Healthy profits in Asia

The battle for coveted health care traffic entered a new round in February when DHL launched a temperature-controlled airfreight service across the Atlantic on a dedicated 747-400 freighter flight. Management characterized the venture as “the first of many routes with a dedicated airfreight service” and indicated that more are planned.

DHL has not given any indications where the next routes will be, but several Asian points are hot contenders, given the rise in health care traffic to and from the region. LifeConEx, the DHL subsidiary that specializes in this segment, is bullish on Asia. CEO David Bang says the company’s business there has shown healthy and steady growth fueled by a growing middle class and an aging population, as well as by the company’s multi-modal cold chain capabilities in and out of India and China.

DHL is not alone there. UPS opened three health care facilities in the Asia-Pacific region in 2013, describing Asia as its fastest growing market in this segment with rising demand for reliable, flexible and compliant supply chains.

Bang has aggressive expansion plans in Asia. Besides its existing nine certified life sciences stations in the region, LifeConEx is looking to add Bangkok; Osaka, Japan; Shenzhen, China; Hong Kong and Guangzhou, China, he reveals.

China and India dominate the landscape, and much of the traffic is made up of flows into these countries, but exports are beginning to register on the radar.

“DHL’s major growth in Asia is coming from India and China, while Korea and Japan are also pretty steady but mainly import-driven. However, although not yet significant, some fast-growing biotech companies in the region are rapidly gaining health authority approvals in the EU and Americas markets for their bio-similar products,” Bang says.

In China, Hangzhou has emerged as a major center for the health care industry. This was underscored last year, when UPS opened a 204,000-square-foot (18,952-square-meter) facility, which caters chiefly to pharmaceuticals manufacturers in the area.

The integrator also set up a 70,400-square-foot (6,540-square-meter) building in the free trade zone adjacent to its hub in Shanghai, which primarily serves the medical device market, and a 50,000-square-foot (4,645-square-meter) terminal in Sydney whose primary purpose is to serve regional healthcare traffic.

DB Schenker boosted its footprint in Asian healthcare logistics last summer with the opening of a 65,660-square-foot (6,100-square-meter) facility near Seoul with temperature-controlled storage facilities for cargo requiring storage at 2-8 and 15-25 degrees Celsius (35.6-46.4 and 59-77 degrees Fahrenheit), following the opening of specialty hubs in India and the Philippines.

Korean Air Cargo is also in the process of beefing up its capabilities to handle pharmaceuticals. Last summer, it obtained quality enhancement plan accreditation from Envirotainer for seven stations in the U.S. and for its facility in Sao Paulo, bringing its global footprint to 22 certified stations. This year, it plans to add three more points – Istanbul, Tel Aviv and Madrid, according to a company spokesman.

Bang welcomes such moves, calling for more airlines to join the party.

“We are happy to see some of the Asian carriers stepping up in this area, but we would love to see a couple more major Asian carriers step up too. The key for them will be growing more talent with this special knowledge through systematic training and quality management systems. IATA Perishable Cargo Regulation, Chapter 17 – air transport logistics for time- and temperature-sensitive health care products – is a good starting point for carriers and their ground handlers,” he says.

He finds that airports in Asia have upped their game but would like to see more efforts there too.

“Compared to just 3-4 years ago, I am happy to say that we have seen tremendous improvement with regard to some of those challenges we used to face in the past, like inadequate basic +2 to +8C storage availability or lack of training at ground handling level in some locations. Many of them have significantly improved, but in my opinion, there is still room for improvement in some of the airport ground handlers’ cool room capabilities and customs processes for active cool containers and auxiliary tracking devices,” he says.

As the region’s premier hub for health care traffic, Singapore already has ample capabilities, but those received a big shot in the arm last year when dnata opened a perishables facility at Changi Airport equipped with a modular cold storage design with dedicated climate control capability and a web-based monitoring system.

The airport looks to this segment as one of the hopes for this year.

“Growth in cargo volumes, if any, will be amidst a challenging environment as global consumer demand and cargo yields continue to remain depressed,” a spokesman says. “As with recent years, there will likely be growth in the time- and temperature-sensitive cargo segments, for example express, perishables and pharmaceuticals, and Changi Airport will be able to serve this growth with our strong connectivity and temperature-controlled facilities.”