Food distributors: don't spoil your day
Most food distributors face a spoilage exposure related to their perishable stock. Your worst nightmare might be a power outage or some other unanticipated equipment failure.
by Gene DiVincenzo
Senior Account Executive at State Auto Insurance
If you're in the food distribution business, you're likely facing the risk of some type of spoilage at this very moment.
Most food distributors face a spoilage exposure related to their perishable stock. Your worst nightmare might be a power outage or some other unanticipated equipment failure. As consumers happily buy the seemingly endless variety of dairy products, frozen food, or fresh meat, fish or poultry, they're not thinking about the possibility of substantial loss due to spoilage during transportation. But distributors certainly are.
In the risk management business, we're thinking about the unique risks food distributors face, too. When we're working to help a distributor recover from a spoilage loss, it's often the result of a few common causes.
When it comes to power outages, lightning is often the culprit of an outage on-site. Off-site, there might be an outage to a power plant or damage to a nearby power line.
The risk of equipment breaking down is, naturally, most problematic for refrigeration units. It's most often an accident that causes the breakdown.
In our experience, most food distributors need to spend some time on three areas of their operation in order to be properly protected.
First, make sure your maintenance agreements are adequate. A refrigeration maintenance agreement should be in place with a professional refrigeration service company. It should be a written contract, and it should include inspection, service, repair, and emergency repair. Freezers and coolers should be serviced on a regular basis to keep equipment running smoothly, and to avoid surprises.
Daily checks on temperature settings should be done, lights should be turned off in walk-in coolers and freezers, and the areas around cooling equipment should be kept clear, to avoid blocking the air flow.
Second, make back-up generators a priority.
Two hours. That's how quickly most perishable food will spoil if the temperature goes above 40 degrees Fahrenheit.
Most of the food distributors we see have back-up generators in place to maintain power to refrigeration systems for products like eggs, raw meat, fish, dairy products, and cooked foods.
Where some operations might need improvement is in the quality of generators in place. They have to be able to handle maintaining sufficient power for the refrigeration systems you have, as well as providing emergency lighting.
Finally, every distributor of food or other perishables needs to have a contingency plan.
Where will you store your product if your refrigeration equipment breaks down or there's a power outage? You can only rely on generators - even the best ones - for so long. Plan for alternate cold storage warehousing locations - even if this includes on-site refrigerated trucks.
A documented, specific contingency plan could make or break your distribution operation when faced with the immediate risk of spoilage.
There's more complexity to managing risk of spoilage than can be conveyed here. How and where you store your stock - and how much perishable stock is in any one location - is another question we see come up in conversation with our risk engineers. Having these conversations with your insurance agent is critical to your overall risk management program and to keeping your distribution business moving.