With the formulation of new business models, niches can be created. The temperature controlled logistics (TCL) is one such niche segment that is growing rapidly and there is a need to explore the potential present in this sector. Lionel Alva...
The logistics industry in India is undergoing a sea change and the need to reinvent business models shall impel opportunities for investment in storage, transportation and services.
The temperature controlled logistics (TCL) industry in India is estimated at nearly Rs 12,000-15,000 crore and expected to grow at 15-20 percent in the next three to four years to Rs 22,000-25,000 crore.
Further, the industry remains largely fragmented and unorganised as a mere 6-7 percent of the industry comes in the organised segment. In terms of volume, the total existing capacity is estimated at around 30 million tonnes of temperature controlled warehousing.
Currently, nearly 75 percent of the total capacity is dedicated to potato warehousing with 23 percent to ‘multipurpose’ commodity i.e. dairy, frozen food, fruits, etc. while the remaining 2 percent is for meat and seafood. Further, in terms of distribution, nearly 64 percent of the total warehouses are located in two states i.e. Uttar Pradesh and West Bengal followed by Punjab, Bihar and Gujarat.
Opportunities in the TCL market The TCL sector involves the storage and transportation of temperature sensitive and perishable products along the supply chain through refrigerated and thermal packaging methods. Ostensibly, TCL forms the backbone of industries like pharma, food service, poultry and meat.
Advancements in cold chain technologies and increasing demand from the developing nations such as India and China is further boosting global cold chain market. Moreover, the growing need to avoid wastage of food and loss of healthcare products due to spoilage is the major factor driving global cold chain market.
Rising demand for frozen food, along with growing demand for packaged/canned fruits and vegetables, has further triggered this growth.
In addition, growth in pharmaceutical industry and introduction of new healthcare products that require storage and transportation at specific temperatures is also contributing to growth in the market.
Despite 60 years of independence, India is among the few nations that portrays a poignant picture of overflowing godowns and decaying food while a major part of the country’s populace goes hungry. Thus, it isn’t appalling to learn that India currently ranks a low 66th among 105 countries in the 2012 Global Hunger Index. It’s unimaginable that nearly $7 billion worth of food is wasted in India annually, mostly due to poor or non-existent storage facilities. Out of this, nearly $2.5 billion is fresh fruits and vegetables which get wasted due to non-availability of cold storage facilities. Furthermore, these problems are exacerbated by flawed stock rotation practices.
“Spoilage is a big problem of perishable products and it is caused principally due to excess stock and flawed stock rotation. Effective stock rotation ensures that products are taken from the storage in the correct order as determined by their sell-by dates,” observes Tarun Arora, Director, IG International.
A government report estimated that food products worth over Rs 44,000 crore get lost every year in the country due to inadequate storage infrastructure. A total of 138 integrated cold chain projects were approved by the government. Growing annually at 28 percent, the total value of cold chain industry in India is expected to reach $13 billion by 2017 through increased investments, modernisation of existing facilities, and establishment of new ventures via private and government partnerships.
Prasanna Sampath, Senior Manager – SCM, Biocon observes, “With inadequate infrastructure for maintaining temperature throughout transit and lack of trained personnel to handle temperature sensitive shipments are some of the challenges that the TCL market in India faces.”
The Indian government is taking steps to improve the cold chain infrastructure, by recognising the cold chain industry as a sub-sector of infrastructure in the previous union budget, and creating an additional budget to construct new cold storage facilities. In addition, the private sector is being encouraged to develop the cold chain industry further, by implementing the latest and most effective refrigeration technology solutions available today.
Considering that a large number of global food and retail chains targeting the India markets, there is an increasing need for retaining the quality of both fresh and frozen food. Thus, there has been an increasing emphasis on the adoption of superior technology by the storage facilities. The government is also promoting the food safety and security bill which would further demand storage and cold chain facilities in order to reduce the amount of food wastage.
Security in the supply chain With the current cold chain infrastructure in India being only a fraction of the actual need, the overall TCL sector presents itself as a large and growing business opportunity. But understanding the TCL related practices and preferences of end-user industries is of prime importance for logistics service providers who intend to explore the opportunity.
Sunil Nair, CEO, Coldex, says, “Adopting technology is essential in the logistics and transportation space, since we are transporting goods that require varied degree of temperature control, it becomes super critical.”
Especially when fresh or frozen foods are being transported, specifically in a global supply chain, the relevant procedures and equipment involved in maintaining the cold chain integrity are elevated to a more critical role.
Adds Nair, “We have implemented a GPS system and a temperature sensor which not only tracks the location of the vehicle but also the temperature of the container at any given point of time, further we can also set any frequency and can check every 15 or 30 minutes.“ Laurent Rigaud, Managing Director, Coldway observes, “The temperature control of perishable products during transit continues to be a critical area, specifically in regions or countries where the cold chain integrity is not completely secure. Stringent operational practices should be applied and respected in order to ensure that the transported product is safe for consumption once the end consumer is reached.”
Special emphasis must be placed on the length of time of goods outside of a controlled environment and ambient conditions at each of these stages must be considered and planned for in order to successfully transport temperature-sensitive products by air. “In recent years, temperature controlled products for the pharmaceutical industry have gained significantly in importance. The driving force is biotechnology products, which generally must be kept within a strict temperature range during transportation,” informs Samar Nath, CEO, DHL Global Forwarding, India.
By coordinating with a carrier that understands pharmaceutical transportation requirements, transport systems can be designed to significantly reduce the risks to the freight at each stage.
“Maintaining efficacy of their products during transportation till point of consumption is the critical focus of the integrity of the supply chain covering safety, temperature conditions, humidity, security etc,” adds Nath.
Contingency plans can be developed to effectively address risk areas where design is unable to sufficiently mitigate. Load planning is essential. The efficient operation of truck refrigeration systems depends on unimpeded airflow around the entire load, including both sides, underneath, in front, and at the rear of the cargo hold. Without constant and unimpeded airflow to all areas around the cargo, the truck’s ability to control air temperature stability is reduced. This increases the likelihood of unplanned variations of temperature within the cargo area and impact to the cargo itself. A well-planned route can reduce the extremes of ambient heat and cold that might otherwise be encountered.