Cold Chain Industry Forecast for 2013

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 The traditional model where freight forwarders sold cargo space at standard rates on a commission basis is no longer applicable, and the freight forwarders must create value to their customers by actively optimizing costs and reducing risks.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.