Costs and investment

Although the economics will vary with the interests of the owners and from country to country, the target of high profitability from cold store investment is common to all. General advice has been given in previous chapters on economic design (influencing investment) and operation (affecting total operating costs). The economic aspects of cold stores as an enterprise are now discussed in detail.

The total investment for the construction of a cold store depends on required land area, industrial plant space and refrigeration load. Storage capacity rules all three, as well as its distribution between chilled and frozen storage. Storage space is usually located next to a slaughterhouse and killing capacity (head per hour) will decide chilling and storage capacities.

The following table gives some guideline figures for necessary surface area in the different sections of a rural slaughterhouse, incorporating chilled and eventually frozen meat storage. Figures indicate percentages of total area and are given for two distinct cattle killing rates.

The total land area necessary for an industrial plant is about six times the area occupied by the industrial building or covered areas. For large facilities (over 100 head of cattle per hour) 40 m² per head and hour are considered sufficient in a preliminary draft. This figure should be increased up to 75 m² per head an hour when the killing rate of the store is reduced to less than 20 head per hour.

Refrigerating loads are directly related to killing rates, which is obvious as the main fraction of the load should be carcass chilling. The refrigerating load for a plant killing 20 head of cattle an hour should be estimated at 160 000 kcal/h (185 kW) continuous refrigeration capacity. This should increase to 460 000 kcal/h (544 kW) for a 60 head/hour plant. A triple killing capacity also demands a nearly triple refrigerating capacity.

Cooling requirements to cope with carcass chilling can be evaluated by considering the amount of heat to be extracted per kilogram of carcass when cooled from 38°C to about 2°C, depending on the different species: lean beef, 8 kcal/kg; fat beef 22 kcal/kg; veal, 6 kcal/kg; fat pork, 19 kcal/kg. Although the hourly capacity varies during the slaughter period, the computation should be based on the duration of the fixed cooling down period. Similarly the amount of heat to be extracted when freezing prechilled meat (that is, considering an initial temperature of 5°C and a frozen product average temperature of about -25°C) will be in the order of 70 kcal/ kg, with little differences according to the kind of product being frozen.

It is difficult to give cost estimates to arrive at the investment needed to build refrigerated stores. They will be highly influenced by the place of construction (particularly the situation and conditions of the country), the size of the industrial plant, and other factors which are hard to quantify. Similarly the way investments are distributed among the different items or sections will depend on the type and size of the cold store, on whether or not chilling and/or freezing are included and on the degree of mechanization, etc. Here is an approximate investment distribution for the main items composing a cold store.

It must be emphasized that this investment distribution is for a cold store with no links at all to a slaughterhouse. Obviously an industrial plant including both sectors is subject to so many considerations that it is not worth splitting up the investment cost. However there should be a balance between investments in refrigerating plant and killing and dressing equipment on the one hand and the remaining investment on the other.

Investment and amortization constitute an important part of the running costs of the cold store. The following periods of financial amortization are usually adopted.

These amortization periods provide a financial situation which allows the equipment to be renovated economically. However this schedule should not necessarily be followed because if the plant has been correctly installed and serviced its working life will be much longer than its amortization period. After financial amortization has been paid off, total operating costs decrease.

The cold storage of meat generates certain fixed and variable costs. The former include capital costs, depending on the duration of financial amortization, rental (if any), maintenance, security, and so on. Variable costs include functioning of the refrigerating plant, produce handling, equipment servicing, complementary equipment and material, produce depreciation, wastage, theft, stocktaking costs, etc. When the storage enterprise policy is planned on a long-term basis there are no fixed costs, as any cost, even building maintenance and security, will change with time.

The sum of the fixed and variable costs gives the total annual operating costs. The operating costs are constituted by well-defined expenses plus the financial costs; these expenses include energy, water, staff and eventual labour, servicing and handling. Handling cost is made up of several factors related to labour, clerical personnel and equipment utilization. These factors are wages, stock rotation, number of articles handled, FIFO rule observance, decrease in lead time and conditions of utilization.

Energy, usually electricity, is a function of the installed power that concerns not only refrigerating components (compressors, fans and pumps) but also auxiliary machines (driving chains, electric batteries for forklift trucks, elevators), and lighting and heating when necessary.

The electricity bill can be drastically reduced by adopting energy-saving programmes, by drawing up an adequate contract with the power-supplying company, by working the plant during low tariff periods and by maintaining the electric motor at a high standard of efficiency (correct capacity regulation and installation of electric condensers).

Water is mainly consumed in the condenser circuit (for waste water systems only pumping energy is accounted for) as make-up water. Cleaning programmes and operator hygiene are secondary consumers. Water consumption is not high and its cost is usually kept low. However, if water treatment is necessary it may be costly.

The staff of the plant should include a general manager, clerical personnel, at least two technicians (refrigeration engineer and mechanical engineer), qualified personnel for maintenance and servicing and skilled labour for handling operations. The number of people in each grade depends on storage capacity, the number of rotations a year, the degree of mechanization and automation and the number of working hours per day. It is obvious that the proportion of these parts in total operating costs varies for different cold stores. Energy costs and the availability of technical and/or skilled labour and even unqualified labour and of spare parts and handling components will strongly influence the relative importance of the various expenses. These will also be affected by the size of the cold store and the number of rotations a year.

In meat bulk storage stock rotation is usually low, no more than three or four times a year. This means handling costs are relatively low compared with storage costs. As rotation increases handling costs significantly increase their share in total operating costs. On the average, expenses can be distributed as follows.

To calculate net storage costs it is necessary to divide total operating costs by the quantity of stored goods. This cost is affected by the annual average degree of utilization of the cold chambers and the number of rotations a year (70 percent occupation and six rotations give a total amount of products stored through the year equal to 4.2 times the cold store capacity; a 60 percent occupation and three rotations represent only 1.8 times the store capacity).

Generally net storage cost represents a relatively small amount compared with the price of the stored goods, even when weight loss from water vaporization and storage disorders are included.

The net cost of frozen storage is considerably higher than chilled storage since initial investment in refrigerating equipment is greater and energy costs are higher. Frozen storage can be estimated to be about twice as expensive as chilled storage.

STORAGE AND HANDLING ADMINISTRATION

Good cold store management has three functions: to get the best possible results in preserving the stored produce, to do this at the lowest operating cost, and to reduce the wear on equipment and plant by maintaining and even improving their working condition and efficiency.

As produce must be controlled during storage an exact programme and data sheet must be established for the follow-up of each product consignment and calendar with an estimated storage-life limit must be kept. The data sheet used to record storage background will cover daily movement of products, with specification of the tonnage loading and/or unloading of each kind of product and information on the stacks in each cold chamber. Some model record sheets for storage are given in the annex.

For proper stock control certain forms must be completed in order to plan, organize and control handling. These include loading/unloading sheets, packing and weight lists, pallet cards for FIFO and location, room temperature and relative humidity sheets and stocktaking (see record sheets in the annex).

The management of perishable produce, generally kept for short periods, must be planned on the basis of a storage capacity large enough for almost all the plant's production.

To reduce operating costs it is of primary importance to keep accurate records and analyse them periodically either in summary sheets or, preferably, in graphs which show trends and any sudden variation more clearly. This makes it easy to refer to any incident, observing the time and working conditions under which it took place.

Theoretical refrigerating load should be used as an indication of the refrigerating plant's energy consumption. Actual energy consumed, usually electric, must be collated monthly against the store operation programme.

Differences between theoretical and actual energy consumption show how well the refrigerating plant has been built, particularly regarding the quality of thermal insulation, and whether the cold stores are being properly managed. For instance, if actual consumption is always higher than theoretical consumption, the refrigerating capacity of the cooling plant may be too low to cope. When actual consumption is higher only during hot weather it is an indication there is insufficient thermal insulation or it has not been properly installed. Mismanagement during loading and unloading will increase energy consumption, especially during peak traffic periods.

The evaluation of energy consumption should be used as an element to establish storage tariff or rate as consumption will be proportional to the weight of the product stored, to the length of storage and temperature requirements, to loading and unloading operations and to the thermal load due to high ambient temperature. Considering these factors it may be practical to fix summer and winter tariffs. It is also advisable to fix different rates depending on the type of service offered by the store—handling, chilling or freezing and storing. Actually each is a function of totally different factors. Handling, chilling and freezing depend on the nature of the operation. Storing, however, depends on storage conditions and on the length of time the products are stored.

Although equipment maintenance has already been discussed it is worth emphasizing again that problems must be eliminated before they worsen. In other words, a preventive maintenance programme must be set up in order to check, repair and/or replace any element or part whenever necessary or at established running periods. This maintenance programme should be extended to thermal insulation, checking its performance every few years by sampling and measuring thermal conductivity of the insulant material.

Some sample sheets for maintenance records are given in the annex. They will help in monitoring preventive maintenance programmes. They also give some hints on how to check abnormal energy consumption in the refrigerating plant and in individual elements.

COMMERCIAL ASPECTS

As well as the actual storage of delivered goods, cold stores offer customers additional services such as chilling, freezing, packaging and invoicing.

Storage and additional services should be stipulated in a refrigeration contract where the special provisions required by the customer are also specified.

Cold store owners are responsible for the adequate preservation of produce from the moment the store receives it until it has been delivered. Operators should take care the produce does not suffer any damage either during handling or through faulty storage. On reception the products must be thoroughly checked for quantity and quality to avoid inaccurate identification of lots.

Carcasses, quarters and cuts should be counted and weighed and small pieces packed in boxes. When the goods are received on pallets the pallets should also be checked inside for any missing boxes. If the number of pallets is high a random check should be set up to control the proportion of missing items.

The importance of checking the quality of the product on arrival must be emphasized. Special attention should be paid to external appearance and surface and internal temperatures, particularly when the product has been transported over long distances, to detect any defective goods. This checking must be done with the customer himself or with the customer's supplier to avoid any future discrepancies.

Vehicle temperature during transport must be cross-checked with the carrier as the vehicle should be equipped with an appropriate temperaturerecording device and the reading element placed in a readily visible position. No product transported at a warmer temperature than that established by regulations should be accepted for storage.

Defective goods should be stored separately if deterioration is not very extensive or refused for storage when they are badly deteriorated. In any case they should be stored in a separate room under the customer's responsibility.

The results of checking the produce at reception will be shown on a memorandum receipt where, besides observations on the amount and state of products on arrival and the transport temperature record, the storage conditions required by the customer and length of storage should be declared.

During storage continuous inspection of the products must be carried out by qualified personnel. However, the customer himself must be willing to make inspections under managerial policy. Routine inspections should be conducted more frequently with higher storage temperatures. Chilled meat and meat products should be inspected daily. Frozen meat inspection can be less frequent, though as frozen products are usually boxed and stored on pallets inspection will be more complicated. The observations made should be recorded under the heading “Comment” on the storage record sheet and notified to customers when they are important.

When the storage period expires (practical storage life limit or customer deadline) delivery of the produce requires the same care as its reception, the cold store staff and customer undertaking a thorough cross-check. Number of items, weights, state and external appearance plus random internal controls must be checked to the satisfaction of both parties.

For the correct receipt, storage and delivery of produce adequate management of stocks is essential. This implies keeping stocks permanently up to date, being able to locate the batches in the different cold rooms, checking accounting inventories and comparing them with physical inventories, and supplying the basic data for invoicing and the analytical accounting of the net costs.

INSURANCE

During the time goods are under the responsibility of a cold store they could be liable to deterioration or even destruction as a result of operating problems, accidents or cataclysms.

The value of the goods stored is often considerable, much higher than the store itself. For example, meat produce value may be from two to four times as much as store value, and out of all proportion to storage charges. It is therefore very important to insure produce against any risk of damage during storage and to establish the cold store's liability in any contingency.

Stored products can be damaged by fire, leakage of refrigerant, machine breakdown or failure in power or water supply preventing the functioning of the plant, some sort of natural disaster (flood, earthquake, tornado), theft or terrorist acts. Obviously the first three causes are more frequent and so they must be specifically covered in the insurance policy.

Fire is the main cause of produce damage. It can break out in the storage area and directly damage the produce or it may break out in the machine room or affect some other vital part of the refrigeration plant and indirectly damage the goods through smoke taint or a temperature rise in the cold rooms. As both sorts of damage mean heavy economic losses, cold stores must be fully covered against all direct and indirect consequences of a fire.

Leakage of refrigerant is always dangerous in the cold store premises but it will have a deleterious effect on the produce if it happens inside the storage rooms. It can damage either by direct contact (ammonia and halogenated refrigerant) or by odour taint (ammonia). Although refrigerant leakage rarely leads to total destruction of the produce very often there is serious depreciation, so the risk is not negligible and the degree of insurance cover should be analysed for each individual case.

Machine breakdown means operating failure of the refrigerating plant with the risk of damaging the stored produce. This can happen also with a power supply failure or an insufficient water supply for the safe operation of the plant. The extent of the damage will depend on the time it takes to bring the plant back into operation. All these eventualities should be analysed and insurance cover paid accordingly. The remaining risks are usually included in a general clause giving full range coverage and thus ensuring any loss will be recouped.

Another situation that is worth including in the insurance policy is that of professional civil liability, which may be imputed to the cold store as a result of professional errors that lead to the unsatisfactory operation of the store and damage to the stored produce.

SAFETY PRECAUTIONS

Safety precautions in a cold store are necessary in the refrigerating plant operation, equipment maintenance and servicing and handling of merchandise to avoid accidents while transporting or stacking produce and any risk to personnel in the cold chambers.

Fire, the most usual risk in cold stores, can originate from walls, pipes or roof insulation, vapour barrier, the merchandise itself or its packages, electrical cables, door frames or rubbish. Defective functioning of the electrical system can be responsible for fire breakout through short circuits, but often welding during equipment maintenance can be a cause.

Several preventive measures can be taken at the time of plant design or construction, such as the location of partitions and doors, passing electric cables through thermal insulating material and installing sensitive detectors for smoke and/or rises in temperature. Fire-fighting equipment should be strategically distributed throughout the premises and store personnel should be trained in fire-fighting.

Fire extinguishers of the dry powder type, which are very effective with all classes of fire, should be wall-mounted outside every cold room door, the machine room and next to any confined area. Maintenance programmes must include periodical checking of extinguishers.

An adequate number of water points for fire-fighting should be distributed from a specially designed water network which provides adequate pressure and flow volume. For a 50 000 m³ cold store a minimum flow volume of 120 m³/h which can be maintained for two hours at a pressure of 4 bars is recommended.

Automatic water sprinkling systems or carbon dioxide foam injectors, particularly for rooms at temperatures below 0°C, can be mounted in large stores, but the relatively high quantities necessary, the limited availability of CO₂ and the cost make their use infrequent.

Breathing equipment of the self-contained compressed-air type must be provided as protection against the smoke which emanates from burning insulation material and against refrigerant leakage. The number needed will depend on the size of the cold store, but a minimum of two should be conveniently positioned near the main doors.

A further precaution against refrigerant leakage can be provided by installing gas detection equipment of the automatic type. It will detect low refrigerant concentrations (as low as 10 ppm for ammonia) before the gas becomes harmful for the stored produce.

Special precautions are necessary to prevent personnel being locked in low temperature rooms. Certain working routines such as staff members not being allowed to enter a cold room alone, or establishing duty rounds before the working shift leaves the premises, will avoid accidents.

Cold rooms should also be equipped with emergency doors, a separate personnel door or an insulated safety exit, a warning light and audible alarm operated from inside and connected to an independent battery-operated circuit, and an axe next to each door.

To prevent accidents with machinery operation the adoption of several rules will increase plant safety. Machine moving parts and transmission drives should be protected by guards; internal transport truck speeds should be restricted to 5 km/h and trucks should be fitted with emergency lights and non-skid driving wheels; personnel must be protected with safety helmets adequate for working in a low temperature; and storage racks should be checked at monthly intervals.

Many other accident-prevention measures can be taken, but none of them will be of use unless a programme of personnel training and periodical emergency routines is established.

HEALTH OF PERSONNEL

Working in cold rooms, particularly at temperatures below zero, demands a high physical and mental standard of personnel. Low temperatures quickly cause heat loss from the body, affecting primarily the fingers and toes: they become numb and the operator's dexterity is reduced. Physical activity will help to maintain body temperature. When heat losses are not balanced by metabolic activity body temperature will decrease; every 1°C decrease in the deep body temperature will reduce metabolism by 12 percent.

Working in a low temperature has special effects on the human body (shivering, numbness, cold diuresis, psychological stress), but it is by no means hazardous to health provided the worker is physically fit and special working routines are adopted to counteract the effects of the cold. First, protective clothing providing sufficient thermal resistance should be worn while working in cold environments. Thermal protection of 3 “clo” (1 clo is defined as the insulating quality provided by a clothing assembly equivalent to a thermal resistance of 0.18°C.m²h/kcal) will be suitable for moderate activity in -20°C. However, only 2 clo would be necessary for heavy work in -40°C.

Protective clothing must provide good thermal protection but it should not be so thick, stiff or heavy that it hinders work. It should be adjustable at the wrists and the neck but not too tight on the body so as not to hamper internal air circulation. The outer layer of the clothing should be windproof and watertight but not totally impervious to water vapour to avoid heavy perspiration. Certain areas should allow adequate ventilation. Hood (protecting neck, ears and forehead), shoes and boots should be lined to provide thermal protection. Boots should be fitted with non-skid soles.

When personnel are working in the cold room draughts must be avoided and lighting should be adequate to facilitate handling operations.

Heated rest rooms (between 20° and 27°C, well ventilated) where personnel can rest and restore their physical as well as mental capacity should be provided. Hot showers and hot beverages should be available. Resting periods must be properly planned and supervised. Personnel should be instructed in the proper use of rest rooms and in the upkeep of protective garments. They must undergo regular medical controls and maintain an adequate personal hygiene.