Transportation in the Pharm Supply Chain: Understanding the Carrier Roles in a Logistics Environment

Thursday, 06 May 2010

The shipping environment in the supply chain can be a complex system in which many decision-makers do not have a full visibility into the different parties that exist and the roles that they serve. Many decision-makers in any supply chain struggle with a seemingly simple question: “How do I get my product from Point A to Point B?” Personnel in the pharma supply chain struggle with additional questions on how to not only move temperature-sensitive products so that they will remain in the needed temperature range, but also how to provide proof that such product remained in compliance. Additional concerns of security affect nearly anybody with a product in a supply chain, but are of special concern to anybody with a high value product that criminals find an easy market for, such as pharmaceuticals, OTC medicine, apparel, and other industries plagued by their popularity as criminal targets. The scope of this article will focus on the primary transit of product from a transportation perspective within the broader supply chain. In this shipping environment, there are primarily two types of carrier models: The Integrator model vs. the Forwarder model. By understanding the inherent differences between the two, a shipper will have a better understanding of the capabilities of each and better knowledge of what their expectations should be. The Forwarder model: In its most basic definition, a freight forwarder is a company that organizes the movement of cargo on behalf of another company. In most cases, a forwarder is not a carrier and does not have assets (trucks, ships, planes, etc.) of its own that it would use to carry the cargo of its client. They are primarily a third-party agent that operates on behalf of its client in arranging the carriage of freight. The fact that they operate as a third-party actually leads to a commonly used name to describe them within the shipping industry: a 3PL (third party logistics provider.) When dealing with a forwarder, it is important to recognize that since they are dealing with multiple parties, there will be differences in standards and expectations of control, timeliness, quality, and compliance procedures from one party to another. In the Forwarder model, it would not be uncommon to see the involvement of multiple companies on a single shipment. The following example provides some visibility into the process: - The cargo is picked up by a truck from Company A - The cargo is dropped off at the warehouse of Company B - The cargo is picked up and put aboard the plane of Company C - The cargo travels to the facility of Company C where it is routed to another plane - The plane of Company C delivers the cargo to the destination airport - The cargo is delivered to the warehouse of Company D - The cargo is picked up at the warehouse by a truck from Company E - Company F (the freight forwarder) has acted as a “control tower” over the process of moving the cargo - If this cargo shipment crosses international borders, Company G may need to be involved as a customs broker as an additional link in the supply chain Looking at the complexity and the number of parties involved, it is easy to see how gaps in control, timeliness, quality, and compliance could occur. It needs to be recognized that the logistics supply chain is only as strong as its weakest link. Add in the distance of overseas transit, and it is easy to see how length and culture could exacerbate any weaknesses. The Integrator model: In this definition, the Integrator serves two functions. Similar to the freight forwarder, the integrator organizes the movement of cargo on behalf of the client company yet also serves as the owner of the assets (trucks, planes, etc.) that are used to carry the cargo from Point A to Point B. In the Integrator model, the integrator has taken on a role of responsibility to the client that includes an understanding of the clients’ expectations at the outset of the shipment, serves as the carrier of the cargo, and acts as the “control tower” that shepherds the transit of the cargo from beginning to final delivery. The Integrator model is built on the common ownership of the different modes of transit involved, which allows the integrator a greater degree of control and insight into the shipment and its transit. Because the Integrator model involves common ownership and management of the assets, it allows the integrator greater authority to dictate specifics concerning control, timeliness, quality, and compliance of the cargo. In instances where an integrator may need to rely on an outside carrier as part of the transit, they are able to dictate the same client expectations to that carrier as if it were their own fleet being utilized. If one were to use the complexity of the pharmaceutical cold chain as an example, the Integrator model would allow the following points of a cargo shipment to be supervised and controlled: - The positioning of the cargo container aboard a plane or truck for optimal temperature control - The accurate preconditioning of a temperature controlled cargo container - The ability to dictate to service locations how the cargo was to be monitored and handled - The ability to force changes in transit modes in the event of potential delays - The ability to monitor and report upon actual temperature readings of the cargo container - The ability to enforce contingency planning in the event of a temperature-controlled container malfunction - The ability to report on temperature data after the shipment completion - The ability to provide auditable temperature records of the cargo shipment for compliance purposes Common ownership of the shipment components (the management and the carrier assets) is what allows this degree of specific control to occur. Conclusion By clearly understanding what model of shipping you and your company are engaged with will allow you a better understanding of what your expectations should be regarding transportation within the supply chain. Recognizing the benefits and limitations of a particular model allows you as a decision-maker to make better decisions depending on what aspects of cost, control, timeliness, quality and compliance are of most importance to you and the particular cargo that you are shipping.