(and How Cargo Monitoring Solves them)
The black-market tobacco industry is thriving worldwide. In 2017, over 50% of cigarettes consumed in New York State were believed to be from the black-market, in the old continent it is around 11 billion Euro of tax revenue that EU governments are deprived from due to illicit trade or counterfeit cigarettes.
The impact of the tobacco black-market on consumers affects their products that may not be up to standards, also tobacco companies that lose money due to theft and counterfeit products, and governments that miss out on significant tax revenue gained from the tobacco industry.
The World Trade Organization and the European Union join forces to implement new regulations to fight illicit trade by creating a “track and trace” system that will enable authorities and citizens to verify the authenticity of tobacco products. In exactly a year from now, in May of 2019, manufacturers trading in the EU will be requested to mark each and every tobacco products with unique identifiers to scan and record their movement throughout the supply chain.
For tobacco companies it is the new digital age of cargo monitoring that gives them the tools to combat the rising appeal of illicit trade and improve their overall supply chain management.
Stepping up Loss Prevention Techniques
Tobacco companies deal with very big challenges to prevent losses at every step of the way, more than most industries trading and moving goods around the globe. Whether a shipment of raw tobacco leaves is impacted or if finished goods are stolen on their way to the distributor, loss has a significant and harmful consequences on the entire operation.
The reason we don’t hear much in the media of theft related events is because inventory loss harms the company’s reputation by showing that their security precautions are not up to par. Theft also has an immediate impact on the inventory management since tobacco is a limited lifespan product, must be sourced from various locations, and is ordered months in advance.
When theft occurs and inventory is impacted, not only does the relationship with distributors suffers due to their inability to get and sell the products, but end consumers may also feel the impact if their desired brand is unavailable to them. That situation is called OOS (Out of Stock), and it is the nightmare of all companies because it hurts not only sales but also its reputation and consequently impacts market share.
As a result, monitoring cargo as it is being transported from point A to point B is increasingly critical for tobacco companies looking to reduce loss potential and increase revenue and profits since cargo monitoring provides real-time global visibility of cargo whereabouts and increases supervision and control.
Added Value to Your Contingency Plan
While cargo monitoring can help tobacco companies reduce the chances of cargo theft and improve their loss prevention capabilities, it supports tobacco companies to ensure contingency and supply chain continuity.
When dealing with a high consumption product like tobacco, knowing how to anticipate and meet consumer demand is critical. As a result, tobacco companies need to have a well-oiled system in place to help them know in advance if things may not go according to plan. This system has to provide real-time data at each and every station of the supply chain. For example, receiving a real-time alert that a shipment has been delayed at one of the supply chain stops will allow the manufacturer and the importer to review their plan, make a decision and take action. When you are able to make a decision during the journey it can substantively limit the damages of learning that an unexpected event occurred when the goods arrive at final destination.
The Supply Chain aspect
Beyond lacking information when theft occurs (which we already known cargo monitoring can help with), tobacco companies also need to know when and where shipping delays occur, when cargo takes longer than expected to be loaded or unloaded to a ship etc.
A transparent cargo monitoring solution that records all information and shares it in real time can do exactly that; beyond sending real time alerts, monitoring solutions record all touch points that a cargo container undergoes. With that data in hands it can be process into actionable insights and supply chain managers (and their customer service teams) can use that information to manage and optimize the process, predict delays, shortages or anything else that might impact their ability to deliver their goods on time. Also to quickly resolve abnormal events such as different container seal than the one declared because the monitoring unit will provide the final proof whether or not cargo was tampered and whether to choose to release the cargo from port, trusting that their cargo monitoring solution is looking out for them. A monitoring solution will also inform the supply chain manager on unexpected events or optional delays such as surprise visits of customs, anti-drug units or any unannounced inspection, thanks to the real-time alerts.
Today, quality assurance is an increasingly important thing in the tobacco industry and a smart cargo monitoring solution that also measures humidity, temperature and other factors can help tobacco companies to ensure the quality of their products but now more than that, to make the switch and to monitor the new (and quality sensitive) tobacco alternative trends such as reduced-risk products. With greater ease tobacco companies now know their products will be managed even when it transit, not just in terms of location, but also in terms of quality
To make sure this all happens smoothly and with no need to invest capex in hardware or complicated logistics to manage monitoring units, tobacco companies should ensure that their monitoring partner will provide end-to-end service including all the logistics around these unit, data-analysis report with business insights and recommendations.
by Dan Benkin, VP Security and Loss Prevention at Contguard, corporate security and supply chain professional.