Cold Chain Logistics

Cold Chain Logistics Global Market Outlook

• The global cold chain market size is estimated to be valued at $273.73.8 billion in 2022 and projected to reach $406.62 billion by 2026, recording a CAGR of 9-10 percent. The year 2022 has witnessed some of the logistics sector’s phenomenal improvements and performances. Cold chain, in particular, grew because of the need to keep the foods, drugs quality intact, improved shelf life, rising global consumer demand for perishable and convenience meals, is propelling the industry forward.

Procurement Centric Five Forces Analysis: Cold Chain Logistics

Supplier Power

• Due to the specific temperature handling required, only a select few top suppliers are able to provide services for cold chain warehousing and transportation

• Most of the top suppliers are also able to provide tracking solutions for the entire supply chain. Consequently, a high supplier power is anticipated.

Barriers to New Entrants

• The major obstacle for new entrants is the investments in facilities for cold storage conditions and tracking solutions. Additionally, customers favor suppliers with experience in  handling cold chain products.

• The impact of developing and emerging countries on new entrants will be moderate to significant because of the challenges that businesses will confront on various levels, including infrastructure, bureaucracy, and inadequate storage facilities.

Intensity of Rivalry

• To be competitive in the market, suppliers have begun to invest in cold chain solutions such as packaging optimizations, real-time tracking solutions, etc.

• Many big suppliers are acquiring regional/local suppliers to gain market share in the market which creates more competitiveness among the suppliers.

Threat of Substitutes

• There are no substitute for cold chain warehousing and transportation solution.

• There are thermo-stable vaccines and advances in gene therapy, which can be stored in room temperature, which will give no room for error and loss of vaccines potency

Buyer Power

• Buyer power is anticipated to be low as just a few number of top suppliers have experience managing cold chain shipments and are GDP and GMP certified.

• ASEAN countries and LATAM will have medium bargaining power since the switching cost to a new supplier is low and number of local & regional players are more in this region providing competitive rates.

Cost Structure Analysis : Cold Chain Logistics

• Warehouse utility rates and labor cost occupy the major chunk of the cost in North America and Europe. Due to ongoing Russia-Ukraine crisis, the governments have revised the utility rates to support the companies, and to encourage the companies to provide the required service.

• Utility cost has increased across all the regions amid the Russia-Ukraine crisis and impacts is high in the overall warehousing cost

• As per the major real estate developer, it is said that the cost of construction of cold chain warehouse is almost $250–300 per sq ft compared to $100 sq ft for dry warehouse

• Wages across North America, Europe are expected to increase by 8–10 percent in 2023 compared to 2022

• The main driving factor behind this increase in wage because of supply–demand imbalance continues in the logistics labor market, with an increasing demand for warehouse workers and truck drivers.

• Utility price is expected to increase across all the regions by at least an average of 10-15 percent, mainly because of global fuel price increase and the limited supply in some parts of European region.

• The increase in the usage of warehouse automation leads to an increase in the equipment cost, due to its regular servicing and unexpected breakdowns, if any