As global growth for this industry keeps shifting to emerging markets, it is increasingly turning to trusted partners specialized in the sector to ensure its precious products are delivered integral and on time.
The life sciences and healthcare industry is expected to continue growing globally –
particularly in emerging markets. Yet this is a sector with very specific logistical
needs. So what are the challenges the sector faces now… and in the years ahead?
The life sciences and healthcare industry
(LSH) is innovative, global and fast-moving.
In 2011, the pharmaceuticals market was
valued at €730bn (US$ 950 bn) and is projected to
grow by 3-6% until 2016; and slightly higher growth
rates apply for medical devices on a smaller base of
€200bn (US$ 259 bn).
Higher spending in developed nations is
expected over the coming years; but emerging
markets are making a big impact on the sector as
incomes rise and access to medicines increase
through government policies and initiatives.
Manufacturing is also increasingly migrating
into emerging markets.
Indeed, in its July 2012 report The Global
Use of Medicines: Outlook through 2016, the
IMS Institute for Healthcare Informatics estimates
that spending on medicines in the so-called
‘pharmerging’ markets will increase by 12-15%
annually, by about €115-€130bn (US$ 150-$ 170 bn)
from 2011 until 2016, reaching a total of €265-
290bn (US$ 345-375 bn) in 2016.
Required conditions
This increased activity is good news for the LSH
industry and its suppliers. Yet this is a complex
and constantly evolving sector with specific needs.
Take the issue of emerging markets, which
are expected to be the key drivers of growth in the
pharmaceutical and medical device sectors. China,
Brazil, India, Russia, Mexico, Turkey and other
parts of Asia and Africa currently offer fast growth
and will continue to do so in 2013; but companies
need to understand the idiosyncrasies of each of
these markets in order to be successful in them –
thus the importance of local knowledge should
never be underestimated.
“In this industry there’s a lot of pressure to
deliver in full and on time,” says Angelos P Orfanos,
President, DHL Life Sciences & Healthcare.
“Knowledge and experience is everything in life
sciences logistics. You need expertise to transport
pharmaceutical products while keeping them in
the required conditions; but there are other issues
to contend with, too. If you ship a pallet of products into – for example – China, it may take four
to five days to clear customs. So where does that
pallet sit in the meantime? How can you protect it
from environmental conditions?”
Increased efficiencies
This is a real challenge facing companies in an
industry that relies on supply chain security, integrity,
special packaging solutions and increased
efficiencies.
In fact, increased efficiencies have been
identified as the most important issue in today’s
market by DHL’s life sciences and healthcare
customers. The global economic crisis is one of
the drivers for pharmaceutical companies to reduce
their overall logistical costs and to turn to
their providers for answers.
“The cost pressure on the industry continues
to increase,” says Michael Terhoeven, VP DHL
Global Life Sciences & Healthcare Sector Strategy.
“Cost was much less of a priority a few years ago;
but customers tell us that cost efficiency is now a
hot topic.”
Country to country regulatory and trade
compliance for the transportation and storage of
medicines is also likely to become stricter in the
coming years, putting even more pressure on
pharma companies. “There always have been high
standards of regulation in this industry but it’s
increasing further,” says Michael Terhoeven. “For
illustration, look at the draft of the European
Good Distribution Practice (GDP) guidelines.
The GDP guidelines from 1990 had four pages.
The new draft runs to more than 30.”
Strategy 2015
These issues, and others like them, are being addressed.
In 2009, DHL announced a strategy to
provide superior levels of service and quality to
customers, called Strategy 2015. For life sciences
and healthcare, a sector strategy was developed
comprised of three directional pillars: customer
engagement, sector community building and
fact-based solutions development.
Firstly, customer engagement includes the
DHL-hosted annual Life Sciences and Healthcare
Global Conferences and Workshops.
Secondly, community building involves
strengthening the company’s cross-divisional collaboration
in order to develop and share global best
practices and processes, harness best-in-class supply
chain and logistics expertise throughout the company
network and build industry competencies.
Thirdly, fact-based solutions development is
based on our day-to-day customer dialogue exploring
our customer’s entire supply chain. Key
pain points are identified in order to derive solutions
to the unmet logistics needs of the industry.
Customer input is collected along the solution development
process and during pilot/ launch.
Examples of launched solutions are the
Clinical Trial Logistics solution, leveraging the
global warehousing footprint and transportation
capabilities as well as the pan-European lessthan-
truckload (LTL) temperature-controlled
Cold Chain road freight capabilities.
All these programs leverage the group’s active
six sigma improvement process under the
name ‘First Choice’.
Quality and competence
Roger Crook is CEO of DHL Global Forwarding,
Freight – and, as a DP DHL Board sponsor for life
sciences and healthcare, is heavily engaged in executing
Strategy 2015 for the LSH sector.
“Life sciences and healthcare is an important
part of the strategy,” he says. “My role as a sponsor
is to ensure the LSH sector team gets the right support,
to guide the overall vision of the sector, to
obtain the financial means to execute our missions,
and to provide guidance and mentorship to the
team on how to enable our key objectives within
the organization.”
“Our customers have rewarded us with their
business and their trust in delivering and storing
their very important healthcare products. The
challenge is that those products can be high-value
or unique, and they require rigorous levels of
quality and competence in product handling.”
This is why DHL’s improved and expanded
global life science footprint – with a vast range
of logistics development and innovation – has
been so important. Five warehouses are currently
being developed in India to support the domestic
growth of the sector (one of these has
already opened in June, a 58,000 sq m facility
in Mumbai); in Chennai DHL operates another
warehouse in the Free Trade Zone acting as an
air and ocean freight gateway; plus, it has invested
in its leading domestic express network
in India by developing a temperature-controlled
express capability.
Meanwhile, the global footprint of DHL
Medical Express was further expanded in 2012,
and now includes the US among others. This
product provides a high-priority, time-definite international
(TDI) express service for the specific
needs of the life sciences industry, such as in clinical
trials or high value product direct distribution.
Good Distribution Practice
The life sciences strategy also highlighted the need
for GMP (Good Manufacturing Practice) and GDP(Good Distribution Practice) compliant Regional
Hubs for warehousing and regional distribution
of pharmaceutical products.
Plus, in 2012, an ‘end of runway’ Integrated
Solutions Center opened at Leipzig airport, allowing
for very late cut-off times by directly ‘injecting’
shipments into the company’s express network at
the regional hub in Leipzig.
In 2011, DHL Global Forwarding acquired
LifeConEx to further extend DHL’s cold chain resources
and knowledge. As a result, DHL Global
Forwarding is planning to introduce a new service
called ThermoNet to the market in early 2013,
which is expected to set a new standard for cold
chain air freight transport.
In 2012, the company opened two new life
science competence centers in Miami and Atlanta
to add to its 28-strong competence center network
worldwide. Both locations have dedicated trained
personnel, temperature-controlled rooms, and
use new technology such as the SmartSensor for
logging and tracking a shipment’s temperature
and integrity. Although temperature-controlled
shipments are handled at all DHL locations, the
facilities in the competence center network offer
LSH customers enhanced capabilities, increased
capacity and greater flexibility to control their
freight. “Our competence center network touches
and provides access to some key emerging markets,”
says Michael Terhoeven.
Facing the future
New solutions such as these are vital to the LSH
sector; but there will always be new challenges to
contend with, such as increased regulation.
“We invest in people to support our customers
in working to the regulatory demands,” says
Angelos Orfanos. “For example, we have over 67
pharmacists whose knowledge and experience of
the sector is second-to-none and who ensure we
comply with regulations as needed.”
Ultimately, LSH customers need a chance
to talk about the challenges they face and the solutions
they need. This is why Angelos is a great
believer in customer engagement through DHL’s
annual Global Conferences and Workshop event.
This year’s Conference and Workshop took place
in Berlin; 2013’s will be held in Miami.
“As companies in the industry become leaner,
they will be looking for new ways to re-engineer
their supply chains in terms of cost-efficiencies and/
or meeting regulatory need,” says Angelos. “That’s
exciting because it takes us into new conversations
about their future requirements and future demand.
Out of those new conversations come exciting new
ideas and new solutions.” Tony Greenway
With 65,000 employees, 318 pharmaceutical companies
and 23% of the whole of the EU’s pharma
production, life sciences and healthcare (LSH) is a
growth sector in Italy.
In fact, in 2011, the value of Italian LSH production
was over €25 billion, with a slight growth
(+0.7%) over the previous year, despite the global
economic crisis.
This growth was mostly export-driven.
Italian pharmaceutical companies now sell 61%
of their production abroad; whereas 20 years ago
this percentage (export/production) was around
12%. Figures continue to rise. In 2011, the export
of pharmaceutical products grew by 9.6% over the
previous year and the import by 10.5%.
Moreover, from 2009 to 2011, the pharmaceutical
export grew by 27%, far above the European
average growth (+10%).
DHL Global Forwarding Italy has made huge
investments in this sector, leading to the realization
of two Life Sciences and Healthcare Competence
Centers in Milan and Rome and a dedicated GDP
warehouse in Verona.
For Sabrina Di Ruscio at global biopharmaceutical
company Bristol-Myers Squibb, it is DHL
The Growth of the Italian life sciences industry
Global Forwarding’s competence in passive as well
as active cold chain solutions that make it top of
the freight forwarders. The working relationship
between Bristol-Myers Squibb and DHL Global
Forwarding is strong; and, as an illustration, Sabrina
highlights a recent shipment from Italy to the US
where a potential problem was encountered and
swiftly dealt with. “An oversized pallet was picked
up,” she says, “and DHL promptly informed customer
service and re-palletized the pallet without
rescheduling any flight. It was good example of
partnership!”
Bristol Myers-Squibb is now working with
DHL Global Forwarding on a Brokerage project.
“Once completed,” says Sabrina, “(it) will give full
coverage and visibility through all the steps of our
shipments from door to door as well as extra lease
management that will permit a relevant cost saving
in terms of active containers rental fee charges.”
DHL Supply Chain Italy, meanwhile, has
some 2500 employees (including third party)
located in 39 sites, which cover more than
500,000 sq m of logistics space across the country.
In 2011, it further strengthened its supply chain
capability in the country through the acquisition
of Eurodifarm, Italy’s market specialist in the
temperature-controlled outbound logistics distribution
of pharmaceutical, diagnostic products
and medical devices.
This new addition to the DHL Supply Chain
capability includes seven distribution centers and
a temperature-controlled nationwide distribution
network, sending pharmaceutical, diagnostic products
and medical devices to pharmacies, hospitals
and wholesalers across Italy.
So what are the needs of individual businesses
in Italy’s LSH sector? To understand the
challenges that life sciences and healthcare companies
face, we asked two customers for their
day-to-day experiences of the Italian market.
We have been working with DHL Global
Forwarding for a number of years now – almost
two decades to be precise. DHL personnel have
always been very helpful and supportive from
the very beginning of our business relationship
back in 1997. As years went by, the relationship
changed significantly to become more of a partnership.
We depend on the expertise of DHL's
qualified staff to support us in all of our operations,
some rather simple and straight-forward,
others extremely complicated to resolve. Especially
in the latter cases, we realize how important it is
to have a skilled and dedicated person to work
with. This is really what makes all the difference.
We transferred the CTS Operations Unit
from Switzerland to Italy, back in 1997. When we
did that we faced a number of issues revolving
around the ownership of the material we were
asked to pack and supply to our clinical sites
worldwide. Before we were able to decide how
best to tackle this issue, we had quite a few meetings,
both face-to-face and via telecon, to sort
out a number of aspects, ranging from the more
operational ones to fiscal problems, with an interesting
panel of internal and external experts.
DHL’s support was crucial in proposing solutions
to the team and providing detailed information
on each solution, thus helping us make up our
minds on how to move forward.
Quite recently we were asked to pack and
supply a new product which is manufactured in
the USA. Our well-established process unfortunately
did not apply in this case, so we decided to
talk to DHL Global Forwarding once again and
create a new process from scratch. This new process
was completely different than the one we
developed in 1997 and it posed a number of
challenges, ranging from the transfer of a very
delicate product in large quantities to the payment
of VAT on behalf of our new sponsor. In
this specific case we worked directly with the
Italian Branch Manager of DHL Global
Forwarding: he had an answer and a solution to
each and every topic we put on the table. This
new process was set up very quickly, in a couple
of months, and was implemented to everyone’s
satisfaction. What we appreciated most in this
new exercise we did together with DHL was the
positive mind-set, proactivity and willingness to
resolve issues in no time at all, as if they simply
did not exist... Quite remarkable!
What are the features that make a big difference
to your day-to-day operations?
Availability, flexibility and engagement in covering
different logistics needs, direct contact, timeliness
and clarity in answering; and obviously competitiveness,
which is a basic aspect in our selection
system.
Can you give an example of a recent logistics
challenge you have had to deal with?
A very recent episode in which DHL Global
Forwarding gave us precious support was the introduction
of the “bollini” (stickers) distribution
in Pfizer network: in a very short time a different
shipment logic had been introduced and integrated
with the usual distribution routing for the finished products. DHL has proved to be a fast and reliable
partner, able to offer a “turnkey” service and meeting
our expectations with only one week’s notice!
Are there any specific logistics issues you are
working on resolving now?
We are continually looking for alternative solutions
to reduce our transportation costs; an initiative
now (in partnership with DHL Global Forwarding)
in the testing phase is the consolidation of ocean
freight shipments to Australia and New Zealand.
And what about the future?
As we are a facility interested in the distribution
of controlled products, the possibility of storing
our products in (DHL Global Forwarding) warehouses
that have been designed for this specific
kind of commodity – while waiting for flight confirmation
– would open the shipment process to
interesting synergies.
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