Ask the Expert: How cloud-based, IoT devices can help improve your supply chain

Ask the expert, Food & beverage, Pharmaceuticals

The last three decades have presented a monumental change in humanity’s dependence on technology. In many ways, technology has vastly improved people’s quality of life and provided opportunities to connect like never before. Software platforms, smartphones, apps—among many other technologies—all make work easier and play more fun.   

However, not all segments within the cold chain have established this same level of interdependence with technology and data analysis. At best, many shippers and distributors might use data loggers with shipment information uploaded to a computer after delivery to be analyzed. At the other end of the spectrum, the data comes in the form of paper hard copies, which are nearly impossible to evaluate with ease. Implementing cloud-based, Internet of Things (IoT) technology within supply chains provides food and pharmaceutical manufacturers, third-party logistics providers, and distribution centers with the ability to ensure product safety, reduce lost loads, and gain long-term insights. 

What are the cloud and IoT devices? And, why do they matter to the supply chain?  

Most people are already using some types of cloud computing and IoT devices, either at work or for personal reasons. Every time you use Facebook, Microsoft Office, or Netflix, you are benefiting from cloud computing. All that means is that rather than having software programs installed on a local computer or hard drive, remote servers via the internet—or the “cloud”—manage the storage and computing off-site. This process allows for ease of access to information across multiple devices and storing large files or data off-site.  

When it comes to IoT devices, you’re probably relatively familiar with these gadgets: Smartphones. Smartwatches. Smart TVs. Chances are you have one or more of these devices in your home or on your person. Maybe you’re reading this article on your smartphone or getting text alerts on a smartwatch. There seems to be no slowing down on the number of IoT devices coming to market. 

Cloud computing and IoT devices can vastly improve supply chain visibility, primarily when used in tandem. Global supply chains are becoming increasingly complex, with multiple hand-off points offering plenty of room for errors. With a passive data logger, manufacturers and shippers cannot make proactive decisions to minimize excursions or lost loads. Instead, they are left reviewing the information after the fact and most likely leading to product waste.   

Using real-time IoT data loggers wirelessly connected to the cloud helps mitigate supply chain risks and offers greater transparency among stakeholders and across lanes. IoT loggers transmitting information to the cloud can track temperature, location, and humidity, informing critical partners from the first mile to the last. The data is captured throughout the shipment, generating supply chain performance reports, ensuring product safety, and reducing waste. The software system connected to the IoT loggers provides real-time insights at your fingertips to help manage external partners and internal teams more effectively, as well as mitigate risks to product and consumer safety.  

There are additional long-term benefits to building a cloud and IoT-enabled supply chain. You can begin to see rich, longitudinal supply chain performance insights that can be collected and reported on, as well as benchmarking. This type of information will assist you in making smarter business decisions and show where the greatest impacts can be made. Analytics and reporting can inform your strategies and business planning, plus over time, you will be able to measure your successes.  

Costs of not using real-time technology 

The food and pharmaceutical supply chains have both been strained recently. Consumer price consciousness, coupled with global shutdowns due to COVID-19, has made manufacturers and logistics providers search for ways to optimize efficiencies. Innovative technologies can decrease product losses, reduce investigation costs, and improve brand reputation. Real-time monitoring through IoT data loggers offers measures to prevent lost loads by alerting the appropriate stakeholders of excursions. A dedicated response team can notify third-party logistics drivers of temperature excursions or other anomalies so the problem can be proactively remedied, and not discovered after the fact. Real-time alerts prevent lost loads from being lost or delayed due to temperature excursion investigations as quality professionals review the data.  

Lost load replacements 

When a shipment with temperature-sensitive products, like meat, dairy, or pharmaceuticals, sustains a lengthy excursion, the items will likely need to be destroyed for consumer safety. If that shipment had passive loggers on board, there is no opportunity for the excursion to be avoided or rectified. The issue remains undiscovered until the pallets are unloaded, and the data is reviewed by quality assurance (QA) teams. Each lost load means that necessary products are limited in the supply chain and could induce stock outages. Additionally, replacement products must be manufactured, grown, or processed first, and then shipped from the point of origin to their final destination. An IoT data logger connected to the cloud provides needed insights of product location and quality conditions during transit that can prevent sustained temperature excursions, and thus, all of the costs associated with lost loads.  

Investigation costs 

Temperature excursion costs are not limited to the direct expenditures associated with the ruined product and replacing it. Manufacturers, especially in the pharmaceutical industry, must pay for having a QA team on-staff. Those QA professionals dig through the shipment data, compile analyses, and determine the root cause of the temperature excursion. Then, a corrective and preventive action (CAPA) is typically implemented to avoid future temperature excursions. Investigational costs can range from $3,000 to $10,000 per occurrence, with an average cost of approximately $6,500. Those operational costs do not include wasted or replacement products. When manufacturers, logistics providers, and other stakeholders use IoT data loggers with cloud computing analytics, they can save millions of dollars through real-time preventative actions. 

Reduction in brand trust 

It can cost food companies up to $10M in losses after one safety incident from various sources: illnesses, lawsuits, fines, and higher insurance premiums. In the pharmaceutical industry, the direct and indirect costs of a product recall can be in the billions of dollars. A safety incident can damage a brand’s perception and take years to repair. The direct costs of a safety incident usually include consumer, healthcare facility, or retail notifications; product retrieval with reverse logistics; storage of unsaleable products; and destruction. Indirect costs are unpredictable and can be more significant to the company. They include litigation expenses, any agreed or mandated governmental oversight post­ incident, lost sales, and the impact on the company’s market value and brand reputation. Having visibility into the supply chain can prevent safety incidents from happening. Real-time alerts allow companies to be proactive and get in front of potential excursions and mitigate brand risks.  

Strengthening the industry 

Data sharing and collaboration are key to ensuring consumer and patient safety, reducing waste, and driving a sustainable supply chain. Data sharing, benchmarking, and collaboration will only strengthen and improve the industry as a whole. Many companies see this type of collaboration as a means to protect patients and consumers, as well as their brand. Industry-wide data can lead to improved efficiencies and reduced risk when you see the supply chain as a whole, as well as drive agility and innovation. 

Getting started 

One of the easiest ways to start using IoT devices and cloud computing to improve the supply chain is to begin a pilot with a trusted partner. Include multiple stakeholders in the pilot planning process, like quality professionals, logistics partners, and IT departments. Select a problematic lane or determine a specific challenge within the supply chain. Organize a pilot with a defined scope, duration, number of shipments, and results expected. Use the results to decide on the next steps after discovering what gains can be made by implementing new technology. For instance, excursions during transit and stock outages can be minimized or eliminated. Storage costs can be reduced because there are shorter product release times, and packaging material expenses can be decreased using data that illustrate what works and what does not. QA teams find that real-time visibility lowers the excursion rates, and there is less time spent on reviewing shipment data for compliance reporting and trend analysis. Product waste and lost loads go down, often saving several millions of dollars annually in operational and product costs. 

About Gisli Herjolfsson, Co-founder and CEO

Mr. Herjolfsson is co-founder and CEO of Controlant, a technology company that is pioneering the development of next-generation supply chain monitoring and traceability solutions for digitally connected pharmaceutical cold chains. He has driven the vision, culture, and growth of the company for the last 10 years. Controlant’s fully validated cloud and IoT solutions provide real-time, end-to-end visibility and risk mitigation across all lanes—air, road, rail, and sea—and through the last-mile. Managed services, including 24/7 global monitoring and response, inventory management, and reverse IoT logistics help to automate supply chain logistics, reduce quality review time, and proactively prevent business and product waste. Intelligent data analytics provide enterprises with proactive insights to fuel impactful decision-making and collaboration throughout their entire business ecosystem. 

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