In 2014, after years of transporting its products by air freight, global pharmaceutical giant AstraZeneca announced a major change to its logistics operation. Despite having used ocean freight for just 5% of its shipments five years earlier, the company said it would try to send around 70% of its goods across the oceans in the coming years – a staggering change for a business of its size.

"It wasn’t so much an announcement," the Journal of Commerce said about the decision at the time, "as an industry quake".

For many years, air freight was known by the pharmaceutical industry as the best way of moving large, high-value goods from one place to another with speed and efficiency. The possibility of a move towards ocean travel had been floated for years, but until AstraZeneca threw down the gauntlet, few had expected it to really materialise.

Ocean calling

Today, it seems like a full-scale modal shift is under way. Shortly after AstraZeneca’s announcement, Pfizer said it was also looking to reduce the number of goods it transported by air, which accounted for 20% of its goods at the time. Early last year, it made good on that promise; converting cargoes of vaccines and biologics from air to ocean containers after a successful pilot scheme on the transatlantic sea route. According to Jeroen Janssens, senior manager at the centre of excellence for packaging and cold chains at GlaxoSmithKline (GSK) Vaccines, the move from air to ocean is something everyone in the pharmaceutical industry is now actively considering.

"We’re all looking at it," he says. "Many are already doing it, and those who aren’t ready yet are seriously evaluating it. At a high level, you can argue that ocean freight offers more security for your products than air because you can secure the container until it’s opened at the destination. There also aren’t as many handling points as there are with air freight, so there are fewer ways it can go wrong."

This issue of security was certainly central to AstraZeneca when it decided to make shipping its new mode of choice. Speaking at London’s Life Sciences and Pharmaceuticals Conference in December 2014, Julian Wann, global category leader, was trenchant in his criticism of the air cargo sector, accusing it of failing to cater to the pharmaceutical industry’s needs.

"It’s not all about price – it’s about getting there," he said. "The value is in having the right product in the right place at the right time, and most of our problems comes from air freight… And security is a problem: products get stolen at airports, and if they get into the wrong hands, people can die."

Of course, cost does come into it too. Over the past few years, the financial pressure faced by pharmaceutical companies has steadily increased. The US Government recently dropped drug prices, patent protections for trademark brands are in danger of running out and the days of blockbuster drugs appear to be numbered. Given that the average pharmaceutical company spends around 6% of its revenue on logistics, improving operational efficiency across the supply chain is paramount.

With its lower transportation costs, ocean travel is generally considered to be a cost-effective alternative to air freight. A recent study by Project Optimize, a collaboration between WHO and PATH, found that using ocean reefers "is less expensive than actively or passively cooled air transport options, even when only a quarter of the 20ft reefer container is utilised".

Steady as she goes

However appealing the benefits of security and cost savings might be, not all companies are moving quite as boldly towards sea freight as AstraZeneca. GSK, for example, is still only using it for a limited number of destinations, and according to Janssens – whose team is responsible for the distribution of vaccines around the globe – air freight remains critical to the company’s logistics strategy and the wider pharmaceutical industry alike.

If you have only a few palettes a month to shift somewhere, you will continue to ship that by air freight, instead of using a 40ft container with a lot of empty packaging material and only a few pallets of product.

"For us, the vast majority of what we do still involves air freight," he says. "The pharma industry is quite traditional, and making changes is not always that easy. Over the past three years we have been moving some goods to sea freight, but it’s not the majority. There are a number of reasons for that. The speed of product delivery is one important element; plus, for some products and markets, we have a relatively low volume to ship, and vaccines are small items compared with television screens and things like that. So air freight tends to remain the better solution when we want to quickly ship small quantities to the right destination. If you have only a few palettes a month to shift somewhere, you will continue to ship that by air freight, instead of using a 40ft container with a lot of empty packaging material and only a few pallets of product."

For Janssens, part of the problem with transporting pharmaceutical products by sea is finding the right partner.
Air cargo may suffer its share of security issues, but shipping companies are not always ready, he says, to take on sensitive products and temperature-controlled supply chains.

"They may not be eager to transport high-value goods in refrigerated conditions," he says. "And because the weight of our goods is relatively low, the container is highly sensitive to variations in external temperature. The liabilities involved in transporting high-value goods mean it isn’t easy to find a partner that wants to actually work with you. Then, when you do find someone, you have to agree on how the product is going to be shipped.

"From a pharmaceutical point of view, good-distribution guidance documents require us to qualify the equipment we use. When it comes to the qualification of containers, there are quite a lot of things that need to be explained to sea-line companies regarding what those expectations are."

Track-and-trace monitoring

For some, advancements in track-and-trace technology offer a way around this problem. Leading ocean carriers have clearly improved their ability to manage cold chains by continually monitoring temperatures and exchanging data with pharmaceutical companies in real time. But Janssens questions whether this actually makes a difference.

"If you really want to use track and trace, you have to ask yourself: once the data is sent to you or your logistics service provider, what can you do?" he says. "When your goods are sitting on a vessel for two weeks, sailing, there’s not much that can be done other than informing your customer that there will be an issue with the container that’s arriving. In the end, we are dependent on the people on the vessel, however sophisticated the technology is. In my opinion, track and trace is useful for road freight, but on the vessel itself, it is relatively unhelpful."

On the road again

As well as benefitting sea lines, the shift away from air freight also helps those involved in land transport. On top of GSK’s large road footprint for pharmaceuticals in Europe, the company is currently exploring plans to extend its road network around the world.

"We’re increasingly opting for road transportation," Janssens says. "It gives you more ease of handling, because you can load your goods into temperature-controlled trailers without any additional insulated packaging materials. At the moment, everything we can move in Europe we will try to move by road. We are also doing this in places like Turkey and Russia, and even some destinations in Northern Africa like Morocco.

"Recently, we have started looking at other destinations too, evaluating what the risks and additional complexities might be. We’re thinking about countries where we already have relatively high quantities being shipped by air rather than by road. We’re looking at Saudi Arabia, Kazakhstan… Of course, these countries will create more challenging temperatures than you might be used to. Going to the Middle East, you can have 50°C+ weather, so you need to have the right equipment to handle it. It’s also not always a stable region from a political point of view, and these are all things that need to be taken into consideration and be part of the risk assessment."

Tailored transport

In the end, for Janssens and GSK, the trick is not to choose one single transport solution to cover all aspects of the business, but to find the right solution that takes into account the product, the volume being shifted and the individual route in question.

"In our company, there is no one-size-fits-all solution," he says. "It’s about looking at the most optimised model – whether that is air, sea or land – which offers the best quality and sustainability. What’s important is preserving the integrity of the product: in our case, shipping vaccines in a cold chain at 2-8°C. We will do whatever is required to move our product from A to B in the right conditions. And if we can do it in a way that is sustainable for our planet, that would be a very good thing indeed."

Predicting what the balance between air, ocean and road transport will look like in the next five to ten years isn’t easy. The logistics environment can, Janssens says, "be very surprising". But as big pharma faces up to a raft of different cost pressures, the need to improve and optimise supply chains will drive innovation no matter what.

"In the future, I think we will see companies become much more specialised in transporting pharmaceutical goods," Janssens concludes. "There will probably be fewer players in the market than there are now, but those that remain will be more specialised. I also see a push towards consolidation, with players asking questions like: why ship a reefer container to the US with 15 palettes in it if another pharma company has ten palettes to ship? Why can’t we combine these? I might be wrong, but I think we will soon see the formation of consolidation hubs that get taken over by logistics service providers, which will move goods and help further optimise the logistics of the pharma industry."