logistics industry

[ANALYSIS] Challenges affecting the cold chain industry 

Den Somera

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[ANALYSIS] Challenges affecting the cold chain industry 
Four issues continue to stifle the industry’s growth and development

Invited at the Monday Circle Financial Forum to speak on the state of the cold chain industry, Anthony S. Dizon, the incumbent president of the Cold Chain Association of the Philippines (CCAP), bared an eye-opening talk on the challenges affecting the industry.  

Dizon especially urged government to promote a policy framework for a comprehensive program that will help in the establishment of a strategic distribution of cold chains in urban and non-urban areas of the country.  

Drawing from his 25-year experience on the ground and observation tours abroad, Dizon said that through this approach, the cold chain industry can truly become a key component part in the government’s program to ensure food security for the country.  

Needless to say, food security results into “economic growth, job creation, and poverty reduction” as it redounds to a healthy and productive populace.  

Currently, “the aggregate holding capacity of cold chains in the country stands at approximately 700,000 pallets, equivalent to 600,000 metric tons.”  

This appears very small – but at the same time a big opportunity – in contrast to the country’s total estimated food supply requirement of 15 million metric tons per year, primarily consisting of vegetables, meat, marine, poultry, dairy, and other controlled temperature-sensitive product categories, according to Dizon.

This will explain the increasing presence of business power houses like Ayala, Aboitiz, and Metro Pacific in agribusiness and the cold chain industry.  

However, as Dizon added, “before we get carried away, the outlook is not all milk and honey.”  The industry continues to be “plagued with serious issues that both apply at the policy and operations levels.”

Serious concern

Present during Dizon’s enlightening talk – being a keen advocate for food security, too – was Albay 2nd District Representative and House Committee on Ways and Means Chair Congressman Joey Sarte Salceda.  

Salceda said he would invite Dizon and his group to a congressional hearing he will be calling “to address the challenges associated with the cold chain industry in alignment with the present government’s commitment to ensuring food security.”

Among the big issues Salceda may give priority are how the government can provide support mechanisms for food security relative to basic infrastructure, the establishment of cold storage facilities in non-urban areas, and the exploration for solutions to address the availability of power supply and its attendant cost issues, which, at the moment, are the major hindrances to the development of a strategic and well-distributed cold chain industry.

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Proposed solution

There were four overriding issues that Dizon particularly raised for immediate attention as they are stifling the industry’s growth and development.  

On top of these issues is the industry’s predicament where “national policies are lost in translation at the local government level.”  For instance, incentive programs are unfortunately stifled by local bureaucracy.  This is the sad reality that has unfortunately become the norm rather than the exception on the ground.  

As important is the prevailing fractious state of the industry. Similar to what is happening in other branches of the economy where the element of competitiveness hamper cooperativism, it is very difficult to cull relevant industry data from members.  

Because of this, “the industry does not have an updated supply and demand data to support proper planning and development,” Dizon added.  

The government does not also have a fully collated data even just on the production side to serve as the starting point of supply chain planning.

Next is the lack of the availability of reliable power supply and its high cost.  They are not only creating serious dilemmas in the urban area operations, they are a major obstacle in the development of the industry’s business in less urbanized areas, according to Dizon.  The industry finds itself helpless on these issues without government intervention.  

The cost of domestic transport is a long-standing problem. Dizon lamented that the industry is particularly burdened with “high shipping costs, high port charges for RORO transport, not to mention the inadequacy of port facilities.”

In turn, Dizon has these several suggestions: Government should provide assistance in the “development of an integrated data network to supply accurate information on production volumes, seasonality schedules etc. to enable better resource and operations planning.”

Also, government should “help alleviate the cost of doing business via incentives on major cost items, like power and fuel.” 

Likewise, the economic managers of the present administration are advised to “adopt a realistic approach in the formulation of policies that affect food supply chain practices and costs.”

Conversely, Dizon said it’s about time government should change its punitive policies in connection with regulatory compliance requirements.  

Instead of the present system of requiring industry players to deal with multiple agencies, he suggested that it should rather put up a one-stop-shop like office for the purpose.

Moreover, the industry should be “spared of the imposition of unnecessary or additional restrictions on import shipments that create delays and additional costs.”

Finally, the government should “refrain from the inconsistent application or the enforcement of policies particularly those that pertain to food safety.”

The Monday Circle Financial Forum is a platform for the development of a fully informed investing public by the proper discussion of various issues, news, events and information. – Rappler.com

The article has been prepared for general circulation for the reading public and must not be construed as an offer, or solicitation of an offer to buy or sell any securities or financial instruments whether referred to herein or otherwise. Moreover, the public should be aware that the writer or any investing parties mentioned in the column may have a conflict of interest that could affect the objectivity of their reported or mentioned investment activity.  You may reach the writer at densomera@yahoo.com

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