Ira Smith, from PelicanBioThermal, will be participating in the panel discussion on modal shift on Day 1 of the FlyPharma Conference 2016. Here, he asks if there is a move away from airfreight for pharma shippers to use sea and rail.
This gradual modal shift has been ongoing for at least 10 years in an effort to drive logistics and supply chain costs down as often sea freight might represent an eighth of the cost of global airfreight, so it’s much less expensive to ship via sea freight.
We’ve seen a sincere effort in the direction of the supply chain being migrated to sea freight. This can happen if the supply chain can “internally adjust”. This would include manufacturing, QA and marketing/sales. Since shipping via sea freight, can take up to four weeks, the accepting party, who might be processing, labeling or repackaging the pharmaceuticals upon arrival, must also adjust to a supply chain that allows for the additional waiting time.
This movement has been taking place over the last decade, while companies were still embracing a ‘just-in-time’ concept of supply chain.
Crucially the supply chain overall has to be in sync with one another, adopting a more collaborative approach, but the motivation for this change is driven by budget.
Regarding rail, it’s commonly recognized that the European rail system is more efficient than in North America. There have been recent reports, revealing that rail links in the United States, once used predominantly for cargo, are now switching over to more passenger usage.
I see rail more relevant for raw materials movement than transportation of the higher value pharmaceuticals and finished goods, which are being increasingly moved via sea freight. There are still challenges with sea shipments, including:
The number of days it takes from point of origin to point of destination. The shelf life of the pharma product is a critical consideration alongside its eventual destination. Whether there are enough reefers (refrigerated containers) available and if so, are receiving customers in favour of waiting for a sea supply chain taking three weeks as opposed to three days via air? Finally, the topic of insurance coverage for high value goods.
The other challenge is not so much whether the reefers work aboard ship, studies have demonstrated reefers reliability, the challenges are when it gets to port and it’s pulled from the ship’s electricity supply.
Have the logistic entities been coordinated carefully enough to meet that container so it doesn’t spend too much time away from the electricity needed to power the unit?
To mitigate such potential supply chain risks Pelican BioThermal™ manufacture passive containers. Increasingly customers ask to test our passive shippers for use inside reefers, to act as a secondary protection for the high value pharmaceuticals being transported, which will create a full measure of “back-up” inside ocean containers, ensuring temperature is maintained.
This provides a safety net in the event the electricity supply is cut, most likely to occur at the dock when awaiting a lorry to pick up the container.
If the electricity supply is cut the pharmaceutical payload is still protected for a further five days – it literally buys customers some time.
So although perceived as air freight movement containers, some of our bulk shippers are being considered for sea freight use as a back up measure.
In my view there’s sufficient business being generated in the world of pharmaceuticals and biotech, which will sustain sea and air freight market growth as there will always be pharma products requiring delivery in a shorter amount of time than is possible via sea freight. Realistically any modal shift to sea freight will not mean the death knell to air freight.
What we will see is a leveling off of the growth of air freight because some of the migration that’s happening will continue to occur in the sea freight mode, however airlines loss of market share will not be dramatic, as that market keeps on growing.
There is growth in the air freight market because of emerging pharmaceutical products, some of which will be needed more urgently to reach patients, such as a product required instantaneously to help stave off a virus or fragile medicines which would require faster transportation by air as opposed to delivery via sea.
With an emerging trend toward sea shipping I think we should ask what are the airlines doing to increase capacity, make themselves more appealing and profitable to the pharma industry to make them want to ship via air?
There will be a continual trend to look at the less expensive options and rationalizing the supply chain.
Moving forward collaboration is key. At Pelican BioThermal, we pride ourselves on not being just another ‘box company’. We are more a consultative advisor to pharmaceutical and healthcare companies, who happen to produce, advanced temperature-controlled packaging (TCP).
We take a very different market approach than a lot of other TCP manufacturers. Given my background in pharma logistics, I work to focus our efforts on bringing a cross section of the customer’s departments together around one table.
It’s key that pharma companies speak more frequently and directly with their own supply chain stakeholders, including logistics, quality control, packaging engineers etc. They all need to be participants in what happens within the supply chain.
Collectively it should be about bringing all the parties to the table.
Together we should look at a project, examine how it touches all the departments in the pharmaceutical company so the collaboration starts at home, inside the company and is supported by the various cold chain logistics partners, such as Pelican BioThermal.