We have seen significant growth in the cold storage and transport sector lately. The industry is projected to expand yet further in the coming years, while private equity (PE) funds are also showing increasing interest in cold chain investments.
Despite the boom, however, companies in this space are struggling to find the candidates they need. What can they do to overcome the talent shortage – aside from enlisting help from specialist executive search firms, of course?
Gov Kandola, our Transport & Logistics Lead, investigates the reasons for the dearth of candidates and suggests some solutions.
One of the more interesting developments we’ve seen in the logistics space in recent years is the rise of cold chain and cold storage. Where this once represented an extremely niche area, cold storage now takes up an increasingly influential sector of the market. Global cold chain logistics is projected to grow from $242.39 billion in 2021 to an incredible $647.47 billion by 2028. But what are the reasons for this boom?
While using cold temperatures to preserve goods dates back to ancient times, sub-zero transportation of products is a more recent development. The COVID-19 pandemic truly brought the importance of cold storage to the fore; delivering vaccines and other just-in-time drugs at scale often requires optimised logistics for delivering goods at sub-freezing temperatures. General trends towards healthier lifestyles, emphasising fresh fruit and vegetables as well as medication and supplements, have seen demand for cold storage and transport solutions grow yet further.
Private equity and cold storage
With the sector expanding, it makes sense that PE funds have made significant investments in cold storage. For instance, EQT are set to acquire Constellation, Europe’s third-largest cold storage owner-operator, while I-Squared Capital have established a cold storage infrastructure operation in Europe; they are also making moves stateside with the recent acquisition of WOW Logistics. Additionally, we’ve seen the news about Lineage Logistics going to IPO recently. I’m certainly curious to see if more cold chain companies look to go public in the next few years.
Complicating factors
So, with demand only increasing, all must be well in this booming sector, right? Not exactly. Pressure on global supply chains has eased slightly since the height of the COVID pandemic, but that’s not to say the situation is stable.
There are myriad threats affecting the logistics sector, including geopolitical tensions, natural disasters and climate change, and general economic instability – not to mention a shortage of labour. This includes considerable vacancies among frontline staff such as truckers and warehousers in territories like the US and Australia, in addition to a dearth of knowledge workers in the cold chain.
So, why is this blossoming industry struggling to attract new blood?
Supply versus demand
The expansion of the cold storage industry has happened rapidly enough for there to be more job openings than there are candidates to fill them. Supply chain and procurement roles are frequently seen as being relatively unattractive to graduates, with universities not often giving much consideration to providing relevant training or curricula for such positions either.
Pull factors elsewhere
Lack of exposure is not the only explanation for the lack of new talent in the cold chain sector. Traditionally, wages in the logistics industry have been low; candidates considering careers in the area might well have their heads turned by more attractive salary packages in other fields.
Candidate profile
However, even if there were enough fresh faces coming into the sector, would cold storage companies avail of them? Possibly not. The ideal candidate is generally seen as having significant experience at tactical, operational, and analytical levels – a combination that is not easy to find at the best of times. That’s before you factor in leadership ability, as well as the technical know-how that candidates must keep on top of. All in all, it is rare to find such a finely calibrated mix of hard and soft skills.
Technological changes in the industry
With supply chain systems the world over coming under strain, organisations are looking at technological innovations to maximise output. From the implementation of AI to software that can digitally monitor the temperature and location of products in the last mile of a journey – not to mention finding new and sustainable ways to keep cargo cool – there are many disparate areas to consider. Finding someone well versed in the varied technological landscape is no easy feat, especially considering how fast things change in the industry.
So, what can cold chain companies do to overcome the talent shortage?
Looking to the future
With a shortage of new talent coming through, more established leaders still occupy key positions across the cold chain sector. Without clear succession planning in place, organisations in the industry will struggle to keep up with the ever-increasing demand should senior leadership move industries or retire.
Companies that have not yet addressed this should do so as a matter of urgency. In these turbulent times, it can be difficult to plan ahead – all the more so in an area as sensitive to external factors as the supply chain. Still, having leadership strategies that work for your business, and which can smooth the transition from one generation of talent to the next, will give your cold chain business the best possible foundation from which to continue.
Accessible training and apprenticeships
If organisations are expecting too much from prospective candidates, they can bridge this gap by providing dedicated training and apprenticeships both to provide the necessary skillset as well as broaden the pool of talent to draw from. Active partnerships with universities would also be a welcome asset to cold chain organisations seeking to scale.
Reassessing expectations
In an area as complex and dynamic as the cold chain, it is normal for companies to want the best from their talent. However, being too prescriptive with a job spec can jeopardise talent strategies and prevent rough diamonds with the potential to thrive in the industry from making the most of their abilities, as well as prevent a much-needed injection of new candidates from entering the workforce. Organisations might want to reconsider the aspects that are truly essential for new recruits to have, and which ones can be taught and/or picked up on the job.
Investing in tech...
While many companies might invest heavily in the digital side of their supply chains, they may not view the supply chain itself as something that can push innovation. Making the most of digital investments often comes down to having the right talent in place to do so – but making sure the chain works as seamlessly as possible can be a question of having the right tech in place.
...and just investing full-stop
It is worth mentioning that aside from recent moves from PE into the cold chain space, we’ve seen some of the established players in the industry invest heavily in expansion of late. In line with my previous point about spending on tech, Magnavale have splashed £130 million on a new automated warehouse, which is currently under construction in Easton, UK.
Separately, Americold have spent $127 million on a new cold store in Kansas, while shipping giant Maersk are boosting their cold-storage influence in India with plans for one of the country’s largest warehouses. Will we continue to see big spending from heavy hitters as the industry expands? Watch this space.
Sustainability under the spotlight
Keeping goods cold is an energy-intensive process, so it is important for organisations in this space to power their operations as cleanly and efficiently as possible as businesses and societies move towards net zero. I asked my colleague Alex Hyde, Sustainability & Energy Transition Principal at Venari Partners, what he would recommend to cold chain companies seeking to maximise their environmental efforts:
When looking at innovation and investment, leaders in cold chain businesses should be doing so with a focus on sustainability and the energy transition. Whilst sustainable solutions are often more expensive, those who get ahead of the curve on innovation will create more value through efficiency and optimisation. The pace of progress in electrification, sustainable packaging, waste reduction, and advanced analytics for supply chain management is hugely exciting, but upstream supply constraints, and the associated costs of implementation across operations, are understandable blockers to wider uptake. However, cold chain logistics leaders who navigate these challenges successfully are the most likely to realise future value creation whilst building a competitive advantage over their peers.
This is sound advice that is equally applicable to companies that focus specifically on cold-storage warehousing, with sustainable solutions of particular interest to PE investors at present. Magnavale’s new facility in Easton, for example, is due to run entirely on renewable energy, while the company has also made significant sustainable upgrades to its Scunthorpe base. Futureproofing the cold chain is an essential step in boosting value creation, efficiency, and sustainability, and thus should be a priority for businesses in the industry.
The right stuff
Naturally, leadership should be a crucial part of any cold chain company’s talent, strategic, and future planning. Indeed, leadership effectiveness, more than anything else, is regarded as the most important driver for portfolio value creation by private equity executives – something to bear in mind for PE funds that invest in the cold chain.
By nature, PE companies like to keep costs down; there can be a disconnect between what the fund managers want and how the executives think things should work. Talent development and continuing relationships with selling partners may take up resources, but ultimately these are areas that organisations in the PE space must invest in for continued success. Hiring human capital experts, such as executive search firms like Venari Partners, can help companies in the cold chain and PE alike to find, retain, and attract top talent.