By Robert Moorman
The pharmaceutical industry continues to grow at an astonishing rate, which is why airlines, forwarders, and drug makers are collaborating at a new level to provide the capacity and service parameters needed for shipping time-and-temperature-sensitive drugs and other health-related products. To meet the highest standards as prescribed by pharmaceutical companies for these temperature-sensitive products, the airlines are working to provide premium service offerings and outside-the-box thinking that will meet growing demand. In addition, the freight forwarders who orchestrate end-to-end solutions for the pharmaceutical customer are digging deeper to forge relationships where all stakeholders are in close communication from beginning to end. A recent case study involving American Airlines Cargo (AA Cargo) and DB Schenker, the transportation and logistics division of Deutsche Bahn, involved this kind of collaboration (i.e. meeting significant challenges in international shipping for the pharmaceutical end customer).
American launched its express temperature-controlled solution, ExpediteTC, in 2009. Having the product wasn’t enough. Before launching the service, the company trained employees around the world in the rigors of maintaining the cold chain for their customers. In addition, the service earned the Envirotainer QEP (qualified Envirotainer provider) accreditation for adherence to best practices set by the industry.
As an additional layer, AA Cargo set out to demonstrate the effectiveness of ExpediteTC through pilot programs on key lane segments with key customers prior to launch. About the same time, Schenker was approached by a pharmaceutical giant about shipping drugs from a facility in Japan to San Juan, Puerto Rico’s Luis Munoz Marin International Airport (SJU). The drug maker had previously had problems with shipments on airlines and wanted to explore new options.
Schenker solicited bids from a number of carriers for the contract and eventually chose AA because it presented the most viable option for expedited delivery of temperature-sensitive products from the region. American’s long-standing relationship with Japanese transportation authorities didn’t hurt either, nor did the carrier’s ongoing relationship with Schenker.
After the contract was signed, the partners took several months to create acceptable shipping processes and obtain the necessary permits to carry the time-and-temperature-sensitive products. The SOP evolved through numerous formats as it was developed and before it was accepted.
Cultural And Other Challenges
Another challenge was cultural. AA Cargo and Schenker officials remembered that the Japanese shipping establishment is very cautious, particularly when moving a high-yield product. “It was very challenging in so many ways, particularly with the origin of the shipment coming from out of Tokyo,” said Carrie Rossi, global accounts sales manager for AA Cargo. “Our product was still relatively new, and we hadn’t created any formal interline agreements.”
There were other concerns, too. “Having to move a shipment intact and maintain the integrity of the supply and cold chain was a definite challenge,” said Ethan Aronie, Schenker’s global account manager of global sales for healthcare. After several months of preparation, and back-and-forth negotiations, the partners were ready to ship the product halfway across the world.
The Beginning Of A Long Trip
A third-party trucker was hired for the 4-hour-plus drive from the customer’s facility to Tokyo. The truck would deliver the aspirin-related drug in temperature-controlled, oil-can-like drums to Narita International Airport (NRT), where it was transferred to Envirotainers and loaded into the hold of a U.S.-bound American Airlines Boeing 767-200LR. The process included taking several record-keeping photographs of the freight being loaded and unloaded for posterity and to satisfy product-safety concerns.
The shipment departed NRT Wednesday, 7:25 p.m. local time and arrived the same day at John F. Kennedy International Airport (JFK), having picked up a day after crossing the international dateline. The drug was off-loaded and stored at a cool-chain facility near the airport.
On Thursday morning, the shipment departed JFK and arrived at 10:55 a.m. at Miami International Airport (MIA). The shipment was again off-loaded and stored at a nearby facility. The cargo was reloaded onto a FedEx wide-body freighter, which departed Miami at 1:10 a.m. Friday, arriving SJU at 3:25 a.m. In San Juan, the shipment was sent to Schenker’s facility, where it was reloaded onto refrigerated trucks for delivery. The 7,232-nautical-mile trip took 70 hours of total ground and flight time. FedEx Custom Critical, a specialist in same-day and overnight shipping of critical freight, was hired to complete the final leg of the air service to SJU because American suspended wide-body service to San Juan in 2009 as a cost-savings measure.
Despite the complex challenges faced by the partners, Schenker was pleased with the first outing of AA Cargo’s ExpediteTC. “From our perspective, the job seemed to be seamless and flawless,” said Bob Gahan, Schenker VP of global sales for healthcare. Aronie added, “What gave us a high degree of comfort at Schenker was the amount of detail the American team was able to provide.” Most importantly, the end customer was pleased with the results. The ongoing relationship between AA Cargo and Schenker could be expanded to include additional international shipments of high-value, temperature-and-time-sensitive pharmaceuticals, Gahan intimated.
Airfreight In Demand For Pharmaceuticals
Timing, they say, is everything, and American picked the right time to launch ExpediteTC. The pharmaceutical business is expanding rapidly with new vaccines and other health-related products coming to market. Consequently, there is a corresponding need for lift of these products, and airfreight ensures speed of delivery, ample security, and minimal exposure to wildly fluctuating temperatures, which can adversely affect the efficacy of the drugs.
The global market value for pharmaceuticals is projected to exceed $975 billion by 2013, according to IMS Health. The dollar value of cold-chain biologics and pharmaceuticals shipment is projected to rise to $187 billion in 2011, a 27% increase from the $147 billion figure in 2008, according to the Biopharma Cold Chain Sourcebook 2010. Vaccines are projected to grow by 8% to nearly $26 billion in 2011. Blood plasma and sera is expected to rise by 8% per year to 2014, or $23 billion, according to the Sourcebook 2010.
Overall, the demand for temperature-sensitive pharmaceuticals is soaring, particularly in China, which posted compound annual growth rate (CAGR) of 21.1% between 2004 and 2008. With the obvious revenue-making potential, airlines are investing heavily in this industry segment. “We have invested millions of dollars in infrastructure, equipment, and software to ensure safe and secure shipment of cold chain products,” noted Dave Brooks, president of American Airlines Cargo division.
American, British Airways, United Airlines, Continental Airlines, and Lufthansa Airlines — among others — have each invested millions of dollars to provide cold-chain products to the major drugmakers, such as Pfizer, Johnson & Johnson, GSK, Merck, and Bristol-Myers Squibb.
Now that ExpediteTC has passed muster, the question for AA Cargo remains: Where to from here? American says it continues to negotiate potential long-term agreements with pharmaceutical companies to ship temperature-and-time-sensitive healthcare products globally. The airline expects to soon announce new partnerships with drugmakers and other forwarders like Schenker.
Apart from its value to the drugmakers, revenue from ExpediteTC and similar cold-chain products is sorely needed during these challenging times for airlines. Remaining consistently profitable is particularly challenging for major carriers with multiple fleet types, high fuel costs, and unionized employees. Years ago, former American CEO and Chairman Robert Crandall, who transformed the airline from a loss maker to a billion dollar plus industry leader, said carriers must find ways to generate additional revenue if they wanted to remain in the black. American is credited with creating the first frequent flyer program, AAdvantage, as well as helping to pioneer the computer reservation system Sabre, and yield management. ExpediteTC appears to be carrying on with this message.
About The Author
Robert Moorman has covered various facets of air transportation for over 25 years. He has worked for several aviation-related magazines during his career, including Air Cargo World, Aviation Week, and Space Technology and Air Transport World. At present, he runs his own writing and media consulting business.