It occupies only 300 square feet in the world’s biggest international airport, but American Airlines Cargo’s first European temperature-controlled facility, which opened in London Heathrow last week, underscores the rise of health care as a key driver of global transport demand.
While the air freight market is flat-lining, pharma shipments, from vaccines and serums to plasma and lab tests, are growing rapidly as the health care industry goes global. American Airlines, which operates up to 14 daily flights between London and the U.S., says its Expedite TC cold chain operation is posting strong growth, with passive shipments increasing 15 percent in the first quarter over the same period in 2013.
The new Heathrow facility, designed to maintain a temperature range of 15 to 25 degrees Celsius, will assist shippers and forwarders with two-day packages by helping extend the life of gel packs, according to Tristan Koch, managing director of sales in Europe. “The facility will be of special interest to our Irish pharmaceuticals customers who have goods that transit London Heathrow on their way to other international destinations,” Koch said. While it expands into Europe, the carrier is also beefing up its U.S. operation with the construction of a 30,000-square-foot dedicated cold chain facility in Philadelphia, one of the nation’s most strategic markets.
Pharma is playing a key role in the strategic planning of airlines as they seek to boost sagging utilization rates. IAG Cargo, the merged British Airways-Iberia carrier, said its recent decision to upgrade its service between Heathrow and the Indian hubs of Hyderabad and Chennai to a Boeing 787 from the smaller 767 was aimed at the nation’s booming pharma industry, which is expected to hit $27 billion in sales in 2016. “The pharma market has been one of the major Indian success stories of the past decade,” said Alan Dorling, Global Head of Pharmaceuticals & Life Sciences at IAG Cargo.
The new IAG aircraft has been optimized for belly cargo with air conditioning in the forward hold.
Biotechnology is currently the fastest-growing market within the pharmaceutical industry, and the number of temperature-sensitive products is increasing, according to Panalpina, the Switzerland-based global logistics group. This means the industry requires seamless temperature control across the entire supply chain.
For all-cargo carriers, the pharma industry has become one of their biggest customers. Lufthansa Cargo says it flies three freighters worth of pharma products by tonnage, or some 1,800 square meters by volume, every day. The German carrier set up a pharma hub in Hyderabad four years ago, and healthcare products along with electronics products and auto parts now account for half its Indian business, as the once-dominant textiles trade becomes relatively smaller.
Healthcare is equally important for the logistics, supply chain management, freight forwarding and express delivery sectors. Life Sciences and Healthcare accounted for 19 percent of Deutsche Post DHL’s €14.3 billion ($19.9 billion) in supply chain revenues in 2013, outpacing automotive at 9 percent and energy at 3 percent, and almost neck and neck with the consumer sector, which generated 20 percent of the division’s sales.
Close rival UPS also is spreading its pharma footprint, with a focus on so-called “pharmerging” markets like Latin America. It recently expanded a storage and shipping facility in Mexico while building two new healthcare product centers in São Paulo, Brazil, and Santiago, Chile.
Leading freight forwarders are leveraging their worldwide networks and industry-specific expertise to provide customized supply chain solutions for pharma/healthcare companies seeking to pare costs in the face of ever stricter regulations, rising R&D and supply chain costs and expiring patents. Kuehne + Nagel, the Switzerland-based global logistics group, is focusing on value-added packages for its customers. It recently won a contract from Johnson & Johnson for the warehouse management of medical devices in China that involved the establishment of a 20,000-square-meter facility, including temperature-controlled areas, close to Pudong International Airport in Shanghai. In Chile, it is managing the national distribution center, including warehousing, laboratory testing, quality control and distribution, for Germany’s Bayer Healthcare.
Panalpina says healthcare remains one of its fastest-growing — and fastest-changing — sectors. Pharma growth has slowed in mature markets to just 2 to 3 percent annually, while the “pharmerging” markets, led by China, continue to post double-digit increases. Also, as with the high-tech industry, healthcare companies are cutting their logistics spend by shifting from air to ocean freight, a major challenge for Panalpina, which operates two owned Boeing 747-8 freighters.
“Meanwhile, the efficiency of logistics solutions [is] more and more in focus (visibility, control, innovations, quality, planning, cost). Network optimization is required now more than ever,” Panalpina said.
Transport firms that have built up a solid presence — and a track record — in health care logistics are poised to reap a bumper payoff so long as they keep pace with the rapid change in manufacturing and distribution patterns.
Global pharmaceutical sales are forecast to top $1 trillion in 2014, with the U.S. remaining the top market, while emerging nations will account for a quarter of revenues, Kuwait-based logistics operator Agility said.
As a rising volume of R&D and manufacturing migrates to Asia, the industry has to manage resources that are much more widely dispersed and to cope with the greater potential for pandemics. Developing-world markets also are getting bigger, more affluent and better able to afford a wider range of medicines.
“As a result, the pharma industry will have to build a supply chain that is much more globalized, scalable and secure,” Agility said. As the supply chain expands and become more diverse, “logistics providers will have to step up with robust solutions,” it said.
Contact Bruce Barnard at email@example.com.