The shipping container, the bar code, parcel tracking software: key technologies have always determined progress in global trade. Thanks to these milestones, we can send almost all goods anywhere in the world. Consequently, global trade increases at great pace.
Sum of world exports and imports as a share of world GDP (%).
Consumers are unaware, however, of the impact high cost pressure, increasing regulation, and most importantly, growing consumer expectations are having on product quality. Roughly one-third of global fresh fruit and vegetables are thrown away due to product deterioration before they get the chance to be sold. As the global population expands, this is totally unacceptable. A large proportion of this deterioration is related to issues in the supply chain process.
Consumers, meanwhile, are spending more on fresh food every day, and expect their favorite products to be available year-round. Kiwis from New Zealand, strawberries from Israel, and fish from Norway have become completely normal offerings no matter where you are in the modern world. As such, product loss anywhere along the supply chain can have significant impact on consumers everywhere. While this environment creates new problems, it also creates opportunities for new solutions and new players in the market.
Very often it is an outsider who shakes up the status quo. Amazon, for example, started out as an online book delivery service and today it is one of the largest integrators of logistics services, pushing down costs and increasing the speed of delivery. They have even begun to operate their own fleet of planes and are now pushing into delivering fresh food.
Logistics providers are trying to differentiate themselves by any means necessary. These factors can include even more flexible delivery times (e.g. Sunday delivery), better information about delivery time slots, pickup spots, and the sustainability of shipments. One of the largest sectors in the delivery service space is in the delivery of fresh food and ‘take-out’. Billions of dollars are annually poured into the combination of hardware (from trucks to bicycles and cooling boxes), software (online order in-take, fast processing, tracking, and invoicing), and service provision (convenient packaging, food security, fast and flexible delivery) which are required to meet customers’ rising expectations in this expansive sector.
Within the logistics industry, traditional hardware and shipping material have seen limited innovation in recent years. Conventional solutions are based on card boxes with icepacks, and are often coupled with Styrofoam inlayers. These solutions are non-reusable and require disposal upon delivery – serving as an annoyance to environmentalists and leading to a large volume of unnecessary waste. This wastefulness is compounded by the fact that only 3% of Styrofoam used worldwide is recycled. The rest is burned, creating harmful and acidic pollutants which enter into the atmosphere. Furthermore, these ‘standard’ solutions are only reliable under moderate climate conditions – they cannot be left exposed to sunshine at 30°C for more than 30 minutes – which can prove detrimental for deliveries sent directly to consumers’ doors.
As a result of the inefficiencies of current logistics solutions, new, more technologically advanced transportation boxes are intensively scouted by logistics providers. The production of temperature and humidity controlled containers and transport boxes is growing at a rapid pace across the logistics industry as a whole, from the B2B sector, with large pallet-size containers, to the B2C space, with smaller convenience offerings.
The most notable features of these containers are their temperature maintaining and monitoring capabilities – which guarantee the safe transport of goods for 24-48 hours for direct-to-consumer shipments and up to 170 hours (more than 7 days) for larger, pallet sized shipments – without electricity. Since the consumer expects more environmentally friendly and convenient solutions, these devices can and should be used multiple times before being fully recycled, reducing the carbon footprints of logistics providers dramatically relative to conventional solutions.
While the development of such high-tech products is already a challenge in itself, the extreme cost pressures experienced by logistics providers is an additional barrier to overcome. With many logistics providers vying for a competitive edge based on the price of their service, more sustainable solutions will need to meet, or even undercut, the price levels of one-way Styrofoam boxes to make logistics providers more amenable to their adoption.
After all, everyone is happy to be more environmentally friendly as long as their business model remains competitive. Cost is an important reason that electricity-based devices will not win this race – they are simply too expensive to produce and use.
Passive boxes, similar to the Styrofoam box, but built of high tech components, are likely to provide the relevant solution to meeting greater customer demands for environmental sustainability. New insulation materials, such as ISOPETTM or vacuum panels, are already making their way into the market. It is also technologically possible to create a box that is “charged” overnight in a cooling chamber, which then maintains a steady inside temperature level (either frozen or chilled) for up to 48 hours – enough time to be shipped and delivered nationally or locally.
The beauty of these increasingly sophisticated emerging solutions is that they can reduce the total cost of shipping to below that offered by highly disposable, one-way icepack filled Styrofoam boxes. New high-tech boxes can increasingly be re-gathered and pooled in order to be used multiple times, for as many as for 150-200 shipments. Newfound reusability of shipping containers will therefore allow for a reduction in the average cost per shipment of up to 20%. These reductions would serve to revolutionize the logistics industry, which already suffers due to extremely low margins – seen by many as ‘unavoidable’.
Consumers the world over will also benefit as technological advancements are made within the sector as they will have increased access to more quality products at affordable prices.
Outside of the hardware utilized in the global logistics industry, the software side is showing significant development. Reliable sensors are already frequently integrated in temperature sensitive shipments, complying with new regulation standards and resulting in higher risk mitigation for the consumer. Data points collected by these sensors better analyze complex shipment processes and take automatic precautions against potential difficulties that could arise.
As logistics providers experiment with and implement blockchain-based solutions, they can create an ecosystem of trust between users and logistic stakeholders around product safety. Many believe that blockchain technology will disrupt the logistics industry in multiple ways and the first proof of concepts look promising – reducing costs in administration through payments on the blockchain and through smart contracts – reducing overhead costs significantly.
These developments have the potential to create an even more globalized world, characterized by further economic integration. Who benefits in this new world? Consumers benefit from fresher produce, logistics providers benefit from the ability to cut costs and provide better value to consumers, while society as a whole reaps the rewards with the associated boost to environmental sustainability. In short – who benefits in this new world which blockchain-based solutions are beginning to make a reality? Everyone.
Richard Ettl is Co-Founder and CEO of Smart Containers Group