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 associated with cold storage using predominantly official sources of economic data. The CCI can be customised to the region, state, and metro where a warehouse facility operates.
Overall, expenses for refrigerated warehouses rose by 5.96% in the first quarter 2022 relative to the same period in 2021. Among the categories of expenses, maintenance and repair costs jumped at the fastest pace, at 14.12%, the second consecutive quarter for double-digit growth in this category. Additionally, continuing a trajectory of increases – occupancy costs for warehouse and distribution properties grew at 5.91% year over year for Q1 2022.
Negotiated rates for providing third-party logistics services such as storage and shipping of perishable foods between cold storage warehouses and customers have been challenged as arbitrary.
Achieving annual rate changes from customers reflective of the shifting costs of operating refrigerated warehouses can be challenging when using indices that do not accurately reflect the cold storage businesses.
The CCI is a customisable “rate builder” template that members can provide justification to their customers during rate negotiations.
The index tracks the growth rates of costs using predominantly official sources of economic data along with actual expense classes from the IARW productivity and benchmarking tool. The CCI can be customised to the region and state where a warehouse facility operates and includes five classes of expenses: labour, electric power, supplies, repairs and rent.
- How does the Cold Chain Index differ from the PPI?
The PPI (Producer Price Index) measures how much an industry raises its prices on output. For example, if the PPI for the industry is up 3.2%, that is just passing through the cost increase that it faced (according to our CCI of 3.2% for the nation). If over a long period of time, we see a CCI that is lower than the PPI, that would suggest that the industry is absorbing cost increases rather than passing them through.
- What is the rationale behind the Cold Chain Index?
Cold storage warehouse rates are commonly questioned and/or challenged. The cold chain index is a customisable “rate builder” template that members can use to provide justification to their customers during rate negotiations. The index is based on published data from US official sources and parameters obtained from the 2016 Productivity and Benchmarking Report.
To download the full report, it is available on the Global Cold Chain Alliance website, here.