'Indian Cold Chain Industry is an Untapped Gold Mine' says Alvis Lazarus

The article is a snapshot from the Interview given by our CEO, Mr. Alvis Lazarus to ASMAG International Magazine on Cold Chain Logistics and Supply Chain. The insights shared by Alvis is related to Indian Cold Chain Industry.

1. How do you see growth in the cold chain industry at the moment? (growth over the recent years? How do you see the future?)

With the current outlook, cold chain industry could easily be a winner, but it isn’t yet. Though the demand is so promising the means to cope up with that demand is still very fragile. Current industry size is around 3.8B$ grown at a CAGR of 10-13% past 5 years and expected to grow at CAGR of 13-16% till 2022.

2. What are the factors driving growth of cold chain solutions market?

The root of this growth is fueled by the rising per capita income and the changing consumer buying behavior. The per capita income is growing at a CAGR of 7-9%.

There is a drastic shift towards packaged food due to the convenience factor. Packaged food industry expected to reach 65B$ by 2020. No surprise, the food processing market accounts for around 34-35% of the total food market in India.

Drivers of demand are –
Industry Specifics:

• Food Industry ~260B$
• Food processing market 34-35% of food Industry market (milk and milk-based products, fruits and vegetables, meat products…) and growing exports in these segments
• Pharma Industry (Pharma supply chain will come to a halt without proper cold chain infra). Again, fueled by exports; Bio-pharma exports expected to grow at a CAGR of 17-19%

3. What are the current trends seen in the cold chain industry? (what technologies are popular, what are the market demands?)

This is a misconception that the technologies are so different, and the truth is the technologies are not so different. If you consider the overall supply chain, the cold chain fits in majorly on the distribution (warehousing and transportation) as well as the raw material storage and transportation. Thereby all the key supply chain concepts, methods and tools make perfect sense for the cold chain as well. For example, procurement & sourcing tool kit (AB Costing, Replenishment strategies, make or buy, etc), transportation tool kit (network modelling, scheduling, routing, etc), warehouse management tool kit (barcode / RFID, FIFO, Lot control, safety, audits) and standards (GDP Good distribution best practices, OSHA, etc) all these apply to cold chain operations as well. Even on Cold chain set up, all the existing tools and techniques like space planning, layout designing, storage systems, material flow and handling are used.
Now the differentiation is the technology in maintaining the product at the right specifications like temperature, packing, handling etc., throughout the supply chain. We really struggle to achieve this due to lack of design norms, operational inefficiencies, discipline issues and lack of process controls.

As a Cold Chain Supply Chain Consultant, I have worked on multiple projects fixing these gaps and most cases we are not inventing anything new, we just fix the missing basics. There were instances, we have used IoT based supply chain solutions to bridge these gaps.

Recently we have worked on an IoT solution to bridge multiple upstream and downstream issues within the dairy supply chain and the solution was effective and irons out all issues in the supply chain. So, the point is

“New tools and technologies keep coming but the tech / tools we already have are not obsolete for this industry and they make perfect sense even today”

4. What are the major challenges that cold chain solutions industry faces in terms of growth? How can they be overcome?

Experts may say technology, but I humbly deny that. Cold chain tech is with us for decades and it is time we put them to use at the right nodes of the cold supply chain.

So, to me there are 3 core issues which is hindering the explosive growth of cold chain –

• Shooting in the dark – there are no many new technologies keep coming targeting the gold mine opportunities in the cold chain but most fail to fix the core issues of the cold chain industry. We need specific and focused solutions considering the overall supply chain. Pockets of excellence is never good enough for cold chain, we need wholistic solutions. A quick sample explanation would be: “there are wastages of around 25% in fruits and vegetables. We fail to address this but keep building technologies and cold chain infra downstream where-in upstream we lose 25% directly and we need cold chain solutions upstream”. This kills the actual value prop and shows up bad on the unit economics data of cold chain supply chain.

• 3PL Silos – the current cold chain 3PL & Warehousing Infra are fragmented, and this puts in a lot of stress operationally as well as financially for the business. The need of the hour is integrated solution and service provider who takes care of the end to end of the supply chain. Since there is no problem in demand, third party providers are not feeling the pinch of losing on this golden opportunity. For decades we were blaming on GST and now GST is live, what are we waiting for?

• Missing Cold Chain Nuances – the cold chain start-ups, set ups and expansions failed to address the nuances of the cold chain in the design. Cold chain supply chain design is a science and it needs to be done with care. Currently, the hardware and software providers just sell a off the shelf product and that won’t give the targeted ROI; and the cold chain industry is blamed for it. To overcome this, right from the network modelling and through the space modelling, facility design, plan for every part (PFEP), logistics and processes’ each one of these crucial designs must consider the cold chain nuances and build the design so specific to the cold chain. If we do this, with the current market condition, the ROI would be less than 6 months.

5. How can distributors of cold chain solutions boost their sales in the current market scenario?

As said before, all providers are happy with sales; just ask any Business Development person he/she would say that all is well in the market. But, only from a bird’s eye view of cold chain industry, it would be evident, that we are eating just a peanut when there is a field of opportunities there. So the service providers and distributors should re-visit their offerings by considering the overall supply chain and fix the two issues I have said – Shooting in the dark, working in Silos and missing cold chain nuances.

“Indian Cold Chain Industry is an Untapped Gold Mine and it is high time we reap the benefits through Efficient Operations and Customer Service Excellence”

About Alvis Lazarus: Supply Chain Consultant at Hesol Consulting, an Award Wining Supply Chain & Management Consulting firm from India. Senior Leader in Supply Chain & Logistics with almost two decades of SCM hands-on experience in devising Country Level and Global Supply chain strategies, Solutions design and spear heading Supply chain Implementation across 10+ Countries. He holds the distinction of driving Supply Chain Solution Design & Implementation across various industries such as Automotive, FMCG, Pharma, Health Care, F&B, Agriculture and E-Commerce. Global Exposure on handling Operations and leading Supply chain, Warehousing & Logistics Projects across EMEA, APAC & AMERICAS Regions.
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