Carlos Castro on Growth in the Temperature Controlled Freight Forwarding Market

As the pharmaceutical industry seeks to outsource noncore activities, it creates a great opportunity for innovative solution providers to go beyond basic freight management.

In this Cold Chain IQ interview Carlos Castro-Izaguirre, Transportation/Cold Chain Project Manager at Bayer Healthcare, speaks to Andrea Charles from Cold Chain IQ, about cold chain logistics in emerging markets and the frieght forwarder. Castro's role in Bayer Healthcare is to manage transportation, including the operational and financial side of freight, shipping today to about 60 to 70 countries from Berkley, California.

Cold Chain IQ: Carlos, in your opinion, what trend is having the biggest impact on the pharmaceutical cold chain landscape?

Carlos Castro: I think, over the last years, I’ve seen a great improvement in cold chain technology coming from cheaper suppliers but I think today over-engineering solutions is pretty common in this industry because there is a lack of integration with the links of the supply chain and, while those critical links is the freight forwarder, I think as recently as being, I would say, the last two three years, there’s been a lot of emphasis on good distribution practices, which is emphasising the integration, the collaboration with the freight forwarder and the other supply chain links. I see this will increase more and it will become the standard in the next five years.

Cold Chain IQ: How important is global supply chain harmonisation and what are the current challenges to be overcome?

Carlos Castro: In terms of harmonisations for the global supply chain of pharma and biotech products, I believe the challenge is in mature markets – US, Japan, Europe. The infrastructure is there. The awareness from the supply chain links is great but, as the pharma and biotech components are moving overseas to emerging markets or they are growing rapidly at rates between 20-30% growth, the challenges are that we still don’t have some infrastructure to support cold chain and the knowledge is still not there. So I believe that the next frontier that we need to cross is summarising this knowledge of supply chain in these emerging markets as well as improving and establishing a baseline for cold chain facilities.
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Cold Chain IQ: In which region do you expect to see the most growth in the temperature controlled freight forwarding market in the next sort of five to ten years?

Carlos Castro: From my experience, I think the biggest growth I’ve seen is Asia Pacific, as well as Latin America. There’s been some growth in the Middle East and I believe North Africa will also have a great increase but I suspect that the biggest increase will continue to be in Asia Pacific and Latin America, if you look at the so called BRIC countries we’re talking about – Asia Pacific, Latin America and then some of Eastern Europe.

Cold Chain IQ: What knowledge sharing ideas or initiatives do you think we can use to optimise the supply chain process on a global level?

Carlos Castro: I think in here collaboration with the freight forwarder, mostly with the freight forwarder, would tend to be the first or the closest link to our work, transportation management, but as well as the other links in the supply chain which are of relevance, for example handlers.

There are the consignees as a connecting point too. Some of these airlines and links in airfreight are also struggling to keep a profit and I think the standardisation is as targeted. You will see that today most airlines will provide a specialised service. There used to be a perishable way, which tended to be produce, and now some of these perishable services I think, even subdividing into pharma, biotech and perishables. So we are already seeing that the supply chain links are moving to a more standardised service to support this biotech/pharma business. I believe that that will continue and will starting moving from regions like the US, Japan and Europe to countries such as receiving countries where you will see also the start of expedite service as they arrive to these regions and have to be taken out of customs as quick as possible to move forward to the consignees.

So I believe the first wave has started. I would expect that, in the next two/three years, that emphasis will shift to destination connecting points.

Cold Chain IQ: What would be your top for measuring the performance of a freight forwarder?

Carlos Castro: Freight forwarder, I believe, is challenging because they have to engage many supply chain links and be somehow be the director of an orchestra and they have to make all these supply chain links and maybe move at the pace that we, as biotech and pharma companies want.

In terms of KPI for what I look today is definitely transit time. I try to compare what they offer and the actual performance. I’ve been working on looking at that time and trying to translate that into dollars because biotech products and pharma products tend to cover high value. So a day or a week, that could be translated into dollars. It measures a financial impact, I think. Freight forwarding will be able to have a competitive advantage if they were to show that they can manage that.

Another KPI factor I see when I look at freight forwarders is the on time performance and how that links to my freight expense. I think, definitely, as we are having more challenges with the fuel prices going up, I think we also see that freight forwarding can be more challenging working with airlines. So being on time and on budget, I think, is a KPI that I definitely look for in freight forwarding.

Cold Chain IQ: As an organisation, how have you dealt with the increasing need by airports and carriers for airport security versus ensuring that your goods are delivered on time, and adhere to the quality standards necessary?

Carlos Castro: For me, something I have started a couple of years ago, we started looking at whatever was closest to us. So we visited our departure points and then we moved to the connecting points. So we started auditing facilities with the airline partners we had, to see the facilities and the cold chain support, security, anything.

We were very happy to see that there is a lot of work being done by these supply chain links – airlines and freight forwarders – to make sure this security is there. I think now I’m actually working with our receiving side, the destinations, to ensure that these products are going through customs and arrive to the consignee in a secure manner. I suggest to those colleagues that they have to engage those parties and one way of doing it is by auditing the sites, by actually visiting destinations or these connecting points. It will give you a better sense of what the capabilities are for your routings.

Cold Chain IQ: Carlos, you are going to be speaking at the upcoming 10th anniversary for the Cold Chain and Temperature Management Global Forum taking place in Chicago from the 24th to the 28th September. Please could you give a brief oversight into what your presentation will cover and also what you’re looking forward to about the event?

Carlos Castro: My presentation will focus definitely on emerging markets. I will go in detail on what is driving that freight expense. I think some ideas on how to control or reduce those freight expenses, and the other part will be performance and how to ensure how some of the KPIs are used and how can we improve that performance of the supply chain.

In terms of what I’m looking for, to get out of this conference – it’s a global forum – I’m definitely looking forward to see what my colleagues are doing there. I believe there’s a lot more to be done in this field. We’re looking at fuel prices increase so I’m actively working now on measuring my carbon emissions as well as looking at smarter ways of changing my shippers to be able to support my work of improving the cold chain as well as reducing my CO2 emissions. That’s something that I’d be looking forward to, hearing what types of projects colleagues are working on.

Cold Chain IQ: Carlos, thank you so much for taking the time to speak to us today. We look forward to hearing much more from you at the event.

Carlos Castro: Great, thank you, and for inviting me, and I look forward to see all participants.

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