The pandemic was a truly Black Swan event. We’ve seen supply chain disruptions in the past, but the magnitude of this disruption was very far-reaching because both the supply and demand ends of the value chain got impacted simultaneously. As we know, the Indian pharma industry gets a lot of bulk drugs, chemicals, and key starting materials from China. In the past, given the disruptions that supply chain professionals have seen, specifically in pharma, the industry has relied on building excess inventory of key materials. We were thinking that once China probably is out of the disruption, things will be back to normal.
This was sometime in February 2020 when the virus started to spread. By March 2020, India, along with the entire world, came to a grinding halt. Though pharmaceuticals were part of the essential services, we have to understand that pharmaceutical manufacturing is dependent on a very long value chain. For example, you can manufacture all the drugs and keep them ready, but how do you pack them? The local printers, foil manufacturers, and carton manufacturers have to be ready and operating to supply you those printed components to pack the material.
Beyond procuring materials, manufacturing, and packing was a critical part of shipping the finished goods to over 150+ countries globally.
During the peak of the pandemic, both air and sea freight logistics were impacted. The air freight impact was more pronounced, as 65-70 per cent of air freight moves on passenger air belly, and since all passenger air movement had stopped, it posed a new challenge to pharma companies to ensure critical lifesaving drugs reach patients globally.
Post-pandemic air cargo, in my view, will continue to play a very important and pivotal role in the pharma growth story for India, not just to meet global medicine needs but also in catering to the growing domestic demand. India is emerging as a strong, reliable, and dependent global pharma leader delivering critical life-saving drugs and is expected to achieve double-digit growth for the next 7-10 years, taking the overall pharma industry value too close to ~$125 billion (from the current ~$50 billion) by 2030. This growth, fueled by both domestic and international needs, coupled with the speed and security required in the delivery of sensitive life-saving drugs and vaccines, will need to be aptly supported by the entire air cargo industry, in my opinion. The overall global pharma logistics industry is expected to expand from ~$95 billion to more than $270 billion by 2030, with a majority of this growth expected to come from air cargo movement.
Pharma goods are ‘high value low volume’ density cargo. With the entire air logistics infrastructure being created in India (the number of airports has doubled in the last 8 years to close to 150, and air passenger traffic is expected to triple in the next 10 years), I see this as an excellent opportunity for the air cargo industry to enable the growth engine of pharma. If this is coupled with an integrated end-to-end service that logistics service providers can provide to the pharma industry, it can be a potential game changer, adding speed of delivery, logistics security (tools to geo-fence cargo movement), and cool/ cold chain management, ensuring that sophisticated vaccines and biologics are moved within India and globally with little risk.
When we talk about air cargo, cost is something that comes to mind, and as shippers, we have to be cognizant and mindful of logistics costs as this directly affects the bottom line for the industry. It becomes even more important when we talk about delivering affordable and cost-effective drugs to the 7+ billion global population spread across more than 150+ countries. That is where the National Logistics Policy, under the umbrella of PM GatiShakti, is expected to play an important role and bring down logistics costs from ~14 per cent of GDP to ~8 per cent in the next 5-7 years. As the entire logistics sector becomes more organised, costs are expected to come down, and efficiency is expected to improve. ULIP (Unified Logistics Interface Platform) enabled with Blockchain and AI will ensure that both shippers and service providers are able to maximise the benefits of the new tools and technology being deployed.
Some of the biggest challenges that pharma shippers face today in the movement of drugs are real-time visibility and traceability of their cargo. Also, cold chain integrity is important to ensure there are no temperature excursions during cargo movement, which could negatively impact the efficacy and safety of the drugs, along with logistics security, ensuring no spurious or counterfeit drugs enter the drug supply chain, which is critical considering that as high as 16-18 per cent of the drugs being consumed globally are counterfeits. This is where I feel the air cargo industry can partner with the pharma industry to provide solutions using the latest tools and technology.
The adoption of IT and blockchain technology in logistics is going to benefit the industry greatly. Technology is expected to bring end-to-end visibility into the movement of goods. Real-time updates to shippers on goods movement, along with technology-driven predictive, prescriptive, and preventive measures, will ensure that the safety and security of pharma drug movement are never compromised.
Another interesting and high-potential aspect of the logistics movement in pharma in the near future is going to be drones. Drones are expected to bring speed and efficiency, especially in the last-mile delivery of cold/cool chain drugs, which is a weak link in the drug supply chain.
Views expressed by Vickram Srivastava, Head of Planning – Global Supply Chain, Sun Pharma
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