For the cold storage industry, there is good news to report. The visibility and need for the cold chain is increasing significantly, as it did throughout the pandemic. The public realizes it is dependent on a global cold chain and the world pays more attention to how food moves through the system. Consequently, the cold chain industry continues to grow domestically and globally, with a nearly 35% increase from 2021 to 2022, based on GCCA member capacity.
This growth is juxtaposed against a cold storage industry dealing with multiple disruptions. And the number one disruptor – strained global supply chains.
Ongoing challenges to supply chains continue to impact the cold storage industry. However, GCCA members are meeting these challenges and adapting to changing conditions with creativity and collaboration with customers and other stakeholders across the supply chain.
Much of that collaboration and creativity has centered around technology. Increased automation in refrigerated warehouses continues, especially as capacity continues to grow and technological advances are utilized more prominently in new facilities.
Another significant disruptor in the cold chain industry is access to consistent and reliable labor. Shortages of truck drivers along with warehouse talent continue to be critical. Added to that, in the United States the most pressing labor issue of the moment is uncertainty over whether rail workers will strike or not. Plus, ongoing challenges with port labor on the U.S. West Coast might be mirrored in East Coast ports in the future.
A third disruptor is skyrocketing costs and inflation. Labor and energy are the top two expenditures for the cold storage industry. These expenditures, along with the cost of materials, equipment, energy, containers, chassis, pallets – all the things that make the supply chain go – are rising steeply. In many cases, equipment and materials are also harder to find and acquire. New equipment, particularly energy equipment, has increasingly long lead times bringing uncertainty and difficulty to planning and operations.
The necessity for the cold chain continues to be very strong. That is good news. But the strong demand for cold chain services in turn demands a functional supply chain with the labor, equipment, and materials to make it all run. This places more emphasis than ever on the importance of advocacy efforts to mitigate disruptions.
Agencies such as the Environmental Protection Agency (EPA), Occupational Safety and Health Administration (OSHA), and the Food and Drug Administration (FDA) are preparing to take significant regulatory actions that will have a direct impact on the supply chain.
The EPA is advancing regulations for its Risk Management Program. Many companies using ammonia as a primary refrigerant will have added burdens down the line from EPA and OSHA. Now law, the AIM Act directs the EPA to implement an 85% phasedown of the production and consumption of hydrofluorocarbons by 2035, pressuring industries using synthetic refrigerant to move to some alternative in the future.
Food regulatory changes are also imminent as the FDA foods traceability rule was finalized in early November. Food safety is among those changes and many products, such as cheese made with pasteurized or unpasteurized milk, are on the FDA’s food traceability list.
Although I anticipate we will continue to see disruptions from labor uncertainties, high inflation, and a strained supply chain continue into next year, the resilience and growth of the cold storage industry and increased public awareness of the supply chain gives me optimism.
The agility to anticipate and respond to disruptions – good or bad – continues to be essential to future success.