The air cargo industry needs to up its game by ensuring reliability and safety across the supply chain to leverage the growth potential in pharma logistics
The global pharmaceutical market is a rapidly expanding sphere. Reportedly, the demand for pharma products has doubled in the last decade and global sales in the sector are expected to reach $1.3 trillion in a few years. This, is turn, has accelerated the growth of the pharma logistics sector. A market research report from Technavio anticipate that this market will grow to $20.44 billion by 2021. Market analysts also predict that it will grow at a CAGR of 5.02 per cent during the period 2017-2021. This foretells a lot of growth potential for the logistics providers.
It’s no different for the air cargo industry. A report released by ICRA, in the latter part of 2017, forecasts that air cargo traffic in India is set to grow upto 60 per cent in the next five years to 4.7 million tonnes.
CRISIL research also reveals that freight traffic at airports to grow by 11-13 per cent in FY2018, due to factors such as “expected revival in the global economy, domestic growth, increasing connectivity on account of air service agreements, and a booming e-commerce industry.”
Airways for pharma logistics
The pharma industry often depends on airways to carry high-value, time and temperature sensitive cargo, especially vaccines. As Vikas Khatri, Founder, Aviral Consulting explains, “Normally air cargo is used more in case of cross border, temperature sensitive pharma shipments. Only in cases of high value pharma shipments, which are highly time critical, air mode is used. Global potential of air freight for pharma shipments is substantially high, it’s almost three per cent of the air freight revenue of the aviation industry.” The industry players also admit that the pharma sector is a major focus area for them. Shankar Iyer, Head of Cargo Africa, Middle East & India, Swiss WorldCargo, Swiss International Air Lines informs, “Pharma shipments are of significant importance to the entire air cargo industry – both from a strategic point of view and as a source of revenue.”
Similarly, Rajiv Hariramani, Vice President – Air Freight, Skyways Air Services states that pharma shipments are definitely a very important source for top lines of the airfreight industry. He says that the nature of the cargo, need for temperature compliance, handling capability of the stakeholders and operational specialisation, all contribute to higher costs and ultimately higher revenues in comparison to other products/cargoes for the service provider.
Bharat Thakkar, Co-Founder & Joint MD, Zeus Air Services explains, “Pharma is now the global commodity of air freight industry since 2014 and is amongst the top revenue earners. Majority of pharma shipments flown by carriers are in the range of +15 to + 25 per cent which is significant for their revenue.”
The growth potential of air cargo goes up considerably as the requirement for temperature-managed services is set to rise significantly. Air Transport Association (IATA) estimates that around $12 billion currently is being spent on cold chain biopharma logistics and believe that forecasts this figure will rise to a substantial $16.7 billion by 2020. Moreover, Khatri reveals that the growth of pharma shipments through air is on positive mode with the emergence of biotechnology in pharma space.
Tackling challenges: Crucial to growth
Yet, shipping pharma products come with significant challenges and require great care. Unless pertinent and timely steps are taken to overcome challenges thrown up by inadequate know-how, poor infrastructure, inadequate facilities and increasing regulations, airways could lose out significant revenue to other modes of transport. An ICRA report released last year highlights that lack of adequate infrastructure could severely hamper the progress of the sector and predicts, “Cargo handling capacity at airports would need to be upgraded by around two million tonnes over the next five years.”
It has also been revealed that more than 50 per cent of all temperature excursions occur while products are in the hands of airlines and airports. Companies have incurred a loss of millions of dollars in the case of large freight shipments. Khatri throws more light into this issue and says, “Temperature sensitive air cargo require consistency and uniformity across the supply chain. Only due to temperature excursion, the healthcare industry faces loss of $35 billion globally, out of which approximately $15 billion is product cost. Most of the losses incur due to change in command of shipment across supply chain.”
Giving more insight into challenges in air freight management of pharma shipments, Thakkar elaborates that the mismatch between the expectations and requirements of pharma shippers and the actual quality of received from the logistics service providers in the air cargo supply chain creates a high-risk situation and causes a number of temperature excursions.
Khatri points out to another challenge on the domestic front and informs that the capacity of air freight industry has increased through belly space of commercial flights, not through air freighters. Offloading in commercial flights and poor infrastructure at non-metro airports are a hindrance in the seamless flow of pharma shipments through air mode.
Moreover, the air freight industry is facing tough competition from ocean freight suppliers as they provide more economical means of transport with efficient temperature control and reduced environmental impact. The past too has witnessed a decline in air cargo’s share of the global pharma product transport. As per IATA data, air cargo share of transporting global pharma products transport declined from 17 per cent in 2000 to 11 per cent in 2013.
Thus, there are myriad factors that need to be considered while transporting pharma shipments. As an IATA document states, “Transporting healthcare products by air needs the establishment of complex logistical methods to maintain a pharma shipment’s integrity. It requires specific equipment, storage facilities, harmonised handling procedures and, above all, strong cooperation among the cold chain partners.”
Likewise, pharma logistics suppliers have to adhere to the good distribution practice (GDP) guidelines of different countries and comply with national or local regulations of different geographies. Thus, it has become imperative for air freight suppliers and service providers to up their game.
So, how is the air cargo industry tackling these challenges to avoid a recurrence of such a scenario?
Steps to leverage growth opportunities
Recognising the need for “a concentrated effort to improve the level of competency as well as operational and technical preparedness” in air transport of pharma shipments, the industry has taken some steps to enhance compliance, standardisation, accountability and transparency across the air transport supply chain.
The most notable among them is the creation of a Center of Excellence for Independent Validators (CEIV) in pharma logistics by IATA with an aim to ‘help the industry to improve the transport and handling of these products to meet the requirements of shippers and manufacturers’.
Likewise, the players too have understood the need to invest in enhancing transparency, data management and end-to-end compliance with regulations and are taking appropriate measures.
Iyer from Swiss WorldCargo informs, “At Swiss WorldCargo, the shipment of pharma is one of our premier focuses, and we have always invested resources to fostering the safe shipment of life-saving products and other pharma throughout the world. This quality standards, and adhering to strict, rigorous processes. By defining and maintaining these standards and processes, we are able to meet our customers’ needs, stimulate significant growth and create new revenue opportunities. And finally, with validations such as our recent CEIV certification, we can confirm our long-standing commitment to quality continues.”
Thakkar from Zeus Air Services apprises that his company has taken measures such as strengthening partnerships with all stakeholders, providing a 24×7 operation team, setting up a temperature-controlled warehouse near the airport/third party logistics GPL, setting up non-bonded faculties with 24/7 temperature-control, providing only controlled access, temperature and humidity indicators, enabling skilled and trained manpower to follow AEO GDP-compliant processes throughout the supply chain etc.
Areas of improvement
But the industry players are also aware that there are many more areas that need improvement. Hariramani points out that newer aircrafts, less carbon footprints, higher fuel efficiency, better infra to save time and fuel to get medicines from factory to airport etc. are crucial to improving the delivery standards and efficacy of the air freight industry. He also advocates on the importance of developing the peripheral aspects and minimising multi handling to keep the efficacy of the cargo intact.
Iyer underlines that more awareness and proficiency in handling pharma is key for the air cargo industry. This demands that all those involved in the logistics chain, be it packaging, warehousing, trucking, forwarding agents, airport terminal operators or airlines, must follow worldwide known standards of GDP and GMPs.
Thakkar emphasises on the need to improve training in Temperature Control Regulations (TCR). A thorough understanding of these guidelines help addresses temperature management issues identified by the industry. This training provides knowledge about requirements and standards for transportation and handling of pharma products, including the compulsory use of the time and temperature-sensitive labels.
Tech route to progress
Technology is another factor which is key to resolving a lot of bottlenecks and challenges hampering the growth of the pharma industry. Khatri elaborates, “With an increased number of biological drugs, efficiency and adherence to temperature will be more critical, as such drugs have shorter shelf life with more temperature adherence. Use of advanced technology can help the industry in efficiency improvement and service quality improvement.”
He also lists down a couple of technologies which are transforming pharma logistics:
Block chain: It can bring multiple stakeholders on a single distributed ledger. These stakeholders will involve manufacturers, carriers, custom agents, custom departments, consignees etc. Live and distributed information can help better coordination between different agencies.
IOT and control towers: Use of IOT devices and monitoring through control tower will reduce probability of failures and also reduce service recovery time.
Some more interesting technologies include:
Big data analytics: It is helping the logistics industry to identify gaps and loopholes, improve their operations, weed out counterfeits and prevent tampering among other benefits.
Mobile apps: Other technologies such as iOS and Android apps are offering users very relevant and significant features such as tracking of their shipments, alerts about temperature excursions, and support from cold chain experts.
The way forward
Speed, efficiency and innovation will be crucial for meet customers’ expectations and tackling challenges. Likewise, the future success of the air cargo industry, especially in the pharma industry would also depend on collaborative efforts and sustainable partnerships between the various stakeholders of the air cargo industry.
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