Pharma's Airfreight Versus Seafreight Boxing Match
There can be no doubting that the world is a changing place, with major political upheaval taking place in both the USA and Europe. Thankfully, the pharmaceutical logistics world tends to favour evolution over revolution but that does not mean that it is not an industry full of innovators.
The 2017 Temperature Controlled Logistics event itself innovated with a move to London bringing with it the London look – post-box, telephone box, bus and taxi amongst them! The bus was used for various product and service launches.
Following on from the initial keynote where the speaker said that use of airfreight only came about because of mistakes in the supply chain, the Ocean Freight Working Group launched an updated version of its report. This report filled in the detail from last year’s report and is now an excellent place to start when considering using ocean freight as part of your portfolio of transport solutions.
For me, there is no airfreight versus seafreight boxing match taking place where one mode will come out as the winner. Seafreight, done well, is an excellent mode in the right circumstances and the same is true of airfreight. The speaker mentioned above was coming at this from a low-margin generics world where cost is a major factor in the choice of mode. For other manufacturing types, airfreight is perfect as it suits their product which may be lower volume, have a shorter shelf-life or simply needs getting to the patient much more quickly than can be done by sea.
This viewpoint is backed up by the statistics which show that, by volume, the sea/air split is 87/13 % and by value 21/79 % (figures from Seabury).
Convergence and collaboration were other key themes of the Conference.
Take a look at your smart ‘phone. Gone are the days when you might carry a ‘phone, a diary, a camera and even money! Your ‘phone has now replaced all of these in one device. This is convergence.
A good example of this at the Conference was a data logging company partnering with a packaging company to provide a converged solution for pharmaceutical manufacturers. This has combined the packing unit, data logger, GPS tracker and IT platform to provide a single solution to the problems of temperature control, temperature monitoring, track & trace, visibility and quality management.
Collaboration, in a logistics context, was mentioned many times during the Conference but on the ground examples are rather difficult to find.
Pharmaceutical manufacturers are competing with each other and are risk-averse with process change taking place at a measured pace. So, collaborative efforts on can take a long time to bear fruit.
Logistics companies are working on wafer-thin margins, when compared to pharmaceutical manufacturers, 2% net return on investment is fairly typical. Therefore, they are loath to give away any small advantage they might have (or perceive they have). Additionally, they have been heavily fined in the recent past for “collaborating” too closely with regards to rates, such as airline fuel surcharges. This makes collaboration between them more difficult since their legal departments do not want a repeat of these – for example, EU fined the EU fined a group of airlines €799m in one case.
All of this hints that collaboration might need to come from an independent party. For example, if a pharmaceutical manufacturer has a few pallets going regularly to a destination, it might seek out others in the same situation to see if they could be grouped together and go by seafreight. Each manufacturer is likely to have its own freight forwarder and who would control this consolidation? If it was controlled by one of the forwarders, they would have visibility of all the parties (rates, volumes, etc) which presents a risk to the other forwarders. However, if there was an independent party which could do the consolidation, everyone could join in without risk and all parties could enjoy the benefits accruing from the consolidation of activity.
This is an area I will be working on in the coming months so I hope to have solutions ready to present at next year’s Conference.
That said, this year’s conference was an excellent demonstration of how the whole industry can come together to understand the challenges faced and provide answers. There was a willingness to share experience in order to help others meet the trials presented by their own situation. The needs of pharmaceutical manufacturers were better understood by solutions providers and the services, products and innovations they presented demonstrated this.
Thus, despite the big changes in the world in general as well as within our industry, the future is filled with talented people who have shown us they understand the situation and have some ideas about how to move forward.
Mark Edwards Biography
Mark has over 25 years of logistics experience garnered at a variety of logistics service providers and pharmaceutical product manufacturers; he is currently the Managing Director of Modalis which is a dynamic logistics consultancy specialising in pharmaceutical and temperature-controlled logistics.
His projects at Modalis have included helping a major pharmaceutical manufacturer to achieve GDP compliance, moving an electronics manufacturer to a new freight provider to save 40% on freight costs, migrating 2 distribution centres for a telecommunications company and successfully assisting various companies with their RFP/RFQ.
Prior to Modalis he was Global Freight and Compliance Manager at Actavis, one of the top, global pharmaceutical manufacturers. He was responsible for all aspects of international logistics and was the subject matter expert for transportation, warehousing, Incoterms, Customs’ compliance, Good Distribution Practice and new product launches.
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