The Cold Chain: Risk, Responsibility and Reward

In this Cold Chain IQ interview Eric Newman is Vice-President for Loss Prevention at ProTecht Risk Solutions, a division of Falvey Cargo Underwriting, discusses the current risks and emerging threats to the cold chain and how manufacturers are seeking to overcome the challenges in managing risk today.

Cold Chain IQ: What are the risks in the cold chain, and are there any new emerging threats?

E Newman: The primary risks within a cold chain continue to be exposure of temp-sensitive products to extreme temperatures and circumstances and conditions that exist within the supply chain that could compromise the integrity of the product. This could be physical damage caused to the product from exposure to rough/careless handling and/or exposure to the normal rigors of transit depending on the mode of conveyance used. Of course the other risk to a product’s integrity would be risk of theft, counterfeiting and diversion. It is therefore critical for manufacturers to conduct necessary risk assessments of their respective shipping lanes and audit their transportation service providers to ensure that appropriate mitigation steps are taken to protect the overall quality and integrity of their products.

Although not so much a threat but something that is a growing trend within the industry (especially with the growth of generic products) is companies looking to ship their temperature sensitive pharma and bio-pharma products via containerized ocean freight instead of air freight. While companies are primarily looking at this alternative shipping method from a cost savings perspective, it is imperative for them to consider the different risks that exist as compared to shipping via air freight. In a typical ocean transit, products remain in transit for weeks as compared to days in a typical air freight move. Accessibility and visibility of products is much more limited in an ocean transit as products will be stowed inside an ocean container (possibly below deck or within a stack of containers 10 across x 8 high on deck) on a vessel for several weeks. This requires that the temperature-controlled sea container be properly qualified in accordance with cGDP so as to ensure that proper product temperatures are maintained during the prolonged and extended time the shipment remains in transit. The reduced visibility and accessibility also requires the shipper to ensure that appropriate security countermeasures and protocols are in place to protect the overall integrity of the product during periods of increased risk which include while onboard the vessel and at the port prior to vessel loading and after vessel discharge. [inlinead] Cold Chain IQ: Why is supply chain risk something companies and their executives should be worrying about today?

E Newman: As supply chains continue to grow globally they are becoming much more complex which naturally exposes temp-sensitive products to increased risk With the increase in outsourcing, products are often exposed to varying climates and extreme ambient temperatures while being moved through the supply chain which requires a thorough risk assessment and analysis in order to develop robust passive packaging systems or the use of active systems to maintain required product temps. These complex supply chains also increases the overall risk of delay, mis-handling, theft and mysterious disappearance which, again, requires diligent risk assessment and implementation of effective shipping protocols and procedures to mitigate these risks. This also requires manufacturers to be more selective with their transportation service providers to ensure they are properly qualified and capable of providing the required level of service. Manufacturers also have the responsibility of complying with global GDP regulations which can be a difficult task when products are moved through a global supply chain where regulations differ slightly from country to country.

Cold Chain IQ: What challenges is the cold chain facing today in managing risk?

E Newman: Certainly understanding and complying with existing and new global GDP regulations/guidelines is a major challenge, especially with international supply chains and the ever increasing focus on GDP by regulators . The other major challenge manufacturers face in managing risk is conducting the proper assessment and analysis of their supply chains in order to identify the actual risk that exists along a specific shipping lane based on the mode of conveyance used. For example, as I mentioned earlier, many companies have or are considering shipping via ocean primarily to reduce their overall freight spend. However, while the cost of shipping via ocean might be as much as 30% - 40% less as compared to shipping via air (depending on product type, volumes and shipping lanes), manufacturers can get hit with significant costs if they have a temperature excursion involving a large volume of product or have a loss of 1 or multiple containers where they did not understand the risks associated with shipping via ocean container and thus did not implement effective and appropriate loss prevention procedures. This could result in a significant financial loss that could potentially include the expense (not to mention the bad publicity) of a product recall that could result from such a loss.

Regardless of the mode of conveyance used to ship products, manufacturers are responsible for properly qualifying their shipping programs in accordance with cGDP which can be a time consuming and expensive undertaking. Thus, many companies are reluctant to commit the resources and expense to properly qualify their shipping programs or they do not have the proper resources at their disposal to conduct the necessary qualification. Recently, there have been various industry guideline documents published that specifically address supply chain risk management and shipping qualification methods and procedures. Two such documents were recently published by the PDA’s Pharmaceutical Cold Chain Interest Group (PCCIG); Technical Report 58: Risk Management For Temperature-Controlled Distribution (2012) and Technical Report 64: Active Systems Qualification Guidance (2013).

In order to keep up with these new GDP regulations and guidelines, there is more emphasis on manufacturers to ensure they are using a risk-based approach to develop and implement procedures to protect the overall quality and integrity of their products throughout distribution.,

Cold Chain IQ: How can supply chain risk best be reduced? Are there any new initiatives that you have recently witnessed, that proactively address risk in the supply chain?

E Newman: Companies can reduce by taking a proactive and risk-based approach to managing their respective supply chains. The foundation of a solid and effective supply chain management program should take into consideration and include comprehensive pre-shipment planning and risk assessment, development and implementation of detailed written standard operating procedures, use of qualified product packaging, diligent service provider selection and performance monitoring program, use of logistics service agreements and quality agreements that includes specific service level requirements, active shipment tracking procedures, formalized contingency plans, appropriate security procedures/protocols and continuous improvement process/CAPA programs.

Cold Chain IQ: Why is the security of the supply chain growing in importance, do you think?

E Newman: The risk of theft, counterfeiting and diversion of pharma products continues to exist within the supply chain. Although the industry has responded to this problem with the development of new technologies and the issuance of security countermeasures and best practices which have proven effective in reducing the overall number of warehouse and truck thefts, the threat still exists and the various MOs of the thieves continues to change and adapt to the industry’s response to the problem. For example, although the overall number of pharmaceutical truck thefts has decreased in the U.S. over the last couple of years, the value per incident when there is a theft (warehouse or truck) is amongst the highest as compared to other cargo commodity classifications. The integrity of the drug supply is critical and thus companies must be diligent and responsible to secure their respective supply chains by implementing effective procedures and protocols that will ensure custody of the products is maintained and documented throughout the entire distribution process through to delivery to the end user. From my point of view, there is still work to be done and it requires manufacturers to remain diligent and continually audit their shipping program (as well as their service providers) on a regular basis in order to promptly identify new threats/risks and implement appropriate countermeasures and mitigation procedures.

Cold Chain IQ: You mentioned GDP: where does the responsibility of risk lie?

E Newman: Responsibility lies with the license holder of the product but there has been a recent shift to harmonize GDP regulations within the industry so that this responsibility is passed down to the various stakeholders within the supply chain. Although responsibility starts with the manufacturer (license holder) they are responsible for qualifying their outsourced vendors and transportation and logistics service providers and holding them accountable for adherence to shipping, handling and storage protocols and, procedures and service level requirements that have been properly qualified to protect the overall quality and integrity of the products during distribution.

Cold Chain IQ: Why do you think Cold Chain Canada is an important event to attend? E Newman: As the concept of GDP continues to evolve, it is important for companies to stay on top of new technologies and methodologies that are being introduced to the industry. More importantly, companies must understand and comprehend quality management strategies and take the initiative to learn what resources are available to help them manage their supply chains in a GDP compliant manner The idea of temperature controlled distribution or cold chain, as it has been referred to in the past, has really gotten away from focusing strictly on temperature maintenance and has shifted to more of comprehensive risk managed approach that is designed to identify all of the various risks that exist within the supply chain. GDP has truly become an extension of GMP, and thus increased emphasis has been placed on all of the stakeholders within the supply chain to protect the health and well-being of the general public that depend so heavily on these important and lifesaving products being delivered to them in a safe manner.