End-to-end temperature and product movement monitoring.
Remote temperature monitoring for warehouses and cooling units.
Vehicle condition and location monitoring of assets.
Transporting temperature sensitive pharmaceuticals is a risky and complex business. According to the International Air Transport Association (IATA), the global pharmaceuticals logistics market is valued at $64 billion and is one of the most regulated, expensive, and fragile cargo markets in the world today.
Data from Pharmaceutical Commerce’s annual Biopharma Cold Chain Sourcebook reveals that temperature-controlled products in the cold chain account for approximately $13 billion; with a growth rate of 8 to 9 percent, spend on temperature-controlled logistics is predicted to rise to nearly $17 billion by 2020, with logistics costs nearing $100 billion. By the end of 2018, emerging markets — including China, India, Brazil, Russia, and Mexico — are expected to account for nearly 50 percent of growth in pharmaceutical drug spending, which will subsequently impact the logistics chain.
With data like this, it’s clear that manufacturers want to ensure quality product upon delivery. It also demonstrates a compelling need to identify and qualify more strategic investments to mitigate mounting risks.
Pharmaceutical transport typically combines different modes. Air transport, prized for its speed and flexibility, has traditionally been used for long distance and intercontinental distribution of the most valuable medicines and vaccines, while road transport is the most widespread method, and is also used to connect with both air and sea freight.
While ocean freight historically has been the Cinderella of pharmaceuticals distribution, IATA notes that 3.5 million metric tons of pharmaceuticals are shipped by ocean each year, compared with 0.5 million metric tons by air, and this number is only increasing.
Over the past five years, ocean transport has taken on much greater visibility in the pharmaceuticals industry. Cost competitiveness is a major factor driving acceptance, as it is up to 80% less expensive than air transport. Most pharmaceuticals are time-sensitive, but for products that don’t have to be moved quickly, ocean freight is a less costly option.
This trend has been driven as well by governmental agencies around the world that procure medicines on behalf of their national healthcare systems and which have been pressuring the industry to come up with lower prices for their products. At the same time, governments have imposed more regulatory and compliance elements to the pharmaceutical supply chain, thus driving up costs, and putting the squeeze on producers.
Although it can take much longer than air travel, sea freight is often more reliable because there are far fewer product handoffs. According to some studies, air freight accounts for 80% of all reported temperature excursions, compared with 1% for sea journeys, thus leading to higher quality.
With ocean freight, customs clearances and other time-consuming paperwork procedures can often be arranged during transit. To the extent that ocean freight entails a greater load tie-up, this can be mitigated through use of “floating warehouse” principles, whereby goods in transit are recognized as inventory.
In addition, ocean transport has a lower carbon footprint that is 1/25th the size of air travel’s. Approximately 1000 grams per m.t./km of CO2 are released during air transport, compared with less than 40 grams by ocean transport. For businesses with sustainability goals in mind, ocean freight offers significant opportunities in reducing their carbon footprint.
So far, a substantial amount of the growth in pharmaceutical ocean transport has been around relatively low value, high-volume products, including generic pharmaceuticals, APIs, solid-dose tablets, and excipients. However, proponents see that sea freight also has the potential to handle more sensitive large-molecule biologics in addition to personalized medicine therapies.
A 2013 report by analysts from The Seabury Group found significant quality-control problems with air freight. As a result, air cargo carriers began to set higher standards, establishing the IATA Center of Excellence for Independent Validators (CEIV) Pharma program to interpret general European Union and other good distribution practices (GDPs) for air cargo. That same year, the EU extended GDP regulations to cover controlled room temperature products, which must nominally be kept from 15-25 °C, and which accelerated a switch from air to ocean transport.
Despite these changes, vulnerable spots in the air transport chain, include handling, loading, the tarmac phase — which is considered one of the weakest links in the chain — and customs clearance, generate incentives for pharma companies to explore sea freight as an alternative.
Although pharma logistics businesses should deal only with partners they have carefully audited and assessed, ensuring that airlines, handlers, and airports are investing in infrastructure and equipment such as warehousing, temperature-controlled vehicles to cover the tarmac phase, as well as technologies that assist in the logistics process, with air cargo, a number of concerns remain.
Other problems have included a lack of skills, training, and standards throughout air transport cool chain logistics, with few SOPs or limited working instructions in place overall. Additionally, there has traditionally been a lack of cooperation and communication throughout the logistics chain, including stakeholders who have been shy in sharing information.
A number of pharmaceutical businesses have initiated studies to examine the benefits of sea freight transport, finding that transporting products by sea saves up to 80% in costs, reduces carbon footprint and staffing requirements, as well as packing, and storage needs.
A Bayer study recently showed ocean transport plus trucking to be an efficient way to transport pharmaceuticals inland in Brazil. Logistics efforts in that country can be challenging, because they involve congested airport customs, driving long distances overland and, in some areas, facing potential security issues.
Among ocean transport’s strongest pharma advocates is AstraZeneca, which has increased the percentage of products it ships by sea from 5% in 2012 to nearly 70%, as of 2017 — a staggering shift for a business its size — to focus on reducing temperature excursions, eradicating product loss, achieving regulatory compliance, and ensuring freight in transit by air is securer and fit for consumption. Shortly following AstraZeneca’s announcement, both Pfizer and GlaxoSmithKline (GSK) Vaccines indicated they were actively looking to reduce the number of goods it transported by air.
Today’s cold chain lanes aren’t confined to single countries or even continents. Having a comprehensive infrastructure in place, which provides global visibility and coverage, is essential to managing these types of payloads, eliminating the risk of temperature excursions, and supporting the recovery of those assets for reuse. Expanding into emerging markets can be especially challenging when temperature-sensitive and high-value payloads are involved.
Ocean freight provides opportunities for an integrated, end-to-end supply chain network that empowers stakeholders in an industry that needs greater efficiency and agility to adapt to constant change — whether that includes competition, product life cycles, technical considerations, or disruptive forces.
Most of Big Pharma is already shipping some of its products by sea; those companies tend to deal in high volumes that lend themselves to full container load shipments. For smaller and mid-sized pharmaceutical companies, which contribute half of the industry’s output, they have not typically had access to a GDP-compliant, less-than-half-a-container load service.
Controlant supports both experiences, involving shippers, logistics companies, and suppliers, helping pharmas that want to enter or increase presences in the ocean freight market. Stakeholders gain the ability to access and share temperature and location data on demand while goods are in transit — across all lanes. Through real-time cloud data, businesses can proactively reduce temperature excursions, eradicate product loss, achieve regulatory compliance, and ensure safe product consumption.
Through their quest to build more efficient, more competitive, and more concerted supply chains, pharma businesses both large and small would be fit to serve the rapidly changing global environment for both the short-term and long-term.
Thinking about making the switch or increasing your presence in sea freight? Contact us to learn more or to try a pilot.
“Pharmaceutical Transportation: How to Increase Air Cargo’s Share,” aircargopedia.com, 2017.
Opinion Editorial, “Unreliable Air Cargo Industry Loses Pharma Traffic to Sea While IATA Sleeps,” coolchain.org.
M. Roebuck, “Astra-Zeneca Eyes Major Shift from Air Freight to Ocean: A More-Controlled Environment for Drugs,” theloadstar.co.uk, December 15, 2015.
R. Velazquez Trevino, “Modal Shifts: Where Are We Going?” TCL London 2017, January 31, 2016.
Climate Killing Airplanes, fluglaerm.de, 2015.
IATA, Centers of Excellence for Independent Validators, iata.org.