Many logistics leaders view cold chain logistics as an extension of general logistics services when, in fact, it has very different operational characteristics and associated activities. Logistics cold chain services are inherently far more complex than merely storing and transporting products. Additionally, cold chain failures can have significant financial repercussions, with estimates in the billions annually with the two primary sectors namely food and biopharmaceuticals.
Given the size and growth of this complex logistics segment, logistics leaders must improve the control and performance of cold chain management. This can be achieved by focusing on three key areas:
1. Strengthen cold chain logistics governance
Cold chain logistics requires a higher level of governance and oversight to successfully manage and execute activities. To operate most effectively, cold chain logistics require a differentiated set of metrics such as:
Carrier and route compliance. The percentage of cold chain shipments moved by carrier/moved in each route by mode that meets the allowable specified temperature range. This helps determine which carriers are underperforming or overperforming and which transportation modes have the highest temperature failure rates.
Temperature and time excursion. Percentage of cold chain shipments that experience a temperature variation outside the allowable specified range and the total elapsed time of excursions. This creates awareness of which transportation lanes have the highest temperature excursion rates and accounts for the total time that product is exposed to temperature excursion.
Average dwell time by location/facility. The average sum of time that lapses between cold chain shipments departing minus arriving. This metric helps identify which facilities/locations have the highest waiting times, which increases product exposure/risk.
Mitigated vs. unmitigated shipment excursions. Defines the percentage of excursions that were mitigated vs. unmitigated over the total number of shipments. Identifies what percentage of shipment excursions were avoided by proactive management vs. those that were not.
Additionally, it’s critical to craft a risk management structure to mitigate the waste, damage and cost that can exist in segments, such as transportation, storage, packaging, equipment and technology hardware. This can be achieved by various means, such as creating a uniform set of cold chain infrastructure involving building layout, storage locations, handling equipment and safety material to increase standardization of work or implementing enforcement and adherence to SOPs and service-level agreements (SLAs) across all nodes of the cold chain network.
2. Identify, evaluate and select the right cold chain logistics partners
Evaluation criteria for logistics cold chain services should go a step beyond generally accepted best practices for logistics operations. These sub-criteria can include factors such as:
Depth and breadth of cold chain services. Not all logistics service providers are equipped to support all cold chain business needs. As part of the evaluation process, it is imperative to understand which cold chain aspects of your network they have capabilities for and are able to execute.
Proximity to cold chain network. Location of distribution points and carriers and an ability to rapidly source and deliver packaging needs is crucial. Consider aspects such as density of distribution footprint, distance to suppliers or manufacturers, distance to customer base and number of carriers in the pool.
Time sensitivity or product shelf-life requirements. Speed to market — particularly for perishables or pharmaceuticals — is paramount, which enables a competitive advantage and/or customer requirement. Factor in their flexibility to change vehicle/equipment type based on customer requirements, ability to rapidly dispatch same-day orders and change packaging type or carrier.
Additional asset value to service cold chain shipments. The ability to dedicate or easily source assets for a particular operation can become an invaluable assessment opportunity in determining the right logistics partners. To evaluate the asset value, consider the number of distribution points, leased versus owned property, age of vehicles/equipment/facilities, temperature monitoring systems, ability to flex temperature storage ranges based on product mixture and maturity of technology infrastructure.
3. Use technology for better management of cold chain
Due to its necessity for high compliance standards, the cold chain requires a more mature approach to leveraging technology than your typical logistics operations. This goes beyond simple shipment visibility and analytics for decision making.
There are several technological devices and applications that can be leveraged for a better governance of cold chain logistics operations. Features to prioritize include real-time temperature monitoring, geofencing, predictive analytics and reporting based on the data collection through sensors, telematics, in-transit alerts and other methods.
Building technological infrastructure internally or externally that enables the capture and analysis of centralized cold chain data is crucial for efficient, compliant and proactive management. This begins by identifying data sources and integrating those sources into a data collection platform that has established collection parameters. From there, you can validate the data and enable alerts for real-time monitoring and define data permissions for data security.
Cold chain processes are generally immature, leaving plenty of opportunity for companies to leverage best practices and gain a competitive advantage. By prioritizing the three areas outlined here, logistics leaders can improve the effectiveness of their cold chain logistics, helping to reduce costs and improve service levels.
