Pharma air logistics supply chains are becoming more reliable, thanks to a growing trend towards closer collaboration between the various partners. But gaps remain, reports Ian Putzger
Airlines and other air freight stakeholders are continuing to develop their products and offerings to pharma industry customers and logistics providers, including investing in improving their operational processes, technology, tracking and facilities. And there is also evidence of a growing trend towards closer collaboration between pharma supply chain partners, as attempts continue to plug any gaps in pharma air logistics chains.
Brian Hodges, head of customer insights and product development at American Airlines Cargo (AA Cargo), notes that the level of engagement with handlers, forwarders and other parties has increased, and the airline is spending more time with these partners – to make sure everybody is on the same page and processes are in sync.
Lorant Kovacs, regional head of vertical market healthcare for the Americas at DB Schenker, observes: “The value that customers put on partnership has increased. People always talked about a tripartite approach. There were a few examples of that, but you could count them on two hands. Now we have frequent meetings with clients and carriers.”
Lessons from Covid vaccine rollout
The importance of collaboration has been one of the main lessons from the roll-out of Covid vaccines, which created unprecedented challenges for all parties involved in the undertaking. The experience also underscored the need for agility and the ability to ramp up capacity quickly.
“Based on the preparations for the vaccines, we have learned to scale up capacity very fast, which will be very helpful in the future,” remarks Priscila Marques, manager of global operations for Swissport.
Like the early days of Covid and the vaccine roll-out, the supply chain disruptions that have rattled the system for the past two years have changed the playbook for supply chain executives at pharma companies.
“What shippers came to realise is that KPIs that were achievable pre-pandemic are no longer attainable,” observes Kovacs. “We’ve had constant lack of capacity, constant shift in demand, and disruptions that challenge supply chains.”
Failures are costly. According to ParkourSC, a provider of supply chain insight and intelligence software, the pharma industry loses roughly $35 billion a year due to failures in temperature-controlled logistics.
Trevor Caswell, chair of Pharma.Aero, agrees that losses in this arena are substantial to a degree that cannot be considered acceptable. “A lot of these are preventable,” he adds.
Marques sees the biggest vulnerability in the number of stakeholders involved in the chain. “Infrastructure, standardisation, and transparency across the supply chain are other vulnerable points,” she adds.
Kovacs reflects: “A stronger focus on process deviations could cut losses to a large degree.” He stresses the need for training, given the critical importance of the human element in the equation.
Efforts on this front have been partly frustrated over the past two years, especially owing to the labour shortage and the staff turnover rate in warehouses. When IATA came up with a labelling mandate a few years back, there were positive effects, but they did not last, he remembers.
“Labelling is not enough. We should be able to use technology. There could be an e-tag, or a device in the warehouse,” Kovacs says.
Visibility is crucial
There is universal agreement that visibility is crucial to bring down the number of temperature deviations, and logistics providers are feeling the pressure to up their game in this respect.
“More and more information is requested, real-time data are required, GPS locations are being implemented in containers, storage location timestamps, digital checklists,” says Marques. “For handling companies, this means that you need to accommodate the latest technologies and implement them at a very fast pace.”
Automatic alerts, digital checks and customer portals are the way forward, she comments.
Caswell observes: “There’s definitely more room for digitisation and transparency.”
The deployment of IoT sensors in warehouses and tags on ULDs has been a major focus in the air freight sector to improve visibility. Early results have been encouraging, but there is room for further improvement, notes Caswell.
“We’re still a bit fragmented where it works. The pharma community is not necessarily the same at the receiving end,” he points out. To make IoT work better at both ends, regulations and efforts toward standardisation need to catch up with the technology, he says.
“The technology isn’t what’s holding us back. It does exist,” he stresses. There has to be more readiness to share data to be more forward thinking and collaborative.
With IoT fully in place, deviations can be spotted as soon as they occur, but this does not mean that the problem can be corrected right away.
“Deviations are rarely actionable,” remarks Kovacs. The cargo is often not accessible, especially once it is loaded on an aircraft. “And if the captain decides to set a different temperature in the hold, maybe because there is an animal on the flight, there’s nothing you can do about it.”
Even if corrective action is not possible right away, operators can plan processes for the moment the cargo is accessible again. Moreover, this visibility facilitates the analysis of what caused the problem to prevent a repeat with another shipment.
“In the past, it took a long time to find out what went wrong,” says Kovacs.
Technology is also coming more into play for risk analysis, one of the areas where tech gurus envisage great strides for artificial intelligence (AI) to model different scenarios and pinpoint vulnerabilities. Overall, however, the time is not ripe for significant use of AI, industry executives find.
“AI is definitely on our radar. It’s here to stay and grow, but it’s still too broad and high level to say where the best application for use cases are,” reflects Caswell. “We have to find a value for members.
Kovacs believes there is a need for a determined and concerted push towards data sharing to move the needle on AI in this sector.
“AI is an entity that requires vast amounts of data. This is a problem, given how fragmented this industry is. Each of us has quite a bit of data, but I haven’t seen an initiative to share this data,” he comments.
Flight schedule integrity
The latest round of disruptions that saw thousands of flight cancellations as the ramp-up in passenger flying overwhelmed capacity at airports hit cargo much less than passenger operations, as the airlines cut mainly shorthaul flights with narrowbody equipment. Nevertheless, it raises questions about the viability of maxed-out passenger gateways for cargo that is both perishable and highly time-critical.
Caswell reckons that the experience forces companies to reassess their routings. Airports that are focusing on cargo, and that see the benefit of this for their regions, stand to benefit. “The opportunity is there for some second-tier airports,” he comments.
Marques comments: “Not all big hubs are too congested. However, we do see that the airports that have invested jointly with us in high-quality infrastructure now benefit from having this infrastructure. It is important that contingency plans are in place to avoid excursions during possible delays and/or flight cancellations. Additionally, you can avoid congestion by managing truck flow efficiently.”
Dedicated freighter capacity
The cutbacks in passenger operations during the pandemic shifted a lot of cargo flows to freighter aircraft. DB Schenker moves some critical pharma traffic on dedicated freighter flights between two international gateways that serve primarily cargo operations – Luxembourg and Indianapolis.
Last year, the logistics firm expanded its Indianapolis facility to include a new 5,000 sq ft (460 sqm) cold room and 50,000 sq ft (4,600 sqm) of controlled room-temperature space. The operation is GDP compliant.
Outlining the reasons for the expansion, DB Schenker pointed to growing congestion at major hubs, emphasising the general absence of wait times for take-off, landing or loading/unloading freight at airports like Indianapolis. Using dedicated freighter capacity, which includes regular allocations for pharma traffic, makes the forwarder independent of carriers’ schedule changes and enables it to make longer-term commitments to its pharma clients, executives stressed.
Changing distribution strategies
Pharmaceutical companies are changing their distribution strategies, notes Hans Guiscardo, sales manager of Latin American Cargo City (LACC) – formerly known as Montevideo Free Airport – which operates Uruguay’s largest airport, a major gateway for the pharmaceutical industry.
The airport has added a second major pharma producer to its clientele and is in conversation with several others, according to Guiscardo. Rather than use multiple long-haul air freight routes to individual pharma markets, large pharma producers are looking to focus on a smaller number of hubs from which to perform regional distribution activities, he says.
This changes the game in several ways – with far-reaching ramifications. For one thing, the operation has to be multimodal, harnessing surface transport to and from markets in the region, as well as the use of ocean transport to feed some of the supplies and less time-critical pharma flows. This multimodal character was the main reason for the airport operator to change its moniker to LACC this year.
The second element of change has been the desire of pharma producers to establish ecosystems of their own suppliers in the vicinity of their activities. At Montevideo, this move has been spearheaded by a handful of companies that supply packaging materials to the pharma industry. Some of these have ambitions to set up assembly lines at LACC to produce for clients located in the region, Guiscardo says.
“We are talking to a forwarder who is looking to set up a 3PL operation inside LACC,” he adds.
A second pharma facility opened last October to meet growing demand, but that space is more or less fully taken or committed; so this summer, LACC started the bidding process for an additional facility that will have 500 pallet positions.
“We now have about 350 pallet positions. That’s not nearly enough to service the clients we have in the pipeline,” Guiscardo says. The operator is also looking to upgrade its warehouse management system, a project that should be completed next year.
Updated pharma product offerings
Some carriers have expanded or refined their pharma product offerings. AA Cargo announced a dedicated suite of products this past spring that harnesses specific solutions like its Medevac service, with priority services for parcels and freight as well as the carrier’s cold chain solution.
The main objective of this was to give customers a clearer understanding of the options available and facilitate the booking process, including the selection of the solutions that best suit a customer’s requirements. Processes per se were not changed, says Hodges.
The biggest change he has seen in the market has been a proliferation of packaging solutions and an increase in smaller shipments, many of them with passive temperature control solutions. This allows the airline to leverage its network, including narrowbody aircraft sectors, to move shipments to more locations, he says.
AA Cargo has added at least 30 new stations to its pharma-capable route network. Three of its major hubs – Dallas/Fort Worth, Philadelphia and Miami – are CEIV certified, and one or two more will be added to this list, according to Hodges.
Swissport currently has 16 certified ‘Pharma Centers’, plus 71 pharma-capable warehouses. “We will continue to focus on expanding into more airports with the Swissport Pharma Center brand and CEIV certification,” says Marques.
In conjunction with other stakeholders like forwarders and airlines, the handler is working with CargoiQ on the development of standardised procedures, events and messaging/communication – to allow better shipment information flow along the supply chain. “The majority of the developments are on the technology side,” says Marques.
For Pharma.Aero, this kind of work is a major focus. In July, it signed an MoU with BSMA, a global organisation that fosters innovation and adoption of disruptive technologies within the supply chain of the life sciences industry. The pair want to collaborate to augment their supply chain management capabilities for their global communities.
“We always look what other associations are doing and what works for them,” says Caswell. “There is a ton of synergies. The project is at the exploratory stage at this point, to see where we can come together on different continents.”
Lately, Pharma.Aero embarked on a project to explore the logistics implications of the rise of cell and gene therapies. The participants in the project have their work cut out for them.
“We’re in the beginning. The supply chain is not in position right now. The industry is not able to manage the expectations required for this. This is very expensive, high value,” says Caswell. “This is a growing area – like the bio-pharma area.”
Another issue that is commanding rising attention is sustainability. A major focus there is on packaging.
“More sustainable packaging can and is being used,” Caswell says, adding that companies are looking closely at their carbon footprint.
This is another area in which the pharma industry will keep logistics providers on their toes, and continue to push through process improvements among air freight industry frontrunners, ultimately moving the whole air logistics sector forwards.