Chemical and Pharmaceutical Logistics: Hand in Hand with Safety
Developments and Current Trends in Pharmaceutical and Chemical Logistics
In many sectors of industry, logistics has become an economic key factor beyond pure cost. This is particularly true in the chemical and pharmaceutical industries, and it is one of the reasons why the Achema 2018 has chosen logistics for these two branches of industry as one of three focal topics.
The focal points in pharmaceutical logistics and logistics for the chemical industry have diverged in recent years. The distribution chain for chemical products extended, and still extends, from the supply of basic chemicals through various upgrading stages and special chemical production into other sectors of industry, but not normally to end consumers. Major emphasis is placed on safe storage and transportation of hazardous substances.
Pharmaceuticals are normally distributed through wholesalers to pharmacies. Online pharmacies have created an additional distribution channel. Many pharmaceuticals are now produced biochemically and require careful handling (e.g. unbroken cold chain). Pharmaceutical logistics is heavily focused on the patient and is closely linked to patient safety, creating the need for traceability in the distribution chain.
This alone shows that safety plays a crucial role in logistics in both of these industries, but with a different emphasis.
Chemical Logistics at a Glance
Up until just a few years ago, companies which provided logistics services to chemical companies were primarily in the transportation business and merely acted as "fulfillment agents". In the meantime, a radical transformation has taken place. Today, the industry is dominated by global supply chains for the delivery of raw materials and intermediates as well as sales and distribution of finished products. Companies specializing in hazardous cargo, transportation service providers which handle liquid and bulk goods and companies that provide chemical site and storage logistics services meet the specific needs of the chemical industry.
The supply chain is now viewed from the end-to-end perspective. The challenge is to manage the complexity of the global supply chain. Mainly for cost and safety reasons, the multi-modal supply chain rail / sea & inland waterway / road (inter-modality and combined transportation) has special significance for the chemical industry.
Particularly for bulk goods, the authorized means of transportation for many chemicals are subject to legal restrictions. Outsourcing of logistics services to professional partners who often operate in global logistics partner networks plays an increasingly important role in the handling of hazardous goods and cargo. In many sectors of the industry, digitization helps to speed up and streamline many of the complex operations.
Characteristics of Pharmaceutical Logistics
To some extent, pharmaceutical logistics has taken a different direction. Particularly to guarantee the safety of pharmaceutical products in the age of increasing globalization, close attention must be paid to every link in the supply chain. Globalization increases cost pressure, and the pharmaceutical industry is no exception. Pharmaceutical products are manufactured at the site which has the lowest costs. Because many pharmaceuticals are temperature-sensitive (particularly biotechnology products which are often very expensive), the challenges in pharmaceutical logistics are different from those in the chemical industry.
Medicinal products are more susceptible to temperature variations, and as a result end-to-end temperature control has become increasingly important. Drug safety is another vital consideration. Pharmaceuticals must be protected against theft and counterfeiting. For this reason, traceability in the supply chain, from raw material supply to finished products on route to the patients, has become vitally important.
Strict Rules for Pharmaceutical Logistics
Similar to GMP (Good Manufacturing Practice), GDP (Good Distribution Practice) was introduced five years ago (2013). The revised GDP guidelines stipulate that pharmaceutical manufacturers must ensure end-to-end compliance with government-supervised regulations for their products throughout the entire supply chain.
The market for temperature-sensitive pharmaceuticals is growing, and that in turn increases demand for temperature control during transportation. In the future, this will include all modes of transportation in the supply chain. In addition to the 2-8°C temperature range, temperature control is becoming an increasing necessity at ambient temperatures (15-25°C) as well. Some transportation service providers have set up special fleets to meet the increase in demand.
Pharmaceutical supply chains have become more international. Large new markets in India, Southeast Asia and China are developing not only for the production of APIs (Active Pharmaceutical Ingredients) and end products, but also as consumer markets. This is generating increased demand for temperature-controlled pharmaceutical air cargo alongside of sea freight in refrigerated containers.
To help aviation companies, cargo handlers and transportation service providers comply with international regulations and standards, the International Air Transport Association IATA created CEIV Pharma (Center of Excellence for Independent Validators in Pharmaceutical Logistics), a standard which covers the entire air freight chain including transshipment points (warehouses, aprons, etc.).
In addition to the stricter temperature control requirements in pharmaceutical transport, shipment monitoring and track & trace are a vital element of the pharmaceutical supply chain to guarantee safety. Commission Delegated Regulation (EU) 2016/161 to prevent entry of falsified prescription medicinal products into the legal supply chain will go into effect at the beginning of February 2019. In the future, a unique identifier must be placed on the pharmaceutical packaging to enable identification and authentication of each pharmaceutical package as well as an anti-tampering device. The clock is running for pharmaceutical companies and all logistics partners who are involved in this complex serialization program to put these requirements into practice.
Pharmaceutical companies now work with a large number of service providers, and that increases the volume of data generated. Processing of large data volumes in real time, increased networking and innovative algorithms are creating the need for new business models and services in logistics. Digitalization is expanding its footprint in pharmaceutical logistics.
Networking between all entities involved in the healthcare system and integration of all available data (big data / advanced data analytics) could provide the basis for enhanced requirements planning and help make pharmaceutical logistics more efficient and cost-effective. One tendency that can be expected is that shipping agents will process more orders using online portals with real time pricing. In the distant future, blockchain technology will provide the basis for secure transactions.
What is the future direction of chemical logistics?
The global supply chain will also have a major impact on logistics for the chemical industry. As large chemical producers expand their product portfolios, they will have to manage greater complexity to guarantee safety in multiple supply chains.
The global distribution chains are exposed to a number of risks, ranging from general conveyance risks to natural disasters. To counteract these risks, chemical companies need to identify and assess them. The use of special analysis tools and the installation of telematics systems on all modes of transport which provide round trip monitoring, geofencing, temperature monitoring and other alarm functions is on the rise.
Enhanced end-to-end transparency in the supply chain and information transfer in real time help reduce the level of complexity. In the logistics process, this means that goods can be located at any time and the current status of an order can be ascertained. This makes it possible to reduce order processing and delivery times and to optimize inventory levels.
The differing goals of individual site partners currently impedes simple implementation of digital logistics solutions, e.g. to manage loading and unloading. Other obstacles include the safety mentality in the chemical industry which delays the decision-making process, because agreement from everyone at the site is needed. In addition, standards for digital technologies are lacking.
However, there is no getting around digitalization, and trends like big data and cloud computing are also having an effect on logistics in the chemical industry. Digital, data-driven technologies for forecasting and process optimization are already making inroads. Neutral platforms, which can be adapted to the specific needs of chemical logistics and help companies efficiently manage complexity when handling dangerous goods, provide the basis for flexible integration of all entities involved in the chemical supply chain. In a collaborative environment, shipping agents can use the common platform, for example, to interact in real time with transportation service providers.
Two factors could cause problems for the chemical industry in the near future, namely the growing shortage of drivers for hazardous goods transportation and the increasing scarcity of sites for storage of hazardous goods and sites with rail access. The industry must quickly find solutions for these problems.
Digitalization will help to address many future challenges in pharmaceutical and chemical logistics. Logistics in both industries must be able to handle greater complexity and more product customization even in the face of increasing cost pressure and personnel shortages. Networking, cooperation and transparency in the value-add chain along with more digitization of the business processes will provide the solutions needed. (sa)