This
year is almost over and 2012 went by so quick but brought so many
learning experiences for me. I was fortunate to attend and speak in few
cold chain conferences (US, Brazil and China) where I not only learned
more about the cold chain supply challenges in emerging markets but also
shared and validated my ideas with many people working with emerging
markets. I’d like to share with you some of the key points I gathered
this year and my predictions for cold chain in 2013.
The
growth in emerging markets has been faster than the logistics expansion
efforts to support this growth, so the logistics industry has seen many
changes. One of those changes is the available carriers to support the
emerging markets. The long-haul routes, historically dominated by
American and European airlines, are now a competition ground where Latin
American, Asian and Middle East carriers that have shown a deeper
knowledge of their regional Markets and have not only gained market
share by expanding the network to include hubs in the European and US
cities but also responded to the cold chain needs by investing in their
fleet, facilities and trained personnel. Carriers are also increasing
the amount of narrow-body aircrafts in their fleets, especially in
regional markets to take advantage of the more fuel-efficient smaller
aircrafts and the flexibility to respond to changes (i.e. expansion and
contraction) in passenger demand. All these changes in the carriers’
network has increased the level of complexity in managing cold chain
logistics for emerging markets because the logistics process by nature
includes a high number of participants and interfaces.
The
freight forwarders and logistics providers (3PL) have also stepped up
to the challenges and understand that they must orchestrate the supply
chain complexity and its participants to obtain a fast, efficient and
resilient supply chain. They have understood that they are not just an
extension of the airlines cargo sales. The traditional model where
freight forwarders sold cargo space at standard rates on a commission
basis is no longer applicable, and the freight forwarders must create
value to their customers by actively optimizing costs and reducing
risks. This integration of the freight forwarders has increased
information sharing among carriers, containers suppliers, and other
participants.
Regulations,
standards and other industry good practices on temperature-controlled
distribution as well as supply chain integrity (security) have grown
exponentially, which confirms the demand expansion in emerging markets
and the need to communicate among the logistics participants. Regulatory
bodies in emerging markets have actively created or updated the
regulations which may not have a global alignment yet. Many industry
organizations have also created standards and pushed them to their
members with limited success in the adoption of these new standards. Due
to the increase in the need for security, the customs clearance process
in many countries has become longer and the few countries with shorter
clearance time are today the exception.
A
increased demand for information sharing (temperature records,
tracking, etc) and linking temperature records to each logistics step to
help the supply chain participants monitor the process have resonated
with the suppliers of these tracking devices and they have responded
with cloud-based systems, but the adoption has been slow.
In 2013, I expect to see the following:
1)
More collaboration among freight forwarders, carriers and container
suppliers to optimize cargo (cube and weight) by designing containers
with the right balance weight and volume for the vessel selected
(aircraft, truck, etc.). This effort will be supported by the stability
data for distribution that pharma and biotech companies are creating.
They are aware that missing or delayed stability data for distribution
will create over-designed containers and transportation. I foresee a
bigger need for a narrow-body shipping containers that will support
distribution in regional markets.
2)
The increased integration among the participants and optimization may
decrease the revenue for some participants (e.g. Freight Forwarders,
carriers, etc), so these participants must actively work to offset the
revenue decrease by creating services that add value to the supply
chain. One example where value can be added is ensuring the best volume
and weight balance in the vessel by aggregating demand of light and
dense products. Another example will be providing storage and
conditioning for containers to free up space and resources at the pharma
companies.
3)
An alignment of the current regulations and industry standards. I also
expect more information sharing so each supply chain participant
understands how all the parts fit together. Training and logistics
audits will become more popular to ensure these standards are being used
correctly. I see an opportunity for freight forwarders to take the lead
in providing the training and audit services.
4)
More cloud-based systems to integrate freight forwarder, temperature
and manufacturer data and make it available not only to the consignee,
but also the carriers, health authorities and customs. The need for
cloud-based platform to share information is valid for global and
domestic distribution because information flow will help optimize the
supply chain cost and risks and will benefit the participants by
highlighting the processes that can be improved to create value.
I
am looking forward to the learning and networking opportunities that
the next year will bring. Please feel free to reach out to me with your
cold chain questions and predictions for 2013.
Until my next article.
Carlos Castro
