Proving the Business Case for the Internet of Things

Spare parts logistics and cold chain markets set for growth

Steve Rogerson
February 18, 2015
 
The global spare parts logistics market is set to grow at a CAGR of 6.9% from 2014 to 2019, according to a report from Research & Markets. In a separate publication, it says the global cold chain market will grow at a CAGR of 15.7% and 10.5% in terms of revenue and volume, respectively, over the same period.
 
The top four spare parts logistics vendors identified by the report are CevaLogistics, Deutsche Post DHL, Kuehne & Nagel and UPS of America. For cold chain, the top four are AmeriCold Logistics, Lineage Logistics, Preferred Freezer Services and Swire Cold Storage.
 
Spare parts – also called replacement parts, service parts and repair parts – are generally stored in inventory by vendors to use them later, such as when the demand arises due the repair of the product and for replacement purposes. Increases in the production of compact vehicles is one of the major trends in this market. Vendors in spare parts logistics are finding great potential in compact vehicles, including subcompacts, micro cars and superminis.
 
According to the report, one of the drivers contributing to the growth is the increase in demand from China, which will help vendors serve customers beyond their domestic geographical boundaries. Further, the report says that unorganised and local dealers of spare parts sell products at prices lower than those offered by multinational players, which leads to increase in competition for the overall market. The presence of these local vendors makes competition intense despite the low quality of the products.
 
One key trend witnessed in the cold chain market is the increased demand in emerging economies. With the rapid increase in the global population, growth of the organised retail sector and increased food wastage, emerging countries such as India and China are increasingly developing their own cold chain logistics facilities to meet the high demand for food and to reduce the food wastage
 
According to the report, one of the main drivers is the increased need to reduce food wastage because of spoilage. The large global population is one of the reasons for the increased demand for food products, which has led to an increase in the demand for cold chains to help in the preservation of food products, and this demand is expected to increase further.
 
One key challenge the market faces is the high cost of real estate and energy. The rise in interbank exchange rates and the increase in the purchase of treasury bills have increased the value of real estate, increasing the rental and purchase price of warehouses. Increased competition among vendors and the increase in the demand for cold chains have exerted additional pressure on the vendors to expand their logistic facilities, which has been difficult because of the rise in real estate prices.