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Cost Structure & Operation

(June 8, 2017) - As a kind of logistics operation that is more expensive than the normal one, temperature controlled transportation needs high facility investment and running cost, and thus cost reduction is a prequisite requirement.
Cost Structure & Operation

Reason for high cost of temperature controlled logistics

The reasons for high cost of temperature controlled logistics are as below

Warehouse system

  1. High investment on facilities (buildings, cooling facilities and maintenance)
  2. Operational cost (energy cost)
  3. Maintenance cost

Delivery system

  1. High price in purchasing delivery vehicles (container, cooling facilities)
  2. Operational cost (such as energy cost)
  3. Gross tonnage reduction (Container. Cooling facilities’ weights lower the load capacity)

Transportation

  1. High lever services such as 24/365 operation (Opportunity cost increases)
  2. Products and accident risk (cost loss)
  3. High-speed services (to correspond to short lead time, even late night/early morning)

Though, it is almost difficult to cut cost by only lowering the unit price of each item in the cost list, it is important to search for a solution for lowering cost as a whole.

Specific solutions to enhance the freshness: Control the number of delivery days to the final delivered destination

The basic solution to enhance the freshness is to increase the inventory turnover rate, and operate a zero inventory of daily delivered raw products.

It is important to improve the accuracy of the issued request forecast with the merchandiser and the number of days to deliver to the small shops.

Solutions to enhance the freshness of products

  1. Accumulation of delivery items: accumulate stored items only if possible
  2. Shortening delivery route: Delivery within the shortest distance.
  3. Increasing inventory turnover: Zeroisation case by case (smooth operation)
  4. Short lead-time: Short period of time from reception to delivery (minimizing safety stock)
  5. Minimize number of delivery days: Just-in-time delivery
  6. 365 days business operation: Daily addition

Daily addition means zero inventory operation, there are also one day delivery cases

It is important to manage the warehouse connecting from manufacturers to small merchandisers and the number of days arriving at the final destination.

Challenge in sanitation management

Products in temperature controlled transportation are not only fully packed ones, but also products with only outside packages and bulk items that are put inside a container. At serviced refrigerated warehousess, law on food sanitation is considered to be the fixed facility standard. In the case of logistics processing within a warehouse, exceptionally strict management is necessary.

The challenge to manage sanitation in logistics

  1. Issues related to operation method: Avoiding dirt and damages
  2. Issues related to facilities: Cleaning and sterilizing inside the trucks and warehouses
  3. Issues related to facilities and machines: Periodically washing pallets and tools
  4. Disposal and treatment of waste: waste treatment
  5. Issues related to workers: Health check, hand washing, adoption of 5S
  6. Others: Insect solutions, etc…

Constantly change pallets into resin types, not the wood ones.

It is important to create a checklist of items like above, and record the implementation status.

For serviced refrigerated warehouses, in application for business registration according to the warehouse industry act, it is compulsory to adopt facilities standard as regulated in the same law as well as in the food sanitation act.

Moreover, based on the main terms of the two laws, General hygiene management rules should also be decided, and should be importantly implemented.