 degrees C and above. This differentiated ability is attracting the attention of shippers of high-value products like seafood, fish and ice cream, and shipping lines using MAGNUM technology are gaining market share and increasing revenues as a result. When using a TCO method to evaluate container refrigeration purchases, the MAGNUM wins hands down. The MAGNUM is for companies who are investing in returns over the long term and smart continued growth of their companies. The savings in power alone justifies the purchase of the MAGNUM over competing products. When adding in the lower M&R, box life extension and 35 degrees C capacity, the MAGNUM is the logical choice for achieving the lowest possible TCO and highest return on investment. Temperatures Effect of Increasing Ambient Hours Ambient Traditional Unit MAGNUM 0 Temperature Pull-Down Temperature Hours Traditional Unit MAGNUM 7

8 Thermo King Introduces 2 New Unit Options Electronic Chart Recorder Due to environmental concerns with the mercury found in some third-party chart recorders, Thermo King has developed an electronic chart recorder that uses the unit sensors to graph temperatures on the familiar circular chart. Acting like a mobile printer, the Electronic Chart Recorder, or ECR, can graph live data from any of the unit s temperature sensors or graph readings from any time period in the datalogger. The ECR is a bolt-on option to any new unit. It affords leasing companies the opportunity to add a chart recorder to any spec unit in their fleet. Thermo King is committed to supporting the leasing industry to satisfy their customers needs, said Wayne Benson, Thermo King container product manager. This is evident in our stable product line, high product reliability and technologies that allow containers on their second and third lease to maintain the ability to hold deep frozen temperatures. Auto Vent Logging Additionally, Thermo King is adding the option to log fresh air exchange settings in the datalogger. Historically, these settings can be a point of human error and a potential cause for cargo loss. By logging the exchange rate in the datalogger, shipping lines can pinpoint where changes to the exchange rate were made, fending off erroneous claims and improving service at their depots around the globe. This simple system, known as Auto Vent Logging, or AVL, is available on all new CRR and MAGNUM units. For more information Contact your Thermo King representative or us at containerproducts@thermoking.com. New Red Warranty Tag The warranty department has developed a new and improved red tag, which has a seven-digit number incorporating a check digit to reduce order entry errors. With the check digit on the tag, only one tag can be used per part, as the warranty system will not allow the bar code number to be used more than once. The tags also facilitate the No Part No Pay program by improving the core return process, as the red tag will allow parts to be traced, confirming the defective part has been returned. Our continued commitment to unit and component quality and extensive best practice training program have significantly lowered our customers costs, says Arlo Eslinger, global service director, container. These new tags will be yet another improvement, further establishing Thermo King as having the lowest total cost of ownership in the industry. All green tags should be destroyed locally and only the red tag should be used going forward. Thermo King Names Gino Ansaldi Field Service and Parts Manager, Container Gino came from a large shipping line and has extensive experience in the industry. We brought Gino on board to support Thermo King s expansion into the South American market, said Arlo Eslinger, global service director, container. He will help us to grow in the service, technician and aftermarket divisions in South America. Gino came from a large shipping line and has extensive experience in the industry. We are glad to have him join our team with his maintenance and repair experience of container refrigeration units. 20/40 is published for the seagoing container transport temperature control industry by Thermo King Corporation. To be added to our mailing list, please send an to: containerproducts@thermoking.com Executive Editors: Steve Bryant, Wayne Benson Editor: Kimberly Thorsen 20/40, Thermo King Corporation 314 West 90 Street, Minneapolis, MN To change your mailing address or to request additional copies, contact Patsy Bettenga at or pvb@adtrack.com For more information, contact Kimberly Thorsen at or kim_thorsen@thermoking.com Printed on Recycled Paper