A recent article in an online industry publication discusses how the air cargo industry has become unreliable and is losing pharmaceutical traffic to ocean transport. The publication cites an analysis indicating that airfreight’s share of global pharmaceutical transport has plummeted from 17 percent in 2000 to just 11 percent today. It calls for the air cargo industry and the International Air Transport Association to act urgently to prevent further mode shift of pharmaceutical traffic to seafreight, not on the basis of price but of quality.
What is not mentioned is that this may be a symptom of a larger story that is occurring in air cargo.
Throughout the past few years, airfreight has regressed to a less regarded commodity or byproduct of passenger-oriented airlines. Des Vertannes, global head of air cargo at IATA, admits that a big part of the problem was that after five years of economic stagnation, carriers weren’t investing in cargo. This may be why Marcel Fujike, Kuehne + Nagel’s senior vice president for global air logistics products and services, says that there is a lack of skills, training and standards throughout cool chain logistics with “no SOPs or working instructions in place overall.”
Other vulnerable spots identified include handling, loading, the tarmac phase and of course, Customs clearance. Fujike asserts that seafreight is more secure because the refrigerated container is sealed and, once plugged in, remains secure throughout the journey. Of course, some airlines committed to pharma handling have distinguished themselves by investing in the product and its handling procedures.
One might chalk all this up as yet more fallout from the economic slump afflicting the air cargo industry. But a closer look at pharmaceutical shipping indicates some potential paths to increased profitability for those willing to navigate its complexities.
Let’s begin with an area that airfreight forwarders are highly familiar with: regulation. Pharmaceutical industry service providers are affected by about 70 different sets of regulations. Taken individually, many of these regulatory processes appear to make sense, but cumulatively they crush initiative, efficiency and innovation. How can airfreight forwarders bring inventive thinking to pharma’s challenges?
As an example, International Pharmaceutical Excipients Council Americas, a group representing drug manufacturers, recently reported that U.S. authorities are holding more excipient (inert ingredients used to make drugs) at domestic ports upon arrival for longer periods than ever. This is delaying drug production in the U.S., and in one case, has even halted the production of a product. This is a significant issue that delays the process, regardless of transportation mode – and an area where our industry members are highly qualified to help out.
Nor should we give up on the compelling advantages of air cargo over seaborne freight vis-à-vis an industry that has distinct competitive and logistical challenges in getting its product to market, such as speed, for instance. With a limited window of time and profitability before the introduction of generic competitors, the first manufacturer needs to get its product to market swiftly, making airfreight the most logical transportation choice.
Another area on which to focus is temperature control, which is a primary consideration for an industry where a two-degree variation can spoil the entire lot of a product. A cold chain expert at FedEx said when temperatures slip, companies lose an average of US$150,000 (111,000 euros) on a small package shipment. For large freight shipments, these damages can run into the millions of dollars. The stakes are high with seven out of 10 pharmaceutical products predicted to require temperature-controlled transportation by 2014.
Even with air cargo’s comparative advantages, we need to do more to deal with the elephant in the room – the higher degree of security inspections that air shipments face prior to departure. While seafreight containers are quickly scanned, air cargo is often screened by the piece, resulting in challenges to maintaining temperature requirements needed for certain drug products. In some countries, long X-ray screening procedures at airports create delays that cause missed flights and worsen this issue.
The resulting modal shift requires immediate action not just by IATA but other stakeholder associations as well. For example, our industry might turn to organizations such as the Cool Chain Association and its Good Distribution Practice program to help establish consistent standard operating procedures for temperature control and proper handling that appear to be absent from the airline industry.
While IATA plays a prominent role in drafting aviation standards, it is beset by the financial challenges of the airline industry. We in the air cargo industry should be looking to help them out by leveraging our member skill sets through organizations including The International Air Cargo Association and the Airforwarders Association, using the recently formed Global Air Cargo Advisory Group.
While the competitive issues presented by slower modes of transportation are broad-based for our industry, pharmaceutical shipping may be one area where we can show swift and measurable progress. Let’s take up this challenge through our associations and working groups before more of the airfreight market share sails away.
Brandon Fried is the executive director of the U.S. Airforwarders Association.
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