Not a Lot of Hot Air

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-By John Boley

What is cold air worth? Listening to Ben Barwick, Managing Director of Austco Polar, you soon realise that cold storage is a little more complex than simply selling cold air, despite his assertion that “our business is about service, we are really selling nothing but cold air. Cold air and good service; that is all we are about.”

Austco Polar is a premier cold store located on the outskirts of Melbourne and specialising in foodstuffs. Ben confesses that there is more to this business than just a big fridge. “There is a lot more to it than that, obviously. We have a warehouse management system and real time tracking where once product comes in it gets scanned onto our system. Our clients can access our website, see what product they have here, what production date is on the product and make sure that matches up with their inventory. So they have that knowledge when they are selling product.” One major client (Ben understandably prefers not to name them) produces breads, pastries and (at the time of our conversation) hot cross buns for marketing into supermarkets. This kind of product is “very date specific and our warehouse management system enables us to make sure we are picking the right stock.” In general, it is a case of ‘oldest moves first’ but sometimes “they will select a certain date and we can pick up a pallet and know exactly where it is sitting in our cold store at any one point in time.”

Actually, there is location too. “The location of our business is fantastic: we are 20 minutes from the airport, we’re right on the western ring road and the Westgate freeway, both major distribution networks of Victoria, we’re 15 minutes to the Port of Melbourne and 15 minutes to the city.” Laverton is the warehousing hub of western Melbourne, with, says Ben, possibly the greatest number of truck movements per day in the whole of Australia. “It is a very industrial area; it is perfect for the industry that we are in.”

The Polar cold store on this site was established in the late 1960’s and the present management purchased the business on July 1, 2010. Polar had added rooms as they grew, so there are “parts of the complex that are old and other parts that are on the newer side,” says Ben. He adds that this has the advantage that the company now has the flexibility to rent certain rooms to smaller businesses “that don’t need that big capacity but want to manage their own stock.”

Is Austco Polar a relatively big fridge, then? Ben says the industry tends to classify a large cold store as one that has a capacity of about 20,000 pallets. “We are not quite there – our capacity is about 16,000 pallets – but we are in the upper range.” Products handled here are sent all over the world. The company has meat clients for which it stores product exported to China, the EU, the US, Japan and other export destinations in addition to Australia-wide. “Products are destined for WA, QLD and all areas throughout Australia. There is certainly a lot that goes through Victoria. The smaller businesses that operate out of here will concentrate mainly in Victoria, but will also go into Tasmania and other closer states, but product that comes through here can go to all parts of the world.”

The complex represents a very vital component in clients’ supply chains. “First, because we are storing their product, and secondly, because we are picking their orders and either loading containers or sending them on trucks. Whether it’s a full load or even just a single pallet, we are picking all that product and so we have to make sure the product is looked after temperature-wise and that no damage is done. Also, we need to be sure we are picking the right product for the right orders because if you are sending product in containers all over the world and it’s wrong…” Well. That just doesn’t happen.

Austco Polar cold storage is a partnership between Ben and a business partner, Gary Stone, and they jointly also have another business called Melrina Victoria which is a domestic meat wholesaler. Gary’s other businesses include Newland food company (a smallgoods manufacturing company on the Gold Coast), Auswide meat wholesalers (Brisbane), the Melrina meat wholesale business in Sydney, Dick Stone (a food service business servicing hotels and restaurants in Sydney) and Melrina South Australia.

Most of Austco Polar’s business is frozen (food only) and most of that is meat, but there is also a substantial business in other foods – such as berries, bakery products and fruit, and some chilled product. Around 90 per cent, however, is frozen, much of it blast-frozen at Laverton. “We run a blast freezing service for all customers, where they will send the product into us either chilled or warm depending on the product and we will freeze it down to temperature,” over a 48 hour period. “Then we rack it and palletise it and then we load export containers or trucks for them as they get orders.”

The complex’s ability to serve Halal and non-Halal markets is “very significant. We have the ability to handle pork in here and keep it segregated from Halal, obviously.” That is one of the advantages of the layout with its many smaller rooms completely segregated. “You obviously can’t have Halal and pork products in the same room at any stage along the distribution network. So we can have areas designated, one for pork and you can keep that separate. That lends a flexibility to the business,” which has all the necessary certifications to handle “pretty well anything that wants to be exported in terms of meat or dairy. It can come through here and we can accommodate it. We are also an approved place of quarantine.”

The service stops short of the trucking operation, which is arranged by the client. “We purely pick product and get their orders ready and they will have trucks come and pick them up to deliver product – although we do have our own fleet of forklifts!” The load to be put on the customer’s truck can be as small as a couple of boxes or as large as containers – between 30 and 40 per week destined for export – and the company also unloads containers on import.

This is not the time or place to talk about the Melbourne climate. Suffice to say that even there, it costs a lot to maintain cold air. The rising cost of electricity is “a massive headache,” says Ben. “In Victoria they have just increased [since January 1] the network charges, which come in addition to the VEET [the Victorian Energy Efficiency Target], which is in Victoria only.” Without using a single joule more energy, Austco Polar is suddenly faced with swingeing cost increases. “While our usage of electricity from December to January was the same, our electricity bill went up 25 per cent with these two new increases.” Ben fears and expects another 25 per cent hike with the introduction of the Carbon Tax. “This is our biggest challenge, looking at the impact these increases will have on our business. Electricity is our second largest input, after wages, and we have to look at whether that can be passed on or how much of it we have to absorb as a business to remain competitive. That is the challenge we have over the next four to six months.”

Clients do understand the predicament, says Ben. “We are working through a few models and we should have an understanding pretty soon as to exactly where we are going to need to be. Then it will be a matter of negotiating.” Austco Polar has already done much to reduce its energy consumption and boost efficiency as far as it can. “Just recently we installed a closed loop ammonia condensate based cooling system, which cools the oil which is used to lubricate the compressors which run the refrigeration machinery. That has saved us a lot on water and led to a reduction of energy since the system came online. We have also started installing LED lights. We have monitoring on every room; everything is all run on off-peak timers to cut down as much as possible. But you do need to remember that we are in the business of keeping food frozen; it is a fairly important part of the whole food chain. We can’t turn our freezers off, and there is only so far we can go.”

But Ben is determined that the energy controversy will not derail the company’s service-oriented philosophy or cause it to cut corners and reduce service levels. “We pride ourselves on our service and we have a very loyal staff. They have been here a long time and they are exceptional; they understand the business. We are big enough to accommodate but small enough to make sure a job is done properly. We don’t want to lose any customers over this carbon tax – that is something we are sure about. Customers are the most important thing to any business.”

Making Sense of Management

Management is the art, or science, of getting things done through people. Sounds fairly straightforward – except for the fact that people are not robots waiting to do our bidding. People have their own minds, motivations, and goals. So how do managers keep operations – and the people behind them – running as planned?

July 19, 2018, 7:53 PM AEST