NOW or NEVER
Author: Alan Kennedy, Director, Team Poseidon Ltd
|Update : 24th July, 2020||Korean Version|
Navigating the uncertainty of COVID-19: The ‘what’, ‘why’ and ‘how’ of reconfiguring the pharma-logistics supply chain for a post-pandemic world.
Faced with a virus that's not yet fully understood and a pandemic that knows no boundaries the world of pharmaceutical logistics is being turned upside down. The fragility of the standard pharma-logistics system, its arguable over-dependence on air-freight, it's silo attitude to transportation planning and its lack of vision, transparency and clarity around collaborative working has turned what was always going to be a massive mess into a near catastrophe.
While the industry has been quick to adopt reactive measures such as piling medicines onto wide-body passenger seats and putting mothballed freighters back in the air, one thing is certain: these are quick-fixes, not sustainable solutions.
Although in recent years, pharmaceutical companies have been increasingly realising the importance of effective supply chain management to their global business, the crucial logistics part of this function has been largely overlooked. Until now.
In the aftermath of the global COVID-19 crisis there is never going to be a better time to move away from the calcified and somewhat flawed behaviours that have characterised the business of pharma transportation and distribution in recent times. The writing is on the wall: THE OLD BUSINESS MODEL IS NO LONGER FIT-FOR-PURPOSE.
There are many reasons why past logistics behaviours can be considered sub-optimal including:
- SHORT-TERMISM A culture of short-termism prevails with a focus on current profits over long-run value.
- LOWEST-COST LOGISTICS PROCUREMENT Logistics planning and procurement needs to be governed by longer-term 'whole-life' outcomes and savings.
- “NOT CORE BUSINESS” A perspective of logistics being outside of pharma’s ‘key competency’ has led to an effective abrogation of responsibility and control by virtue of widespread outsourcing policies.
- MANAGEMENT INERTIA The sustained halcyon days of pharma growth and profitability have bred complacency and resistance to change on the basis of ‘if it ain’t broke, why fix it?”
- FRAGILE SUPPLY CHAINS A blind faith in lean inventory management and JIT delivery strategies has exposed some inherent weaknesses in the over-zealous balancing of supply and demand.
- INSUFFICIENT STANDARDISATION A lack of standardisation and a huge amount of duplicated effort across the industry as shippers devise proprietary systems and methods of shipping.
- OVER-RELIANCE ON AIR-FREIGHT An unhealthy over-reliance on air transportation for drugs rather than a more multi-modal approach.
- INGRAINED SILO MENTALITY A deep-rooted silo mentality persists both within and between, pharma shippers which precludes good planning and efficient freight management.
- FLAWED RISK PROFILES A myopic adherence to inadequate risk assessments including an almost universally blind-eye to the potential for large scale disruptions such as COVID-19.
- NON-HOLISTIC THREAT MANAGEMENT The lack of a systematic and synchronised approach to other major global challenges especially sustainability.
- DISTRUST OF COLLABORATION An industry aversion to working together to tackle perennial logistics issues and to avert and address industry-scale disruptions.
- OUTDATED SUPPLY CHAIN METHODOLOGIES The perpetuation of a linear, substantially opaque, logistics chain characterised by 'master-servant' and 'bid-buy' mentalities and a noticeable absence of collective responsibility.
Taking all of these together, it is no surprise that the critical pharma logistics sector has demonstrated an extreme vulnerability to global disruptions and exposed an indefensible lack of operational and strategic flexibility. In particular, the fact that it has been transporting most of its golden eggs in the one modal basket is not a defensible strategy when more resilient solutions are available.
So, with the challenges of COVID-19 we are at a point were we need fundamental change, and we need it quickly.
Ocean freight post-pandemic
It is very likely that, post-pandemic, a greater proportion of pharmaceutical manufacturers will be considering switching a sizeable, possibly predominant, volume of pharma shipments to ocean freight, while maintaining air-freight in a more supportive role for top-up purposes, remote transfers, and emergency applications.
In other words, ocean freight is likely to move centre-stage as part of a more shock-resistant, multi-modal freight system for pharma. Be clear that air freight can perform eminently as a back-up to ocean freight. But the reverse does not apply. Sea freight should be viewed as the ‘workhorse’ with air freight as an ‘emergency responder’.
Poseidon - the integrated pharma ocean freight program
Success in the post-pandemic world of pharma-logistics will come to those companies that adopt a better, more relevant, business model. Poseidon is a groundbreaking pharma-logistics model that has been specifically engineered to reform the entire spectrum of long-haul pharma transportation. In fact Poseidon can be seen to address a majority of the pain points enumerated above.
Work on the Poseidon program has been underway for more than two years with input from right across the pharmaceutical and logistics industries. The Poseidon network has successfully conducted a number of large-scale proof-of-concept field trials and it has engaged some of the best and most committed companies and individuals in the market-place.
- Poseidon is an up-and-running, ‘competition-law compliant’ pharma-logistics model that allows pharmaceutical manufacturers to aggregate volumes and selectively share information in a legally permissible manner using an independent ‘neutral trustee’ party.
- Poseidon is based on the following precepts:
- Aggregating multi-party freight into meaningful consignment sizes
- Funnelling the aggregated freight through a limited number of lanes/ports
- Carriage and handling by limited number of quality operators
- Standardising as far as possible in terms of process, product and player
- The smart consolidation of shipper volumes from multiple manufacturers will bring economies of scale and provide the resource and buying power to drive supply chain reform and extract more favourable rates and service levels. By aggregating freight volumes, pharma producers can be part of a much more stable and reliable transportation network.
- The Poseidon network is based on collaborative best-practice across the entire cold-chain –shippers, carriers, suppliers, LSPs, insurers, IT specialists, trainers, distributors etc.
- Supply chain transparency and consignment visibility are both at the heart of the Poseidon concept. To this end Poseidon is working on a secure digital planning, booking and tracking platform interface dedicated to the particular needs of the pharma industry –operational performance, regulatory compliance, multi-party aggregation & consolidation, end-to-end monitoring, insurance cover, cost management.
- Poseidon has developed and thoroughly field-tested a ‘fault-tolerant’ pharma transportation system which provides pharmaceutical shipments with unprecedented levels of fault, delay and environmental tolerance. At the same time, shipments are tracked and monitored door-to-door by satellite telematics. All pallets benefit from ‘duplex protection’, a combination of active and passive thermal technologies which, together, provide a high degree of performance reliability.
- In its solution line-up the Poseidon system also includes the latest reefer technology with the option of in-built redundancy in the form of duplicate refrigeration units and on-board generator power for the immediate and automatic availability of power.
- The need for additional product buffers stocks in the system without incurring then huge capital expenditures associated with building/occupying additional GDP-compliant cold-store facilities can be met, at least partially, by the adoption of smart ‘floating warehouse’ inventory strategies. This is where product in a particular lane is distributed contemporaneously across several reefers and in several vessels.
- This floating warehouse approach:
- spreads the risk across a number of locations
- allows controlled delivery phasing
- offers flexibility for re-routing purposes
- provides qualified GDP storage conditions
- Buffer stocks held in this way practically eliminate the need to expand or arrange receiving end storage capacity and variations in stock levels are very quickly and easily accommodated without any expensive warehouse expansions or contractions.
- The Poseidon model is scalable, extendable and adaptable to all transportation modes.
About the author:
Alan Kennedy, Director, Team Poseidon Ltd
Alan Kennedy is focused on bringing best-collaboration practice to pharma-logistics. He is a consultant specialising in supply chain dynamics and reform and is one of the architects behind the Poseidon integrated pharma freight model which has been conceived to radically transform the long-haul transportation of pharmaceutical products. He currently serves as the independent 'neutral trustee'. Alan brings more than 25 years of supply chain reform experience and has served on many industry supply chain committees and working parties.