The Friday Report: March 23rd, 2018

Quick wrap up of a few hot topic newsworthy stories in the supply chain logistics industry

Cold Storage Warehouse Growth Fueled by Consumer Shopping Habits & Expectations

The food supply chain is changing.  Between the increase in consumers shopping online for reasons of convenience and changes in taste and food preferences, consumer behavior and expectations are changing the food supply chain and the cold storage warehouse industry along with it.  Food producers and retailers are being forced to change the way they do business. Because consumers prefer fresh, locally sourced foods and desire quick food delivery, refrigerated warehouses and food production facilities need to be positioned closer to populated areas.

Online grocery sales topped $19 million, 3% of 2017 grocery sales.  By 2024, online sales of grocery items are expected to exceed 13%, $100 million according to data from FMI/Nielsen.  According to CRBE research on the U.S. market, accelerating online sales are driving up the potential for an increase of 35 million square feet of cold storage warehouse space.  The anticipation is that food goods will need to be repositioned from brick and mortar retail stores to warehouses and distribution centers over the next 7 years.

The cost of building a refrigerated warehouse tends to be two to three times that of building a conventional ambient warehouse.  Maximizing the return on the investment of refrigerated warehouse space is crucial to the success of the facility.  Today, cold storage warehouses are built for much more than simple storage of food products. Many cold storage warehouse operators act as 3PLs and provide optional value-added services including packing, labeling, light processing of goods and other services. This helps them to defray facility operation costs while providing valuable add on services that can save the customer money.

This 3PL flexible cost model can be ideal for customers in the food industry.  Using a cold storage warehouse can elimaddonthe costly investment in infrastructure, assets and a workforce and enable them to take advantage of the economies of scale and expertise of a seasoned refrigerated warehouse operator.

Using Blockchain to Secure the Pharmaceutical Supply Chain from Counterfeit Drugs

Counterfeit drugs, which can be name brand or generic have now surpassed the value of illicit narcotic drugs.  These “fake” pharmaceuticals may contain no active ingredient, harmful ingredients, the wrong ingredients, ingredients in the wrong concentration, ingredients in the wrong dosage or drugs past their expiry dates.  Counterfeit drug medications can result in unexpected side effects, reduced treatment effectiveness or even death for consumers.

Global microbial resistance may also be partially attributed to the incidence of counterfeit pharmaceuticals which contain a reduced dose of active ingredients that fight infectious disease. Counterfeit medications have contributed to antibiotic-resistant forms of shigella, tuberculosis, salmonella and cholera.

To help secure the global pharmaceutical supply chain, both the EU and the U.S. have initiated legislation which requires an electronic system to trace and authenticate medicine products as they move through the supply chain. 

Due to the complexity of the issues and the lack of an interoperable solution, some people are advocating the use of blockchain to help solve this problem.

Even though blockchain technology is still in its infancy, it holds tremendous promise.  Using strong encryption, blockchain is built with a time-stamped chronological chain of blocks in which the blocks are records of transactions.  A decentralized, transparent system which relies on a peer-to-peer network, blockchain does not reside on a centralized database but rather acts as a distribution transaction ledger.  Using blockchain, the pharmaceutical supply chain will be able to trace drugs from the manufacturer to consumers.  Use of blockchain would engender more consumer trust and reduce costs.

Reverse Logistics Can Result in Secondary Profits

According to the National Retail Federation, holiday sales reached nearly $692 billion in only the last two months of last year.  Did you know that the rate of returns for e-commerce retailers is typically 15-30%?  Less than half of returned merchandise is resold by retailers, usually at a discount and another 5 billion pounds of returned merchandise is simply thrown away.  This is because the cost of transportation, restocking and reselling the returned merchandise exceeds that of disposal.  Some goods end up on the secondary retail market.

The reverse supply chain is the busiest in January and February due to holiday returns.  Merchandise is acquired by resellers through liquidation sites and steep discounts so that they can absorb the costs but still turn a profit.

The huge volume of merchandise returns is fueling the growth of the reverse supply chain.  Online liquidators, retail outlets and value retailers are big business and actively working to solve the problem of ballooning returns.

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