Cold Connection

Labor Continues to be Highest Cost in Operating a Cold Storage Warehouse

GCCA's Cold Chain Index data for the first quarter of 2020 shows that labor continues to be the largest contributor to the cost of running a refrigerated warehouse.

“GCCA’s Cold Chain Index is a valuable tool for third-party warehouses – and their customers, such as food retailers and wholesalers – in contract negotiations that reflect actual costs of the major inputs for producing the 3PL services – labor, electric power, rent, supplies, and repairs,” says Jason Troendle, Director of Market Intelligence & Research. “Today’s 3PL services are not commodities; they are tailored in many cases to specific customers, and many 3PLs are offering value-added services such as case picking, blast freezing, GDP Audit Certification, SQF Certification, and much more. The CCI helps purchasers of 3PL services understand the basic costs and it’s up to the 3PL to discuss the ROI of the value-added services.”

 

Q1 2020 GCCA Cold Chain Index Data

 

 

 

 

 

 

 

 

 

 

 

 

The rates that cold storage warehouses charge customers for providing third-party logistics services such as storage and shipping of perishable foods have been challenged as arbitrary and steep. In order to improve the economic information available to industry participants, the Global Cold Chain Alliance has commissioned a Cold Chain Index (CCI), reported since the end of 2018. The CCI tracks the growth rates of costs using predominantly official sources of economic data. The CCI can be customized to the region and state where a warehouse facility operates.

The CCI includes five classes of expenses: labor, electric power, rent, supplies, and repairs; the cost shares typical of a North American refrigerated warehouse are shown in Figure 1. Labor was the largest share of expenses, at 46% of the total. Property rent or lease expenses represented nearly 35% of total expenses. Electric power accounted for 10% of total expenses. The “other” category included the leases on material handling equipment, expenses on utilities other than electric power, and un-specified other expenses. Note that the cost shares have been updated since the Q4 2019 release for all 2020 releases based on the FY2018 IARW Productivity and Benchmarking Survey results.

 

 

June 08, 2020

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cold chain index

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