Why It’s Time To Change The Cold-Chain Game
I am perplexed at the state of the cold-chain industry in a country like India. On one side, everyone associated with the industry knows that India is under-invested in its cold-chain logistics infrastructure. A National Centre for Cold-Chain Development (NCCD) sponsored study has established that India has only about 15-20% capacity of the reefer trucks needed in the country. While cold storage infrastructure fares slightly better, the installed capacity is still very skewed in terms of its distribution, and woefully short of what the country needs. On the other hand, all industry stakeholders unanimously agree on two things:
- The demand and consumption of products that require temperature-sensitive handling are on the increase.
- There is considerable wastage of fruits, vegetables, and other perishable products because of lack of adequate cold-chain infrastructure.
Current State Of Affairs –
For any businessperson, the current scenario should be a great motivation to be a player in the Indian cold-chain industry. Yet, when you interact with the product brand owners, third-party logistics (3PLs) providers, cold storage operators or retailers, none of them echo the enthusiasm and bullishness that one would expect. As an industry outsider, I attribute this to playing a new game (perishable or temperature sensitive products) but with the traditional set of rules.
Traditionally, logistics operations have always been structured to ensure that the right product is made available at the right place, at the right time and for the least possible cost. However, cold-chain logistics involves significantly higher investments and operational expenses from all the parties in the chain. So, if the focus is continuously on squeezing costs, it will give no joy to anyone involved. I am not suggesting that price does not play a role. It does, but it is not the only game in town.
Is The Consumer Left Out In The Cold?
Allow me to elaborate on this point a bit. Let us focus our attention on the most important stakeholder in this play – the consumer. Whenever a consumer buys a product, there is an implicit faith that he/she is putting on the entire logistics chain to guarantee product quality, effectiveness, and safety. This is non-negotiable in the mind of the consumer. Do you think a consumer will be willing to compromise on this just to save a few bucks?
Let us take two real-life scenarios:
- A physician administering a vaccine to a patient wants an assurance that it has been diligently handled through its supply chain journey. It must be safe to administer and effective as a medication for the patient. What are the chances that the physician/patient will make the decision on the vaccine purely based on price, especially if they have any doubt that the product may have been compromised?
- My wife regularly orders home-delivery of fresh meat and seafood from an online site. Every time she orders, she makes it a point to remind me that she is paying a premium for the products because she feels this vendor is the “Rolls Royce” for fresh meat and seafood. The convenience of home delivery is a smaller consideration. The biggest draw for her is the “quality and freshness” of the products she gets. The experience has been rewarded and reinforced with every transaction. When I asked her how she knows that the product delivered will live up to her expectation of “quality & freshness,” she says she can “just feel it.”
Giving The Consumer Real Solutions –
And this is wherein lie both the solution and the challenge for the cold-chain industry. Most discerning brands are investing in creating and leveraging a logistics chain that has the infrastructure to handle temperature sensitive/ perishable products, to ensure its quality, safety and effectiveness. Some even go to the extent of providing chillers/refrigeration-units to retailers, knowing their product could spend considerable time in the store before it’s bought. However, today they are unable to give assurance and visibility to the consumer in a systemic, transparent and scalable way, that the product in their hands has been handled diligently. So, in my wife’s example above, if the “quality & freshness” that she pays a premium for, can be moved from “just feel it” kind of perception to factual data points that can be transparently shared with her during the buying process, it will have two very pronounced effects.
- The brand will empower her to validate the “quality & freshness” every time she takes delivery of the products.
- It creates a buying behavior change wherein she will begin to demand this from every brand owner.
This changes the rules of the game. In the absence of this, it is only logical that products from reliable brands get equated with those from vendors who either don’t invest in cold chain infrastructure or try to get it done in an ad-hoc, makeshift manner.
The Brand Truly Owns The Product –
So the clear message to the brands is – if you have made a significant effort in bringing a quality product to the market, let it be known as best as you can. This ability of a brand to transparently share information about the product’s handling with the consumer is called “traceability.” There could be multiple other data-points that a brand can share with the consumer through traceability like its authenticity, its origin/source, nutrition information, etc. I intend to cover this in a lot more detail in a separate blog. But all of these mostly validate and assure the consumer about the product’s uncompromised quality and genuineness. The three significant impediments for the brands to provide this traceability to the consumer today are:
- Number of players involved in the supply chain: Given the fact that brands could use multiple external partners for operations like processing/manufacturing, transportation, warehousing, distribution, etc., it becomes challenging to collate data from numerous heterogeneous systems.
- Fragmented and point solutions that don’t talk to each other: Even within the brand’s own company, multiple different systems are running from different suppliers for different functions. Since most of these were never deployed with interoperability in mind, they hinder getting an integrated view of the product’s journey. In an overwhelming majority of cases, data from data-loggers used to record cold store temperature, during transportation of products for distribution and while being stocked with the retailer has never been integrated and viewed, even by the brand.
- Lack of remote visibility into operations: While operations are being carried out at local levels, what’s missing is a bird’s eye view of all aspects of operations. There is a need for remote management and real-time alerts on possible issues.
Technology In Cold-Chain Industry –
Fortunately, technology today can help us address these and other impediments and begin to create and communicate value to consumers. The moment is ripe for brands to disrupt the old rules of the cold chain industry and start writing some new ones. The other players and partners in the ecosystem can quickly become the enablers for this change. Apart from innovation, energy and vibrancy that it will bring to the industry, it will also help brands get much closer to the consumer.
At SensiWise, we are committed to helping enterprises get visibility and insights into their operations and assets for agility, efficiency, transparency and innovation. We do this by leveraging technologies like IoT, Analytics, and Blockchain. If you are a player in cold chain logistics and would like to explore how technology can help your business, do contact us.