Incubator initiative: How can small producers in Western Australia achieve economies of scale efficiencies in logistics and distribution?

Abstract

This Incubator Initiative research project explores how small producers in Western Australia could collaboratively use cold chain logistics to reduce or share costs in the supply chain. Cold chain logistics is essential for quality control in the shipment of premium wine, yet, because of cost, may be beyond the reach of an individual producer who wishes to ship, for example, interstate or overseas. An unbroken cold chain is an uninterrupted series of refrigerated production, storage and distribution activities, along with associated equipment. Interviews were held with wine producers and regional organisations as well as with supply chain providers offering transportation and logistical services to:

• assess the interest of small producers in collaboratively engaging in the use of cold chain logistics to reduce costs, while improving market opportunities
• identify options that would facilitate the collaborative use of cold chain logistics among small Western Australian producers.

Summary

In the transportation and distribution of wine, any temperature above 16°C (60°F) accelerates the maturation process and could change the wine’s varietal character, its sense of origin and possibly shorten its life expectancy. One way to control temperature in the transportation and distribution of wine is to use cold chain logistics. Cold chain logistics provides guaranteed, end-to-end temperature controlled conditions (i.e., temperature-controlled rail, road, air and sea transportation and storage and warehousing). According to industry insiders, cold chain logistics is a big step forward in the conservation and protection of wine (especially premium wine).

In general, the participants realised the benefit of cold chain logistics in the sense that end-to-end temperature-controlled transportation, storage and distribution of wine can preserve the integrity and provenance of the product. However, there were differences in perceptions of the necessity and use of end-to-end cold chain logistics. With respect to current practice relative to cold chain logistics, there were no participants using a complete, end-to-end cold chain solution. However, some producers are using temperature-controlled measures in the transportation of wine.

The findings suggest several potential options for collaboration in the transportation and distribution of wine. While there was clear interest in participating in a collaborative arrangement (including cold chain solutions), a number of disadvantages were also identified including time and flexibility constraints as well as challenges in co-ordination.

In summary, the use of a complete end-to-end cold chain solution for the transportation and distribution of wine in any of the collaborative recommendations identified is unlikely to be an acceptable option. This is due to the increased cost of using an end-to-end cold chain solution which makes it more likely to be economically prohibitive. However, certain elements of a cold chain solution (e.g. insulated liners, timing based on weather forecasts) can be used collaboratively. Individual producers may be able to determine which aspect or ‘leg’ of a cold chain solution is most applicable and leverage the collaborative group to share the costs.