Food, pharmaceuticals, flowers and fashion are the chief industries that make up the cold chain, otherwise known as the supply chain of time-sensitive, perishable products.
At the Americas Competitiveness Forum in Atlanta in November, logistics leaders from Pfizer and Kraft offered some intriguing observations on customs, handling and other aspects of cold chain logistics at a session called “Delivering It Fresh: Special Handling for Complex Supply Chains.”
“The first requirement for exporting any product is that you have competitive quality at a competitive price,” said moderator Dr. Donald Ratliff, executive director of the Supply Chain & Logistics Institute at the Georgia Institute of Technology. “The thing people forget is that it has to be that way wherever your customer is — it’s not good enough to have it at the point of origin of the product.”
Ratliff said studies have shown that logistics can be a “much bigger trade barrier than any policy,” with cold chain issues offering the greatest difficulty because of a mélange of safety, customs and regulatory practices that can kill speed to market as surely as a flat tire.
“Most logistics focuses primarily on cost,” said Ratliff. For perishables, he suggested, such matters as quality, speed, predictability, reliability and safety are at least as important.
As it happened, two of Ratliff’s fresh supply chain panelists were from companies freshly involved in major mergers: Pfizer with Wyeth, and Kraft with Cadbury Adams.
“I’m a legacy Wyeth person,” explained 36-year pharmaceutical industry veteran Charles Bennett, director of global specialty and cold chain logistics for Pfizer. “I’m still trying to get used to how big Pfizer is,” encompassing product areas from animal health to oncology to baby formula. He confined his comments to biotech and vaccine products, those most in need of special care when it comes to predictability, consistency and reliability in shipping.
“Before we even decide to ship a product into a particular lane, we need a qualified shipping system,” he explained, using a toolbox of systems to validate every trailer, airline container and box along the way. Each type of product qualifies for a certain number of hours in transit. For instance, in the U.S., small boxes to doctors should arrive in 24 to 48 hours. More complicated lanes arise, he said, when product is being shipped into Latin America.
“What then becomes more important is our ability to map out the transit time,” he said, owing to airline and inland freight schedules, and to customer clearance at the end. “For this region, that is the challenge we have a tough time predicting [for],” he said. “If it’s not reliable and predictable, we have to use a 120-hour box, or maybe we only need a 96-hour box. When we’re making those decisions, not only do we need to know about transit times, we also look at the product — stability data, the size of the shipment.”
Then the key issue is how the regulations in the destination country might differ from those of the FDA in the U.S. — and how those specific requirements might impede speed.
“If clearance at the other end is six hours or two days, we have to err on the side that costs more money to ship,” he explained. “What we see sometimes — not only in the Latin America region, but in the U.S. — is going to one airport but changing flights, and the aircraft can’t handle the container. They don’t all operate consistently. We have to anticipate that a bit, and when we get surprised, sometimes our product gets caught.”
The company packs some of its products for a 48-hour transit time. If delays interrupt shipping and no refrigerated storage is available at the point of the delay, the product could be lost.
“Sometimes we get surprises when a new requirement comes out, and it usually delays the shipment,” said Bennett. “It’s not getting easier with photo security at airports and TSA. It’s harder and harder to shorten that time.”
Time Management an Issue at the Ports
Scott Boyer, associate director of transportation — customs, Kraft Foods Global, Inc., is responsible for North American customs compliance. But “when you’re crossing borders, it’s not just customs you’re dealing with,” he said. It might also involve the Canadian equivalent of the FDA, or even the Commerce Dept. Ninety-seven percent of what Kraft imports is subject to FDA review.
“We’re anticipating with the addition of Cadbury that we’ll have 60,000 shipments and over $2 billion worth of imported goods [a year],” he said. Kraft is a participant in C-TPAT (Customs-Trade Partnership Against Terrorism) as a tier-three importer, meaning its sharing of risks and best practices, including compliance, is rewarded with fewer inspections. All in the constant quest for that holy grail of logistics: lowest landed cost. Boyer said he sees inventory in transit as capital in transit.
“Several years ago, someone at Kraft said if we could take one day of inventory out of our network it would save $1 million in capital,” he said. “If I have goods spending less time at the ports, less time being inspected, then I have fresher product, more reliability and more efficiency in the network, and I can return containers so they can use those for revenue.”
Boyer said he’d like to see a partnering program with the FDA so that agency’s risk concerns could be addressed, and Kraft could reap some benefits from addressing those risks, becoming “more of a trusted importer.”
State of Disharmony
Harmonization of security standards could also help.
“Our industry is challenged by a lot of the scanning,” said Bennett, including consistency in instrument calibration. “We spent a lot of time with the TSA getting our site certified so [the product] didn’t have to be scanned. In India, every pallet going through the airport was getting scanned.”
Since most of Pfizer’s high-value products move by air, airline capacity constraints have led the company to ship into more different ports. The introduction of such variety introduces its own level of risk.
“If the inspectors know you, they trust you,” he said. “If they’ve had an incident with another pharma
company, we get these delays. The regulatory agencies don’t work together a lot of the time.”
In Pfizer’s case, keeping things moving could be a case of life and death, as a number of its vaccines are part of national immunization programs run by national governments.
“Instead of making a couple of large pallet shipments, we end up chartering aircraft to move product,” he explained. But governments usually have an allotted amount of money to spend, including freight.
“So we’re trying to convince some of the governments to change, because they’re spending more money on transportation, and getting less product,” said Bennett. “A lot of governments say they require the World Health Organization regulations, which say [the shipment] can’t be more than 45 kilos [99 lbs.].”
Just as important as quantity, however, are quality, and the speed required to keep that quality intact. Some biological products take 15 months to make, and shipments can price out at well over $1 million a pallet.
“The key here is when we have a temperature deviation,” said Bennett. “Sometimes it’s the customs officials, who think they’re protecting the constituents. Sometimes they open the boxes, and they compromise the product.” Or it may sit there for an inordinate period of time.
“The key here is not just that the inventory may be thrown out,” he said. “With that value, you can’t hold it a lot. Any change can really affect the patients in that region.”
Thus was the importance of Bennett’s main message reiterated, for the sake of both Pfizer and its products’ eventual users: The more predictable and more reliable the customs and inspection process can be, he said, “the better off we’d be.”