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Refrigeration business striving to freeze slowdown

Industry leaders talk about the impeding perquisite for preserving storage facility for agro products, especially during the critical time when the nation is hit by the global pandemic Novel Covid-19. They also discuss ways to regenerate market confidence in cold chain logistics as a post revival technical.

The impact of global COVID-19 continues its blow on the consumer durable and essential commodity market in India. The outbreak is also expected to incur huge losses to the overall consumer market segment including the commercial, residential and industrial refrigeration market.

Refrigeration market projections in the light of COVID 19 pandemic
Global refrigeration market is expected to reach 2,618 Bn by 2024. The outbreak of COVID-19 pandemic has already affected millions of people worldwide and its economic impact is huge and this is unlikely to go away in the near future. In fact, the International Monetary Fund (IMF), has predicted a global economic downturn due to the effect of COVID 19.

Divyansh Rathore, Business Head-Temperature Controlled Logistics, Future Supply Chain Solutions Ltdsays, “In such a scenario, it is highly unlikely that the cold chain logistics will remain unscathed especially when the refrigeration solutions are required the most during these times. However, due to issues such as labour shortage and lockdown across the globe, this business could also see some effect of the slow-down.” North America dominates this market due to increasing demand of commercial refrigeration equipment in United States and since COVID-19 has impacted these countries, the market would take longer to return to normal.

However, the situation is still very fluid and it is difficult to give an estimation at this point of time. Aditya Vazirani, CEO Robinsons Global Logistics Solutions, says that the COVID-19 pandemic has brought about a large-scale health and economic crisis. Just like other sectors, logistics and supply chain as an industry has also suffered severe setbacks, mostly due to the closing of borders, negligible international trade, slowing down or shutting of manufacturing and other industrial sectors. “However, the cold supply chain and temperature-controlled warehousing that is responsible for handling pharmaceuticals, perishable foods, agricultural produce, meat, fish and dairy products etc., has seen a surge. From transport bottlenecks resulting in longer storage duration in the warehouses to increased demand, have all led to the active and thriving cold supply chain. Going forward, with mild hiccups, I see this sector booming, keeping up with the estimated growth numbers”, Vazirani said.

Industry redesigning their target market
Cold Chain business in our case is not dependent on global markets but the steps which are taken due to lockdown has led us to a situation where the industry see that the normalcy may not be restored for at least 6 months from now.

Noting the changing graph of the industries, Rathod says that this is a dark difficult phase which will definitely pass by. However, he points that this situational experience has led them to start rethinking in terms of how the businesses will be seen, projected and implemented in future.

Whereas, Vazirani feels that the fear of COVID-19 has brought about conservatism in the economy, where people and companies are holding onto cash reserves to tide them over for the rainy days yet to come. He says “RGLbelieve that India’s growth story hasn’t changed but has been delayed by 6 months at the very least. The true impact of COVID-19, in my opinion is yet to be felt economically, but consumption will not come down.”

FSCS redesigned their cold storage targets by lowering the target for the current quarter to 60-65 percent of the original projections due the lockdown. “We have lowered it to 30-35 percent of the original targets for Reefer Transportation. We believe volumes could start improving from Q2FY21 and expect the business to get to normal levels by Q4FY21. In the medium term, we could expect growth rate of 15-20 percent every year in line with the global growth rates”, adds Rathore.

On the other hand, Vazirani says, “At RGL, we are working on creating products for our customers to try and ensure further stickiness, finding alternatives streams of income through cost saving mechanisms and implementation of renewable energy.”

Expansion of refrigeration and cold storage facilities for agro products
India is the second largest fruits and vegetables producer in the world. Managing the refrigeration and cold storage for such huge produce is a challenging task. Government and Industry both are initiating and adopting various initiatives to improve the facilities and overall agricultural output and revenues.

Rathore, on this note, talks about couple of government initiatives like, fund raising activities to boost the agro products cold storage facilities, creation of National Centre for Cold Chain Development, FDI allowance in the cold storage sector among the other few significant steps. Along with this, adopting proven technology solutions will help to achieve business goals. Going more to the details, Rathore says, “Industry has moved towards the adoption of multi-purpose cold storages, controlled atmosphere storage, Electronic controllers etc. that help to manage the requirement of different temperatures and humidity level. These can be used throughout the year to store various range of commodities.”

Vazirani highlights that around 40 percent of India’s lose its agricultural produce due to the lack of an efficient cold chain network. It was thus the need of the hour to focus on building one and I am glad the government has taken steps in the direction.By identifying logistics as part of the infrastructure segment, there is hope in creating a more organised and integrated ecosystem for storage and movement of goods, including those for agricultural products.

“The initiative for a dedicated railway and air freight corridor transporting agriculture produce, the setting up of cold storages at key ports and airport terminals and the development of logistic hubs etc., are all significant steps in driving the growth of an organised and efficient cold supply chain network for agriculture and food products”, he adds.

According to Rahul Agarwal, Director, Kool-ex Integrated Cold Chain Solutions, “The current infrastructure is fragmented and there is also a need for creating larger warehouses to enable economies of scale. The next five years will see consolidation and emergence of larger capacity storage and transportation facilities”.

Storage of fragile agro products
Most of the food products have a very short life span, and hence require intense temperature management to preserve their shelf life, so transporters’ key challenge is, return load. According to Bhupender Singh, MD, Ravi Integrated Logistics, in India, road transportation is a primary and critical concern, following non-reliable condition of roads and traffic in different areas which increases the time of delivery and painful challenge for the transporters. Also, limited time of entry to cities for transport vehicles makes the distribution cost more costly and delay in distributions.

Since shelf life of perishable products is less, it is important to have good quality asset for long haul distribution, maintaining accurate temperature and humidity throughout transit.

Agarwal here highlights that the cost of distribution becomes a challenge for storing and passage of perishable products which are low in value. Also, since the movement over longer distances is time consuming, the shelf life of the product can be impacted due to delays in transit. Another challenge is the maintaining of temperature in transit. It is crucial to continuously monitor the temperature in real time, as a small excursion can spoil/ damage the product.

Regenerating market confidence in cold storage sector
There needs to be a joint effort both by the cold chain organisations as well as States and Central Government. In the current scenario, it has become very difficult to move reefer trucks across the length and breadth of the country. The State and Central Government need to clearly issue the guidelines to allow seamless movement of goods/trucks across the nation.
Talking about the key factors to be considered while regaining market’s confidence, Rathore says, “Safety of the drivers in reefer movements and associates working in the Cold Chain DCs is our prime responsibility. Training on Social Distancing/Uniforms/Sanitizers/Masks are the basic requirements across the Cold Chain network.” We have also put critical manpower be it Technicians/ Pickers in a quarantined-locations (Private Guest Houses/Our Office Rooms) near our Cold DCs. This is giving a lot of confidence to our customers that there will be continuity of services.

The market is currently depending on cold storage facilities to effectively store surplus build-up of food, while also store and deliver vital medication and pharmaceutical products in an effective fashion. At critical stages, implementing technology to create better visibility across the supply chain would drive market confidence showcasing and determining that the yield to sale percentage is higher than 60 percent.

“These have been trying times, both on the national and global level and governments and economies are struggling to build a stronger revival strategy. Logistics, especially the cold storage and supply chain component plays a vital role in the transportation of essential goods, namely pharmaceuticals, nutraceuticals, perishable food products, agricultural produce, meat, and dairy”, says Vazirani.

Shaping the refrigeration industry with 3PL and 4PL services
The outlook of cold chain logistics is evolving, from growth to slow-down, changing trends and needs of customers. Empowered with advanced technology, refrigeration industry has its own strength and ensures greater food safety and quality. “3PL and 4PL will make the refrigeration industry stronger as it has the ability to manage the logistics processes regardless of what forwarders, carriers or warehouses use. It also provides access to broader supplier base, back end system integration and market transparency of goods and services provided”, says Rathore. Moreover, 3PL and 4PL will make the refrigeration industry stronger and increase sustainable business efficiency.

Whereas according to Singh “Although the current business is passing through the difficult time in the current market scenario but demand is growing day by day but there is still scope of growth, which even can be observed from our growth. Mr. Kool had started operations with 8 vehicles in March’15 and now we are having 250+ company owned reefer vehicle and our Newly build State of the Art Cold-Storage with 6,000 MT capacity at Ghaziabad location, while another 30,000 MT is in pipeline for the next financial year.”

Whereas, Vazirani feels “With the rise of 3PL and 4PL service providers, coupled with government-led initiatives, and the quicker adoption of technology and expertise in Inventory management and deliveries would create a robust requirement and gradual shift away from the unorganised to the better organised service providers.”

However, the Indian refrigeration and cold supply chain essentially consist of cold storage/ warehouses (60 percent) and cold/ temperature-controlled transportation (40 percent). So far, lack of trained resources and adequate infrastructure has been a major challenge in the growth and development of the sector.

With the help of government initiatives and adoption of proven technology solutions, the industry will be able to achieve business goals and regain market confidence.
Divyansh Rathore, Business Head-Temperature Controlled Logistics,Future Supply Chain Solutions Ltd

With the mild hiccups like transport bottleneck and long duration storage issues, I see this sector booming, keeping up with the estimated growth numbers.
Aditya Vazirani, CEO,Robinsons Global Logistics Solutions

Limited time of entry to cities for transport vehicles makes the distribution cost more costly and delay in distributions.
Bhupender Singh, MD,Ravi Integrated Logistics

The next five years will see consolidation and emergence of larger capacity storage and transportation facilities.
Rahul Agarwal, Director,Kool-ex Integrated Cold Chain Solutions

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