Historically, achieving annual rate changes from customers reflective of the shifting costs of operating refrigerated warehouses have been challenged as arbitrary, or countered with indices that do not reflect cold storage businesses. To equip members with resources to aid in those conversations and remove subjectivity, the Global Cold Chain Alliance commissioned the first-ever Cold Chain Index (CCI), which was designed to improve the economic information available to all industry participants. This idea was an initiative of the board of directors to help facilitate industry growth and mitigate concerns of commoditization.
According to Corey Rosenbusch, GCCA President & CEO, “the reason the board made this a strategic priority comes back to the concept of growing the industry. One of the challenges was the constant pressure from customers on pricing and rates as it applies to the services they provide. Being equipped with some tools that will allow us to better educate and inform customers about cost structures in our industry will allow members to be more productive in negotiating annual rate changes.”
To that end, the Cold Chain Index utilizes a customizable template that members can use to provide justification to their customers during discussions. This was something that wasn’t available before because of the uniqueness of the cold warehouse industry.
“Labor and energy are our two biggest cost drivers and they aren’t necessarily accounted for in those indexes [CPI and PPI],” Rosenbusch said. “We also have a tremendous amount of invested capital in our assets that is often not factored into customers’ calculations. We were able to build a model that more accurately reflects that cost structure and then apply commonly accepted indices to measure the growth or increases in those costs quarter over quarter.”
While there’s still some work to do on the CCI, the plan is for GCCA to release the first index in February 2019, when a full year’s worth of data will be ready.
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