Against a backdrop of increasing regulations, fuel costs, and delays clearing customs (especially in developing regions), life sciences companies are turning to their logistics service providers (LSPs) to smooth the way. The providers are responding by forging deeper, more collaborative relationships with their shippers and by designing cold chain services with pharmaceuticals in mind.
That new mindset is taking LSPs beyond a commodity level of service arranged around transportation, fuel surcharges, and bills of lading to function as a value-added extension of the shippers. LSPs are working with their clients collaboratively to design more-efficient transportation options and to manage charge backs, rebates, packaging specifications, and many other aspects of the supply chain. In large firms with substantial shipping needs, LSPs may install full-time staff on-site, becoming the logistics department. In some cases, these LSPs work so closely with shippers that they have become the logistics face of the shipper.
But, even with less collaborative arrangements, working with LSPs can give life sciences companies an edge. One benefit of working with LSPs, especially for smaller organizations that tend to lack in-house logistics capabilities, is access to the warehouse management systems and transportation management systems typically used by large organizations to boost efficiency and increase products’ visibility as they move throughout the supply chain.
Collaborative logistics relationships also help life sciences organizations tap into best practices gained from their LSP’s exposure to many companies and situations throughout the world. LSPs have the benefit of experience and typically share best practices with their clients. They know, for example, how long it takes pharmaceuticals to clear customs in various ports of entry, the normal procedures for various types of products, and the policies of multiple airlines. For example, as Dan Bell, operations manager at Marken Ltd., pointed out, “Every product, carrier, and transport channel has a unique set of challenges, and only specialists can navigate these requirements within today’s aggressive timelines.”
Sometimes those relationships help shippers find new partners to help them enter new regions and markets. “Via their LSP partners, they can become global overnight,” according to Bas Dubbeldam, VP of logistics for Agility. Outsourcing logistics also helps shippers shift fixed expenses to variable expenses, paying only for the services and resources they use.
Sanofi-aventis, for example, leveraged Agility’s expertise in optimizing its transportation and distribution between six European sites and multiple Middle East locations. Agility consolidated the flow of products into a single, 60,000-square-foot regional logistics hub in Dubai and handled import clearance, road transportation, storage, and distribution throughout the region. Temperature and humidity levels are monitored from pickup through storage and distribution. That solution improved product visibility and logistics and lowered costs.
In the next few years, the lines between shipper and LSP will begin to blur, Dubbeldam predicts. “The next phase in collaborations will be around vested outcomes,” he says. In that phase, 3PLs (third-part logistics companies) and shippers will function almost as one company, sharing risks and benefits. The challenge will be in measuring and allocating risks and benefits so they are shared equitably. “There are small areas where companies can make that happen, but it’s hard for two companies to totally work together,” he admits.
In the meantime, to fully leverage the capabilities of their LSPs, “Companies need to build the supply chain — for manufacturing and for logistics — far earlier in the process than they do,” says Wynn Bailey, partner of the life sciences practice at PWC (previously known as PricewaterhouseCoopers). He advised planning for the manufacturing supply chain by the time products are in Phase 2b or Phase 3 trials. In contrast, the supply chain for clinical trials must be addressed as the trials are being designed because logistics, including the ease and speed of delivering trials materials into a region or getting samples or even unused medication out of the region, may affect the choice of trial locations.
“I’m seeing more discussion early on,” Bell says. “Shippers are talking with their LSPs to help them make good choices using the LSP’s real-world experience.” The need for early planning is especially true with the demise of the blockbuster business model. “Companies now have to build and operate multiple supply chains and tailor them for unique products,” many of which have narrow temperature ranges, Bailey observes. “Biotech and pharmaceutical firms will rely on 3PLs to do much of that,” he predicts.
Even with an established relationship, it pays to plan ahead. “The more advance notice LSPs have of a shipment and any special circumstances involving it, the better the service can be,” insists Bob Glasgow, senior VP of commercial solutions for AmerisourceBergen Specialty Group. Shippers can achieve better results and lower costs by collaborating early with their LSPs. To help both parties plan more effectively, he advised alerting LSPs when new products are added that require different parameters. It’s no longer enough to put goods on a refrigerated carrier and send them to a cold chain expert. Instead, “Think ahead!” he says.
That admonition to think ahead includes considering the delivery dates for each shipment. 3PLs tend to be aware of practices and regulations in the regions to which they ship and can adjust accordingly. For example, an LSP can time shipments to ensure temperature-controlled products don’t arrive at customs during the weekend or at labs or physicians’ offices on days they are closed.
That capability to time deliveries is particularly important when shipping to developing countries. “Developing regions have more inspections and delays,” Glasgow notes. LSPs and shippers are well served by “building relationships the old-fashioned way,” he says, like inviting customs officials to facility open houses and other events to show they are valued and to help them become familiar with the shipper and its logistics partner.
LSPs may also be particularly helpful when temperature-controlled goods are transported between cold regions, such as Toronto in winter, to hot regions, such as Brazil in the summer. The packaging needed to refrigerate a product in Brazil could be enough to freeze it in Toronto, Bell says. Cold chain specialists can find solutions that are appropriate throughout the supply chain.
For Glasgow, “The challenge is to get shippers to pack differently. When you peel back the cooler, you have a small amount of product.” Using more efficient packaging, however, may reduce shipping costs by allowing more product to be shipped in the same amount of space. It may also, however, increase packaging costs, so those costs must be weighed against improvements in temperature control and the effect on the total cost of delivering the product.
Time savings should be included in those calculations. Larry Stambaugh, CEO of CryoPort, says his clients report time savings of 70% to 80% by changing from dry ice to his liquid nitrogen dry vapor technology called CryoPort Express. CryoPort, which has partnered with DHL and FedEx, handles all of the documentation and labeling requirements so clients need only place the specimen in the CryoPort Express box and seal it. “Clients go to the FedEx or DHL Web portal and enter the shipment details. When the box arrives, they open it, put in the samples, and hand the box to the carrier. The paperwork is already done,” he stresses. Afterwards, the carrier returns the box to CryoPort, where it is refurbished and returned to service.
CryoPort Express holds frozen samples at -150°C for at least 10 days and has a temperature monitor in the specimen chamber. “That isn’t available with dry ice,” Stambaugh points out. The CryoPort approach is part of a growing trend to ensure that high-quality packaging is maintained throughout the supply chain all the way to the customer.
Specialist Or Generalist?
“General logistics firms see pharmaceuticals as an attractive market with potentially higher margins,” Bailey says. “They are investing significantly in building cold chain facilities for biopharmaceutical customers.”
For example, after one year of trials, Nippon Cargo Airlines (NCA) last year signed an agreement to use Envirotainer’s active temperature controlled containers to support the NCA Pharmacare service. That priority freight service includes checks on the container condition at each stage of handling in the airports and 24-hour contacts in case of emergency. Customers can specify the temperature in the container as well as the ambient temperature in the cargo hold.
Likewise, AA Cargo launched its cold chain service, ExpediteTC, to provide temperature-controlled, flight-specific service throughout American Airlines’ network in 23 countries. It offers in-transit re-icing and battery changes for active temperature-controlled containers and guarantees that transport will occur as booked.
To meet the specific needs of life sciences shippers, AA Cargo developed a training and quality program tailored to the Good Distribution Practices (GDP) guidelines from the Parenteral Drug Association and guidelines in the IATA’s perishable cargo manual. “Personnel training ensures familiarity with all aspects of Envirotainer control, operation, maintenance, and troubleshooting,” according to Jennifer Pemberton, AA Cargo spokesperson.
Despite such training and growing interest in providing cold chain services for the life sciences market, not all 3PLs are interchangeable. General logistics firms are less familiar with the regulations and strictures governing the pharmaceutical market. Those LSPs may work successfully with large pharmaceutical companies that have in-house logistics experience, but may not be right for young companies in their first trials or launching their first products. “These are not insignificant hurdles,” Bailey says. Over time, those hurdles are likely to be overcome as generalist LSPs gain experience in the pharmaceutical cold chain.
What is certain, however, is that collaborative relationships between shippers and LSPs are growing, providing substantial benefits by streamlining the supply chain logistics globally and employing the latest technology to ensure that the cold chain is maintained with minimal or no temperature excursions.