Air cargo pharma demand to grow but challenges ahead

Players in air cargo pharma supply chains should expect volume growth to continue, but there are challenges ahead from ocean freight while shippers will demand increasingly sophisticated solutions.
Speaking at the Air Cargo News’ pharmaceutical and life sciences session at Air Cargo Europe in Munich, speakers agreed that demand for air cargo services from pharma shippers was on the up.
Dirk De Rooij, commercial director of Seabury Consulting, said that pharma volumes in air cargo had grown at a compound annual growth rate of 3.4% between 2006 and 2016, compared with an overall industry growth of 1.4%.
Between December 2016 and February 2017, pharma demand growth had improved further to 4% year on year.
And the growth is expected to continue – he pointed to statistics from IMS Health and Evaluate Pharma that showed that biopharma logistics spend would reach almost $93bn in 2020 compared with around $78bn last year.
However, he pointed out that not all of the growth is necessarily coming from new demand. A lot of the improvement was down to shippers switching from using general cargo to ship pharma to using specific pharma products from airlines to meet regulations, such as the European Union’s Good Distribution Practice.
One of the challenges identified by De Rooij was modal shift to ocean transport, especially for low and mid value products such as antibiotics and medicaments.
Alan Dorling, global head, pharmaceuticals and life sciences, at IAG Cargo said that if the air cargo industry is to fully capitalise on the opportunity presented by pharma, communication and collaboration between the various parties in the supply chain was key.
He added that the industry should strive to create transparency; invest in specialist vertical teams, have robust and compliant quality management systems and standard operating procedures, develop bespoke solutions, push for training throughout the chain and invest to meet new legislation.
On the last point he said it was only a matter of time until the US, and other countries, implemented their own version of GDP.
Dorling was later asked whether he felt the air cargo industry would in the future be able to maintain the margins required to sustain investment in pharma products.
He said: “It depends what their pain threshold is in terms of product write-offs is. It’s not cheap to recover a product, it’s got to come back home, be re-tested and written off.
“You can’t have it both ways, you can’t say we want temperature controlled warehouses, we want good knowledgeable people that understand our products and the terminology and the nature of our products and then say we want to pay 80 cents a kilo.
“The brave airlines will turn around and say that isn’t possible. If we don’t maintain contribution then we can’t invest.
“Pharma takes 12 years to bring to market and costs a billion dollars, why argue about saving a few cents when shipping it from the production plant if it puts it at risk.”
However, he said that some companies may risk profile shipping and decide for some shipments on certain routes it is acceptable to send it through as general or express.
Tony Wright, chief executive of consultant Exelsius, later led a panel debate looking at how air cargo supply chains could develop in the future, setting the scene by outlining the growth of personalised and targeted medicines and vaccines and the requirement these would have for specialist transportation and handling.
“Future innovations in the sector will lead to changes in manufacturing and distribution and will require advances in life science logistics solutions and a significant challenge is ahead of us for the types of products that are coming out,” he said.
Wright began by asking participants to outline how they felt their sectors should develop to meet future pharma supply chain demands.
Andreas Sahli, global head of healthcare for Panalpina, said in the future he expected shorter shelf life of products and personalised medicines.
To meet these challenges, Panalpina has trained around 2,500 staff to understand GDP requirements; it carefully selects supply chain partners and then audits and works closely with them.
It was also looking to further develop its digital solutions and improve visibility.
He agreed with De Rooij that modal shift to ocean was happening, explaining that fewer temperature excursions when using a shipping container. However, the decision on using ocean had to be weighed up against the length of transit when using box shipping.
Jonas van Stekelenburg, head of cargo at Schiphol Group, said the biggest challenge for Schiphol Airport in further improving pharma supply chains was learning how to collaborate and innovate.
Two years ago it shifted to a "front running approach" where it asked companies that could potential join its pharma communities whether they had the money to invest in projects, if they have people and if they had the time. This allowed them to only engage with companies that were really willing to innovate.
Bernd Struck, dnata senior vice president UAE, agreed that air cargo was losing marketshare to ocean and added that the industry could not afford to be complacent.
He called for improvements in transparency, quality and reliability and said the industry needed to widen the scope of services it offers.
He added that IATA estimates that $15bn in pharma products are lost every year due to temperature excursions, with 60% of those deviations happen on the transport to the airport or on the airport.
Dnata was focussing on enhancing the safety and security of pharma shipments and said stations in Singapore and Amsterdam were GDP approved and were working on CEIV certification, as were its two hubs in Dubai. Monitoring was another area of investment, he said.
Turhan Özen, chief cargo officer at Turkish said that manufacturing and distribution of pharma products was becoming increasingly complex with multi-site manufacturing strategies.
He added that the use of personalised medicines were growing, while demand in emerging markets was increasing, regulations were becoming heavier and there was market consolidation in the pharma industry.
He said the air cargo industry needed to invest in end-to-end visibility, better data management and end-to-end compliance with regulations.
“The first challenge to overcome is to make the sector fully integrated and end-to-end in terms of visibility, transparency and compliance. Then, we should provide and design solutions that add value to pharma shippers.”
Looking to the future, Wright asked how they would like to see pharma supply chains improve over the coming two years.
Özen re-emphasised that he would like to see end-to-end traceability and compliance.
Struck would like to see dnata’s entire network certified and would like airlines to load pharma cargo segregated from other cargo to create efficiencies in moving shipments to facilities.
Van Stekelenburg said he would like to have a business case in place that works on reducing emissions and justifies investments in track and trace and early warning of temperature excursions.
Sahli said he would like better co-operation amongst supply chain players and would like to see improvements from certain ground handlers, although he added that dnata did a good job.