Take a Fresh Look at the Cold Storage Warehouse Industry

2020 update on cold storage warehouse industry

Across a variety of industries from flowers and food and beverage to pharmaceuticals, film, chemicals and other temperature sensitive goods, companies across the supply chain have turned to public cold storage warehouses to properly and safely handle, store and ship their inventory.  Brands with household names to those starting new business ventures have been turning to public cold storage warehouses, trusting their reputations and livelihoods to an often unknown third party service provider.  With refrigerated warehouse space at a premium in many markets and the demand for cold storage warehousing increasing annually, construction is picking up across the country.

The temperature-controlled warehouse industry may have started out as unsophisticated, family-owned businesses but as of 2019, the U.S. cold storage industry is dominated by only a few select players owning the following percentages of the cold storage market:

%

Lineage Logistics

%

Americold

%

USCS

%

VersaCold

Industry consolidation has noticeably continued into 2020.

Growth in Cold Storage Warehouse Industry

Fueled in part by consumer preferences for fresh, local food products as well as increased popularity and production of specialty pharmaceuticals, the cold storage warehouse industry is poised to make a dramatic jump in evolution to a more technology-powered industry.  As global economic conditions have improved over the past two decades or so, more people have reached the status of “consumer” and are now better able to take advantage of the wide array of options when purchasing goods.

Consumers today are more particular about quality, speed of service, order fulfillment and are more likely to have access to the Internet, Smartphones and social media. This enables them to impact brands directly, by posting and sharing messages, videos and images to report back on their experiences. 

Refrigerated and cold storage warehouses are an essential element of that experience.  Across supply chains, goods are received, processed, stored and shipped, all while operating so as to preserve product freshness, quality and the brand promise. 

Today, and especially this year, consumers have increased their incidence of online shopping for groceries and other temperature-controlled food products, including subscription services such as meal kits.  Refrigerated warehouses have reported being besieged by inquiries from small food companies trying to get their inventory into 3PL cold storage warehouses that have the capacity, technological capabilities and knowledge of fulfilling online DTC orders.

According to a survey reported in the January/February 2020 edition of the Global Cold Chain Alliance’s magazine, Cold Facts, cold storage warehouses reported a 34% demand in the growth of e-commerce, and this was before the COVID-19 pandemic.  This coincides with other drivers such as an increase in temperature-controlled food product diversification, changing consumer food preferences and the increased demand for food. 

Outsourcing by food producers, processors, distributors, retailers and other supply chain businesses is extremely common and now equates to 79% of the refrigerated warehouse storage capacity.

Today’s 3PL warehouse also has the added challenges of dealing with warehouse labor shortages and turnover rates and the increasing expectation and need for the use of technology in the warehouse environment.  New opportunities and challenges have been identified in the GCCA study.  This can be in terms of clients expecting the 3PL to use sophisticated newer technologies including automation and robotics, cold chain tracking and monitoring technologies, leading edge warehouse management systems designed for temperature-controlled warehouses and other innovations. 

According to the 2020 Third-Party Logistics Study, IT capabilities are a proven and consistent differentiator when customers are searching for a 3PL warehouse.  Shippers tend to rely on 3PLs for reporting and dashboards on metrics and key performance indicators (KPIs) and favor those with the technological expertise of dealing with analytics to provide actionable insight for improved decision making.  This demand for data and predictive analytics remains a challenge for nearly a third of 3PL cold storage warehouse operators.

Two significant opportunities for the public refrigerated warehouse industry are the escalation in the incidence of outsourcing by customers and need for value-added services and customers’ dependence upon third party logistics providers for their expertise in and use of technology such as data and predictive analytics.  Today, more than ever before shippers expect that their 3PL can use data analytics to help improve business planning and operations. 

A niche market, the cold storage warehouse industry is in growth mode.  Over the past year and a half, temperature-controlled warehouses across the U.S. have reported an average of 85 percent occupancy, a rate at which the industry considers facilities to be “full” or at capacity.  With industry consolidation forcing the power into the hands of only a few giants, smaller food processors and food and beverage companies often have found themselves at a disadvantage when negotiating for warehouse space.  Larger warehouse operators often favor enterprise businesses and small companies may find themselves pushed out of facilities.  This is one of the factors fueling the construction of both new private and public cold storage warehouses.  This trend is anticipated to continue for the next few years.

Conclusion

Today’s cold storage warehouses do much more than track and trace dairy products and fresh produce for food processors.  These increasingly sophisticated refrigerated facilities now provide warehouse management system web portals for customer ordering, handle huge volumes of imports and exports and help ensure the efficacy of the cold chain using monitoring devices.

Shippers of perishable foods have come to rely on the expertise, technology and knowledge of skilled leadership teams and third party logistics providers that leverage complex supply chain solutions to meet the cold storage warehousing expectations of customers.  From refrigerated transport, warehousing solutions that utilize data and predictive analytics to customized transportation and logistics, temperature-controlled warehouses help ensure the quality and safety of inventory, preventing spoilage and costly damages.

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1. Revolutionary low code/no code flexible workflow-driven warehouse management software ​

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5.  Executive-level attention and oversight

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