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Critical for the Cold Chain: Sustainability and Technology Investment

By William DiBenedetto, CBN Feature Editor

Dealing with the global cold chain requires shippers and logistics providers to adjust to constantly changing regulations, technological advances and increasing costs.

Regulation in the food and pharmaceutical industries is increasing due to globalization, putting strains on producers and transporters alike to ensure that products are legitimate and that end-to-end quality is maintained. Preventive measures, compliance and harmonizing regulations are major issues for the food and pharma industries.

In the European Union, for instance, about 80 percent of pharmaceutical products require temperature-controlled transportation. In anticipation of similar regulations in the U.S., many pharmaceutical manufacturers are adopting this approach.

In addition, the phase-in of rules stemming from the U.S. Food and Drug Administration's prevention-focused Food Safety Modernization Act, which passed in 2011, means companies must invest in real time methods to document each step in the food supply chain. Products such as produce must be traceable to their point of origin. In addition, recall systems must be reliable and efficient to comply with more stringent regulations.

Getting out ahead of regulations is a common theme across cold chain logistics — as manufacturers build more stringent practices into their requirements, 3PLs and other transport providers must respond to make sure they are properly credentialed and prepared.

"We are throwing much more rigor into how we select service providers," said Greig Jewell, director, Lean value stream, supply chain operations, Nestlé Canada, who was quoted in an Inbound Logistics report. "We operate a supplier-facing supply chain now, involving not just our packaging and ingredients, but also our service providers such as VersaCold."

Driver shortages and capacity constraints continue to impact the cold chain. The reasons: operating a refrigerated fleet requires significant capital investment, specially trained drivers, increased liability, and greater risks for frequent and strict inspections.

Cold chain operators must stay on top of technological advances to ensure efficiency, integrity, and safety. This includes their IT infrastructure and devices to gather and report shipment data in real time.

Cold chain carriers continue to invest heavily in on-board equipment that's built into refrigeration units to track temperature and location; manufactures invest in high-tech packaging that makes data available to 3PLs and shippers in real time. Some shippers also use removable sensors to track the temperature of their cold cargo, usually for high-value goods and international shipments.

Temperature tracking can also be built into the packaging. MillerCoors uses temperature-sensitive ink to show when products are at an optimal temperature. Inks are also used on milk cartons to indicate when the temperature has fallen out of safe range. Nestlé Canada uses GPS-enabled sensors for inbound ocean, rail, and truck freight. The devices include real-time alarms for zone, route, intrusion, and temperature.

Then there's the sustainability equation. Cold chain operators have to be on the look-out for ways to balance the energy-intensive requirements of perishable products with the desire to reduce resource consumption and impacts on the environment. Options include the increased use of compressed natural gas and electric for vehicles.

All of these factors add up to what UPS calls "pain in the supply chain" for healthcare and pharma organizations. UPS' most recent pain-in-the-chain survey — its eighth — says cost and cost management are among the most difficult cold chain issues facing those industries. While the UPS survey focuses on the logistics end of the supply chain for health and pharma companies, the challenges it cites are also applicable to virtually all other areas of supply chain management across many industries.

Cost management remains a substantial and stubborn supply chain issue, according to UPS. "Healthcare logistics decision makers report rapid business growth, fluctuations in fuel and raw materials costs, increasing regulations, and new market expansion as the biggest challenges to managing supply chain costs."

Contingency planning is another area in healthcare and life sciences that companies can find both difficult and risky to justify investing in, based on the limited and unpredictable impact of disruptions to the supply chain, UPS says.

The UPS survey compiled results from more than 400 healthcare logistics executives across 16 countries. According to the survey, rapid business growth is a leading stumbling block in controlling costs for pharmaceutical supply chains, with 56 percent of respondents saying they struggled with it last year. Other major cost factors cited as stumbling blocks included fluctuating fuel costs (55 percent) and fluctuating raw materials costs (49 percent). Other "pain points" included aging IT systems (38 percent) and lack of supply chain visibility (38 percent).

Areas of success revealed by the survey include good progress in addressing product security, increasing success with regulatory compliance — a paramount issue in the pharma industry because of the heavy burdens that U.S. and international regulatory regimes impose on the industry on a frequent basis.

Another area of success that could be a way forward in addressing the challenges of cost management and contingency planning is the use of logistics and distribution partnerships and collaboration as a comprehensive strategy.

The need for alignment and collaboration across complex supply chains is more vital than ever because, as UPS says in its pain-in-the-chain report: "As more innovative, sophisticated products enter the global market, the stakes will only get higher for healthcare companies to ensure growing consumer demands are met with innovative, sophisticated supply chains."