Transport Method Selection – Key Considerations When Moving Products Internationally

Aspects Coming from the Transport Market and Triggered by the Modes

Transports of pharmaceutical products on overseas trade lanes can be handled basically by airplane or ship, a combination of both or – in very seldomly seen cases by rail, if relevant connections exist. The following paragraphs, however, will concentrate on air and sea freight transports being the most dominantly used modes. If a shipper looks at potential coming from the transport market, the following criteria and questions will lead his thoughts:

• What speed of transport is required and what is the speed of transport to be expected from an airfreight or seafreight. When using airfreight, we are talking about a few days from receipt of an order until the customs-cleared goods are delivered to the consignee, whereas a seafreight transport will be counted in weeks – depending upon the final destination.
• The availability of equipment such as containers with adequate functions (such as equipment to control and handle temperature fluctuations inside the box) and space availability on a certain ship or plane.
• The image of a mode – in general, airfreight enjoys a much better image in public, in the media, etc. than seafreight does. Airfreight is perceived as very fast, neglecting the fact that a carton handled by airfreight will spend ~ 80% of its travelling time on the ground, whereas only 20% from total transport time are spent in the plane flying.
• Another important aspect will be risks by mode of transport which should be identified in a risk assessment to be performed before the first shipment is planned. Consultancy with the individual transport insurance service provider can help to evaluate further, if a change of mode (from air to sea or viceversa) will impact the amount of insurance premium to be paid by the shipper.
• The aforementioned point naturally leads to other questions which cover the different steps in the transport process, potential stop / risk points, the degree of subcontracting and potential to (or not to) foresee deviations in the process and to interfere with the right party.
• Last but not least, the transportation cost will be of importance. This should not only cover the transport cost itself, but also secondary costs linked with a certain mode such as charges for pre-carriage or on-carriage to a certain harbor / airport, terminal fees and cost arising from congestion situations or strike. This is an area where reliable consultancy from the forwarder side can help a lot in order to consider the multitude of outer influencing factors and come to the right decision about the mode to be used.
• The available transport packaging will be another point triggering the options to use a certain mode. If a carton is consolidated and de-consolidated several times in an airfreight process at departure, transit and arrival points, this will challenge the transport packaging differently as compared with a carton being stowed into a container already at the shipper’s warehouse and being unloaded only at consignee’s warehouse ramps. The transport packaging will then need different robustness and it will face different challenges during transit. This has to be properly considered by the shipper when the decisions come about the mode of transport to be used.
• The different volumes handled from one departure point to a certain destination will decide which modes make sense. If only a few number of pallets are shipped by year, seafreight is not really a choice; on the other hand, shipping high volumes by airfreight can bring up other challenges such as block-space required – which then forces the shipper to comply with the dates originally set in the shipping process or to communicate very effectively with carrier and forwarder in order to avoid too much tension in the process of harmonization between the ad-hoc need for certain space versus the aim of a carrier, to maximize its space and with the highest possible yield (per kg transported). One can argue, that this is not the shipper’s issue, but in the end it will decide the options a shipper will be offered on a certain tradelane.
• From the shipper’s sales, marketing and service point of view, the optional and required frequency of service will be another aspect to look at. How often do we want to ship? What are the customers’ expectations in that area and for which degree of service are we prepared as suppliers? These arguments will then trigger the Key Performance Indicators, upon which the service of a logistics function in the pharmaceutical company will be measured – internally as well as in comparison to other suppliers of pharmaceuticals.

Aspects Triggered by the Requirements of Pharmaceutical Products

There can be a large variety of different pharmaceutical products. The complexity of their research, development and production may lead to different requirements in the supply chain. This will then also trigger the question about the choice of modes for a certain product:

• Product stability data will need to be considered versus thermal changes which are to be expected during transport.
• The business strategy is another aspect of consideration. This leads to the question, which speed of transport respective to the availability of product at destination is required from business side.
• Thirdly, the tolerance of the product and product profit margin versus logistics costs is given. Generally one can say, the more complex and sophisticated a medical product is, the more tolerance towards transport and logistics cost there will be, details of calculation need to be handled in an overall calculation in a business case.
• There might also be variable strategies from a company for the tolerated local and / or global inventories and the principles behind the key performance indicators applied when deciding upon the stocks kept in a company network.
• Also, the resources for production and the date of availability of products ex-production will trigger the urgency with which a pharmaceutical product will need to pass the supply chain until finally delivered at destination.
• There might also be a less tangible factor such as the image which a pharma product enjoys – lead by the cost of product, size of a package, temperature requirements – and this will then lead to the customer’s request for a certain mode or on the other hand, to tolerance of the customer towards a mode with longer transit times after placement of an order.

Actions on Carriers’ Side in the Recent Past and their Backgrounds

The economic downturn in 2009 had a tangible impact on logistics service providers. The measurements they have taken are tangible for shippers. Ships do “slow” and “super slow steaming” which means they reduce their normal speed by half. This reduces consumption of crude oil, but increases the travelling time quite a lot. From Europe to Asia, transit times of up to 45 days are now possible where before around 30 days were the rule. A side effect coming up was the currently fashionable argument, that such measurements are part of a sustainable logistics approach.

In parallel, ships have been taken out of service which brought obvious pressure into the supply chain when the economy picked up again in 2010. The carriers’ motivation was clear – bringing up rates which had faced a steady decrease in the past years on both sides of the tradelane – from Europe to Asia as well as from Asia to Europe. Looking at the 2009 P&L of the players on the carriers’ market, justification is found – the carriers have faced severe situations and endangered their further existence as a company. Backup from banks could not be expected – they have been facing their own challenges in 2009 and reacted even more stringent than ever on giving loans to critical industries with high assets and considerably low profit margins. Facing their fate, the carriers were inspired by ideas of new and increased surcharges which they introduced to the market with unbroken, decisive spirits. In parallel, the airlines parked planes in the desert, taking them – at least temporarily – out of service. Each single tradelane was analyzed and the most inefficient ones were deleted from their flight schedules.

Importance of Airfreight for Pharmaceutical Companies and Strategies to Ensure High Quality and Safety

Moving to the shipper’s side, what did all this mean? How crucial is airfreight for a company having production sites globally? In figures published by Lufthansa on a Focus Day Pharma in 2008 they showed that the proportion of pharma shipments from the overall volumes in air cargo is below 1 percent weightwise – but at circa 30% if you look at the volumes of the cargo. These figures explain why the quality of the process chain in airfreight is so important for a pharmaceutical company. In order to assess their quality and ability to perform, the following issues should be taken into consideration:

• Use of qualified forwarders and carriers only with staff trained and knowledgeable about the needs of a supply chain for pharmaceuticals – especially when it comes to the requirement of temperature control during transport.
• A typical airfreight transport implies around 30 to 40 process steps with many different parties involved and a high degree of subcontracting. As a shipper one should gain enough understanding of the physical process on a certain tradelane to understand where the areas with the highest risk for the quality of your product are.
• This then leads to questions like which hubs or transit stations the carrier uses on the way to the destination of your shipment and which areas they interfere with your cargo.
• If airfreight cool containers are used, it is essential to understand which technical functionality the container has in order to solve the request of temperature control. Some containers will require plug-in stations during transit, others need re-icing and a check of batteries in order to assure the power supply during transport.
• The requirements for stable handling of your shipments also stretches to the timespan where your cargo is still sitting at the airport of destination under customs control awaiting to be released after final customs check (either document-wise or even after a physical customs control of the shipment).

Transparency is Key – As Are the Factors Influencing the Logistics Cost for a Pharma Order

Even if the transport from A to B can do a lot to bring a negative impact on the quality of your product and in the best case can only preserve the original quality, it is only one part of the story. The overall cost of operations will imply other factors as well:

• Cost of extra measurements to be required due to a low performing process or equipment (container, isolated boxes, etc.)
• Cost of inventories due to short or longer transport leadtime
• Workload of staff involved in the preparation of shipment due to the type of transport packaging used (including need for regular training).
• Potential additional cost on transport service provider side due to special shipper’s requirements

Similar aspects apply once we are moving to the field of seafreight, so the same areas should be tackled before a certain tradelane is implemented to be served with sensitive pharmaceuticals, which are expected to show the positive effect on patients’ health as indicated in the leaflets of the inner packaging. In the end and always, this is the reason why it is essential to look into the processes described above.