How to reduce supply chain logistics and cold chain costs through real-time technology

Cold chain management   27 Feb 2019

Poor forecasting and decision-making due to a lack of end-to-end supply chain visibility can result in excessive costs, product waste, and delays, in addition to the downstream effects of lost or damaged goods. In the Pharmaceuticals logistics space, poor visibility can lead to product losses adding up into the millions of dollars and critical supply shortages that patients need. In the Food sector, temperature deviations can lead to product conditions that are unsafe for human consumption.

Optimizing operational efficiency and reducing costs are important and should be a top priority for any enterprise that is conducting a large number of annual shipments and that wishes to remain financially competitive.

With today’s increasingly complex global supply chain, agility is increasingly important, as businesses will need to change and adapt fast. This requires supply chain teams to engage in real breakthrough thinking and a fundamental change in mindset. In this age of disruption, sustainable growth will only come from the adoption of more radical, long-term thinking.

Even businesses that are completely outsourcing logistics, they will want to make sure they are working with quality partners that are following industry best practices, following internal and regulatory compliance requirements, and providing optimal services at the desired level. 

Understanding cold chain and logistics costs

Although the understanding of logistics costs differs between companies, they generally include transportation, labor, storage, and administrative costs, with inventory carrying and transportation contributing to the bulk of expenses. Other costs include fuel costs, delayed arrivals at ports, which can subsequently lead to higher transportation fees, complex regulations governing international trade, including compliance checks and document processing, and subsequent delivery delays and increased warehousing expenses.

When dealing with temperature-controlled products (ambient and cold chain), particularly those of high-value, the process and costs are quite different.

When it comes to logistics cost management, efficient performance and timely delivery can be as important as driving down logistics costs. Both need to be adequately balanced against each other.

There are also indirect costs to consider. For instance, the downstream effects of a stock outage can have significant effects on patient safety and health, or impact consumer loyalty, and brand integrity.

How to reduce cold chain and logistics costs

Reduce handoff points

As the number of supply chain handoff points increase, so do the risks involved. Temperature and stability studies incorporating Internet of Things (IoT) and cloud solutions can help to identify and mitigate risks across supply chain lanes and facilitate accurate decision making that can lead to significant cost savings.

Consolidate shipments

Full container loads (FCLs) are preferable when shipping goods to less-than-a-container load (LCL), as they mean that products are loaded only with like products and in accordance with a business’s specifications. Given current reefer capacities and container shortages, there FCLs can be a limited option. Not having to share space with another vendor’s products reduces the likelihood of customs delays that occur beyond a business’s control.

However, LCLs are becoming an increasingly preferred and economical option. Consolidating shipments is providing greater opportunities to ship products economically. This involves a combination of multiple smaller shipments from suppliers sharing the same destination in one shipment. There are risks involved, production schedules and temperature requirements need to be aligned.

Move to a single integrated visibility platform

As a general rule, supply chain operations should be connected through a central platform, accessible by all involved stakeholders. This enables parties to improve efficiency, illuminate weak spots in the supply chain and correct them, and work together to improve relationships. Controlant’s IoT-enabled cloud software platform provides user-permissioned access to live shipment data, as well as rest APIs for software integrations into enterprise resource planning (ERP) software and other business systems.  

Monitor temperature in real-time

Maintaining visibility over your end-to-end supply chain can improve forecasting and cost control through a better understanding of your risk points, better performing lanes, packaging combinations, and temperature conditions throughout the various handoff points.

Real-time temperature, time, and product location tracking data is providing the most current and relevant data, enabling enterprises to react quickly to prevent temperature excursions and product waste, reduce the need for large safety stocks, and minimize product and operational waste.

Eliminate crisis management costs

The direct and indirect costs of cold chain failure can be extreme. There are the direct costs of product and operational waste that are involved. The costs of quality review, procuring new supplies, and the logistics costs associated with the replenishment.

The downstream costs of failure can include loss of consumer trust, marketshare, and even loss of life. Investigation and litigation costs can run high and ruin businesses.

An active supply chain monitoring and intervention program is crucial to connect the dots, ensure that logistics partners are complying with regulations, and can even be leveraged to negotiate better insurance premiums and co-pays.

Looking at supply chain cost reduction from a top-down perspective, factoring in how automated data collection can help provide big-picture insights, is important when considering your complete cold chain logistics process and how to identify cost saving actions.

While real-time shipment temperature monitoring and intervention are one aspect of your efficiency plan, they are a vital one. Embracing new technologies such as IoT, cloud, and blockchain, can have the potential to increase cold chain efficiency and transparency, reduce costs, and improve overall services.

Businesses that aren’t taking steps forward to optimize their cold chain will be left with a competitive disadvantage.

Cold chain logistics don’t need to be complicated or costly

Contact us to learn about our real-time visibility solutions or to get started with a pilot.

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