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Innovating The Cold Chain

By 2016, over 50% of the top 50 best–selling drugs will require cold chain transportation.  But is the regional industry ready for the extra demands this will place on its ability to adapt to and meet demand? Sindhu Hariharan investigates

If one had to come up with an appropriate phrase to describe the state of global healthcare and life sciences industry, it would be: ‘in flux’.

While macro-economic factors are influencing outcomes at the regulation-heavy industry, the sector is also experiencing mixed fortunes leading to a conflicting impact on the bottom line.

On one side, growth opportunities in APAC’s emerging markets, and increased healthcare consumption, brings cheer; unrelenting cost pressures and tiresome compliance procedures are pulling down margins.
Additionally, innovation – the need of the hour – has led to burgeoning R&D costs in niche areas like bio-tech and clinical trials. This, when coupled with stringent regulations around temperature control and authentication, means profits are shrinking further.
This has forced healthcare providers to undertake a keen scrutiny of their supply chain set-ups and streamline them to keep a tight lid on costs.

Looking outwards

Pharmaceutical shipments require specialised transport and handling procedures that cannot be compromised on. As a result, healthcare providers are increasingly looking to entrust distribution to logistics providers with investments in special infrastructure, R&D and expertise needed to get life-saving medicines and equipment across to the user.

“As the global economy recovers from recession, healthcare spending is expected to accelerate. In such a scenario, the majority of healthcare providers consider it wiser to outsource logistics to specialist 3PLs and focus on their core competencies,” opines Eric ten Kate, director of healthcare Middle East, for Hellmann Calipar Healthcare Logistics.

Tim Wilson, Middle East health industries leader for PwC, and Mathew Jones, Middle East health director, PwC observe reflections of this trend in mature markets. “We have seen key players in Europe transform their network, using a limited number of “multi-market” warehouses, and leveraging fourth party logistics (4PL) business models to dynamically manage transportation,” the consultants said.

MENA’s share of the pie

Leading research firm IMARC Group estimates the total size of the healthcare cold chain logistics services market to expand from its current size of $8.5 billion to nearly $13.4 billion by 2020 – a whopping 60% rise.

As per an industry report titled Global Cold Chain Market for Pharmaceuticals 2015-2019 brought out by market research firm Research and Markets, APAC is an emerging market for this solution with the UAE, Saudi Arabia, Algeria, Egypt, and Lebanon being key contributors to MENA’s cold chain logistics market.

For MENA, the market potential is enviable and is only expanding. Cathy Robertson, experienced logistics professional and founder and head analyst, Logistics Trends and Insights pegs MENA’s pharma logistics market at $2.3 billion – 3.1% of the global pharma logistics market. “Emerging markets such as those in Africa will see growing demand as its middle class grows,” explains Robertson.

Andrew Mitchell, VP of life sciences and healthcare EMEA, DHL Customer Solutions and Innovation is an industry leader excited about MENA’s prospects in this specialised vertical. “We have, in the last two years, opened 10 new life sciences warehouses throughout the EMEA region. Dubai remains the centre of life sciences for the Gulf countries and most of our customers maintain a presence there,” said Mitchell. He feels that, with the recent establishment of a free trade zone in Lagos, it could emerge as the next West Africa hub for life sciences.

How can logistics players equip themselves?

To take advantage of such a lucrative share of the pie, the regional logistics sector must endow itself with key differentiations of this vertical.

A crucial expectation of any pharma company from their logistics partner is real-time visibility of products to ensure its integrity.

Explaining Hellmann Logistics’ infrastructure to cater to this demanding vertical, Eric ten Kate says: “We provide customers with a state-of-the-art dedicated healthcare facility that assures temperature controlled storage meeting the Ministry of Health requirements for GSP (Good Storage Practices) certification, combined with humidity control.

“Our latest warehouse is equipped with a floor cooling system. The building is under continuous monitoring and back-up plans are in place to mitigate risks of temperature excursions of any kind.”

In Dubai, Hellmann operates as a separate joint venture catering to healthcare known as Hellmann Calipar Healthcare Logistics.

Healthcare logistics enablers must put in place documented Standard Operating Procedures (SOPs) and follow them to ensure structured operations. Another regulation-driven necessity is to meet international quality assurance standards like Good Manufacture Practice (GMP), Good Storage Practices (GSP) and Good Distribution Practices (GDP) among others.

“Warehouse design and planning is becoming a prerequisite to put away, store, pick and maintain products in temperature controlled areas. The loading bay area must also be temperature controlled along with docking stations both for goods inward and outbound,” explains Muthanna Muckatira, business director Middle East, Ehrhardt + Partner Solutions, a logistics tech solutions provider.

Ehrhardt + Partner offers Pick-by-Voice and Pick-by-light solutions that are already popular in the western markets.
Industry participants say that the making staff understand the significance of reporting quality excursions must be top-driven from the senior management. There should also be a quality manager designate reporting directly to top management.

Trend spotting

“By 2016, over 50% of the top 50 best–selling drugs will require cold chain transportation. So logistics providers in the sector will have to adapt accordingly,” observed Kevin Hill, regional sales and marketing director, Agility. With its 104,500sqm warehouse catering to operations across MENA, Agility counts more than 350 pharmacies, 40 clinics and 21 hospitals in Kuwait in its distribution network.

Hellmann’s Eric notices the industry move from a ‘one size fits all’ approach to segmentation and personalisation. “With more high value products now being dealt with, security requirements and measures are expected to gain significance. Global developments such as serialisation and 2D printing are also reaching our vertical in the Middle East as the world keeps getting smaller,” he added.

DHL’s Mitchell speaks of interesting developments around packaging solutions, and notes: “Hybrid thermal packaging is evolving; localisation of reefers is getting more accurate; and data analytics based on ambient temperature data is also picking up.”

DHL Thermonet, a product from DHL Global Forwarding provides temperature visibility along the supply chain enabling 24/7 proactive monitoring and intervention.

Right place and right time

Despite healthcare logistics being extremely niche, it presents plenty of opportunities for MENA’s logistics industry.
“The geographic location of the Middle East is an advantage for this region as it is a major transhipment hub connecting Asia to Europe and Africa. Free trade zones established also encourage growth of healthcare sector,” stressed Robertson of Logistics Insights.

“The region has the opportunity to leverage the latest digital technologies, enabling companies to leap frog what is found in the more established health systems in the West,” add PwC’s Wilson and Jones.

The Achilles Heel

However, before jumping on the bandwagon, logistics providers must take stock of impediments.
The environmental conditions in the Middle East are a primary challenge, requiring well-planned and controlled transport systems.

As per Hellmann Logistics, the challenges they face mainly relate to climatic extremes and the need for a regional standard. There is no regional equivalent of the US and EU standards and regulations at the moment, they said.
DHL points to differences in the quality of infrastructure between mature and emerging markets that add to the cost of delivering healthcare solutions in the region.

‘Reverse Logistics’ can also not be ignored. Recalled and expired shipments need to be disposed in the best possible manner, and in entirety. Experts say that logistics companies should use globally recognised coding systems for pharma products as an identifier for better traceability and disposal of medical waste.

Even with all the SOPs in ship shape, logistics companies still require personnel who share the same values as the organisation when it comes to quality. The staff should also be trained on latest guidelines and developments in this line.


Hellmann Logistics is working on its warehouse extension project which will see current warehouse capacity of the company being doubled by adding over 12,500 temperature-controlled pallet positions. The company expects this additional space to be operational by mid-2016.

DHL is also bullish about this vertical. Following their successful introduction of ‘Thermonet’ – temperature controlled air-freight solution – the company said it is working on enhancing this offering to make it an option for ocean freight customers as well. DHL also expects significant opportunities in Iran.

Capitalising on its core strength as a logistics provider for the pharma industry, Agility is highly optimistic about pharma solutions. For one of its global pharma clients, Agility has enabled an ‘Integrated Control Tower Solution’ – a one-source setup that enables total supplier management and transport flow management.

Saudi Arabia’s King Abdullah Economic City (KAEC) is keen to position itself as a strategic hub for pharmaceutical companies. As per a recent official release, pharma company Pharmaline has partnered with KAEC to build and operate its first Saudi Arabian pharmaceutical plant in KAEC’s Industrial Valley.

The projects in progress and the demand pipeline just go on as MENA has both opportunities and capabilities going in its favour.  The time is ideal to leverage smart technologies to grow this niche vertical and capabilities of 3PLs and 4PLs in the region also support re-imagination of supply chain models to ones that are leaner and more transparent.

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