Cold chain restructuring: a solution to supply chain challenges

Global challenges led countries to shift their focus to other supply chain options in Asia and India, and those are becoming international logistics hubs.

With manufacturing activities, including pharmaceuticals gaining strength in the latter half of 2021 and a flourishing e-commerce industry growing steadily, much of these sectors’ success depends on the smooth functioning of supply chains. As a global pharmaceutical hub, India has responded to the supply chain challenges with resilience. 

The demand for fresh produce and perishable food items in India has also increased over the last two years, escalating the need for cold chain transportation like reefer trucks to supply the products to a broad section of the country. The industry also largely follows a fragmented approach, which is a cause of concern. This sector needs to curb the shortage of infrastructure and resources to enable efficiency. With the prices of a vast array of goods still rising, India is absorbing a troubling realisation: time cannot resolve the supply chain disruptions but restructuring the cold chain industry would be a start.

 

India’s cold chain industry 

India is the largest global producer of several agricultural commodities. It generates more than 400 million MT of perishables every year. It is also the world’s largest producer and consumer of dairy products, with more than one-fifth share in global milk production. About 3500 service providers in the country provide transportation and distribution services for the agricultural sector. Unfortunately, more than 8100 cold storage facilities, with a combined capacity of over 30 million MT (August 2020), can fulfil only one fifth of the national requirement. The private sector operates 92% of these cold storage facilities at an average capacity of 75%. Still, approximately 16% of fruits and vegetables get wasted due to poor infrastructure and lack of collaboration within the industry.

West Bengal, UP, and Bihar currently host almost two-thirds of the country’s cold storage capacity. On the other hand, semi-organised players hold around 80% of the installed capacity. Establishing a national cold chain network could amend the scattered distribution that the industry follows. The logistics industry has moved from rapid oneday deliveries to 10-minute drop-offs in the past few months.

Grocery and food delivery startups have set up dark stores to facilitate superfast transportation and delivery of orders. Companies delivering medicines and related products via one-day delivery are not far behind. The growth of at home blood tests has furthered the need for a robust cold chain logistics network that could facilitate the processes within the industry and reduce turnover rates.

 

Cold chain practices need to change. 

Restructuring the cold chain practices within the industry and reassessing the systems based on requirements could prove beneficial to the establishments within the sector. As the third-largest pharmaceuticals industry, India serves more than half the global demand for pharmaceuticals and vaccines, around 40% calls for generic medicines in the US and around one-fourth of the total drug demand in the UK. Cold chain restructuring could support the industry in exports and maintain quality standards internationally.

 

It is predicted that the industry may add an extra 1.5 to 2 lakh pallet capacity for frozen and chilled commodities in the coming years. But that may not be enough. The assets employed in running and maintaining the sector cost 2.5 times more than their counterparts in the dry logistics sector. On the other hand, the Indian pharma sector is expected to grow from $41.7 billion to $120 billion by 2030. Although the Indian government has permitted 100% FDI in pharma, the parched cold chain sector needs a boost in infrastructure to support the rampant growth of the industry.