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Seizing Opportunities in Growing Cold Chain Logistics

Cold chain logistics, an ideal storage and transportation mode for temperature-sensitive products, has been gaining momentum across the globe. This increased demand is fueled by the fact that cold chains provide an opportunity to raise the quality of life through fresher, safer food, pharmaceuticals, and biologics by providing access to previously locally unavailable products. Further, within the food industry, it offers opportunities for small- and medium-sized farmers to export their temperature-sensitive products to retailers around the world.

Cold chain logistics is an essential means of transport for suppliers of temperature-sensitive products. Hence, suppliers are increasingly investing in this growing market to improve the longevity of their commodity. For example, investments in the live tracking of reefers and containers have been growing, as it helps monitor location, temperature, and humidity. Any deviation from standard outcomes or procedures are captured by automated control tools such as order fulfilment solutions, self-storage systems and pallet flow systems, and alerts are sent accordingly. This not only helps suppliers improve operational efficiency but also provides more visibility to the shippers over their goods.

Nonetheless, this market faces biggest constraints in the form of protectionist measures by the government and non-tariff barriers. The difficulties and delays of clearing customs or cross-border transportation is also a challenge. Efforts are being taken through policy development, commercial dialogues, participation in trade negotiations and industry advisory committees, such Cold chain logistics is an essential means of transport for suppliers of temperature-sensitive products. Hence, suppliers are increasingly investing in this growing market to improve the longevity of their commodity.as the Advisory Committee on Supply Chain Competitiveness and the International Trade Administration, to reduce trade barriers.

Availability of more space and avenues to store goods provides new opportunities to manufacturers to produce more goods. However, as sourcing managers increase their category spend on cold chain logistics, they need to be aware of the following concerns:

  • Growth in the cold storage supply chain has been boosting the prices of reefers which is inflating suppliers’ overall costs. This rise in cost would ultimately be passed on to the end clients, thus resulting in a surge in service charges.
  • Although the market is growing rapidly, risk of breakage remains a serious problem, primarily in developing countries. Statistics suggest that the rate of cargo damage to fresh products within the cold chain could be as high as 20 to 30 percent in developing countries such as China as compared with 5 to 10 percent in developed countries.
  • Furthermore, as ownership of each stage of the cold chain — warehousing, ground transportation, air freight, airports, distribution and other services — is very fragmented, the lack of end-to-end process control results in widespread mismanagement of such logistics. Thus, sourcing managers are recommended to evaluate maintenance services provided for vehicles and storage facilities at each arm of the value chain.

Service providers who can address these pain points will have an upper hand in this growing cold chain logistics market. Sourcing managers should select suppliers who are able to invest in automation for effective space utilization and increase their capacity for accommodating more products. Moreover, since supply chains are becoming increasingly complex, sourcing teams are advised to shift from simple storage service providers to integrated service providers who can offer value-added services, providing flexibility in operations.

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