With a potential COVID-19 vaccine on the horizon, shippers need to prepare for supply chain disruptions during ‘the biggest product launch in history.’
News of a possible vaccine from China this week has sparked an increase in air charter rates that could have widespread implications during a peak season already struggling with tight capacity and soaring rates. According to The LOADSTAR, there is speculation that 60 charters have been booked from Tianjin to the U.S. to distribute the vaccine, and many more from Beijing and Tianjin to the Middle East, and some charter operators have even started to cancel agreements for commercial goods.
Air Cargo Industry Isn’t Prepared
According to a recent survey conducted by The International Air Cargo Association (TIACA) and Pharma.Aero, the air cargo industry is far from ready to handle the monumental effort of distributing vaccines to the world’s population. The survey, completed by 181 airlines, airport operators, ground handlers, and freight forwarders, found that only 28% of responders feel ‘well prepared’ for the undertaking, while 19% described themselves as feeling ‘very unprepared’. But the true level of air cargo’s preparedness will only become evident once vaccine production commences.
In the meantime, there are just too many unknowns, including where production will likely get underway first, which airlines/airports have the best life sciences capabilities, how much capacity will be needed, how much will be transported by truck, and what is the optimal transport temperature. The International Air Transport Association (IATA) currently predicts that some 8,000 wide-body freighters will be required to transport the vaccine to the global population assuming the vaccine can be delivered in a single-shot vaccine, but most of those in advanced stages of trial are designed for two injections. We don’t even know how long the vaccine will be effective. Will we need yearly vaccinations, like the flu shot? Meanwhile, DHL Express and McKinsey estimate that 15,000 freights will be needed.
The reality is, no one knows just how many aircraft will be needed. Two critical unknowns will actually determine how many freighters will be required – the type packaging that will be used and how much dry ice is required to maintain product integrity. Package size will influence how much product can fit in a shipping container. Dangerous goods regulations strictly limit how much dry ice can be carried on planes. This is because as it warms, it turns to into vapor that can harm the crew or cause an explosion if enough pressure builds up inside a package.
One thing is for certain though – all major gateways will be involved. And in any case, general cargo will be bumped as carriers look to cash in on the situation.
Supply Chain Risks
Due to the unprecedented quantity, urgent demand, and the current global trade climate, the survey also highlighted a number of risks regarding transport of the vaccines, which will also impact shippers of general cargo, including:
- Handling and storage shortages
- Capacity shortages
- Equipment (container) shortages
- Shipment delays
- Increased costs
Vaccine Distribution Timetable
Another important consideration for shippers to note is the global distribution of vaccines will require an extended effort. According to Need Jones Shah, a director at TIACA, “This isn’t a four-week effort. This is going to be an 18-month project. Maybe there will be a surge in the beginning, then a more regular cadence of shipments. We’re in for volatility for sure.”
Where Are the Vaccines?
As Pfizer’s vaccine nears the home stretch of its phase 3 clinical trials, the drugmaker is scaling up an ambitious distribution system to deliver hundreds of millions of doses around the world. The company plans to ship 7.6 million doses daily from their distribution sites in Kalamazoo, Michigan and Puurs, Belgium to nearby airports, utilizing two dozen trucks and roughly 20 planes per day from FedEx, UPS, and DHL, as well as additional trucking from the receiving airports to the vaccination sites and cold-storage warehouses. If everything goes according to plan, the drugmaker plans to file for a potential emergency use authorization next month, with shipments following soon afterwards.
Moderna, Johnson & Johnson, AstraZeneca, and Novamax are also in late-stage testing and have been working up their own manufacturing and distribution plans, which have yet to be announced.
Advice for Shippers
What can shippers do to mitigate supply chain disruptions? Listed below are a few suggestions.
- Hone long-term forecasting tools. Plan deliveries of raw materials and components well in advance of when they will actually be needed to avoid supply chain disruption.
- Consider alternative transport scenarios: Switch from airfreight services to premium ocean cargo or change your distribution strategy to smaller gateways.
- Identify mission-critical items: Your list should include your biggest sellers, items that go directly into your products, key replacement parts and maintenance products, and inventory items you may use only in small quantities but are crucial to your operation.
- Maintain a healthy inventory: While many industries have typically run tight inventories, carrying a greater inventory of key products during these times of uncertainty will enable you to maintain operations and meet the needs of your customers.
- Model financial impacts: Understand the ripple effects of your inventory management changes. Margins will likely decrease while you implement protective measures and backup plans, your inventory-to-sales ratio may increase, and your inventory-turn metrics may reflect longer turns. Adjust your cost and cash forecasting models and KPIs to reflect the new reality.
- Evaluate new and existing suppliers: Do your homework and conduct a risk analysis. Can you source from additional regions? Are there new suppliers who can supplement your supply chain – even if it’s temporary?
- Consider new consignment arrangements: Would your vendors and suppliers be able to hold inventory for you or be willing to put supplies in your plant on consignment? This protective buffer could be win-win for each party in the event of a disruption.
- Secure additional warehouse space: With the eCommerce boom, getting goods to customers quickly has increase the demand for warehouse space, which quickly accelerated during the lockdowns, especially for cold storage. Once a vaccine is approved, demand for cold storage will skyrocket.
- Stay in the know: The delivery of COVID-19 vaccines will be one of the biggest logistical challenges in modern history, and the impact will be felt on the global supply chain. Early on in the pandemic when shipments of PPE bottlenecked the supply chain, it became painfully clear that disruptions in the supply chain can cause major problems across all industries and verticals. Monitor vaccine development to effectively manage and mitigate supply chain disruptions to keep your goods moving.
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Sources:
- The LOADSTAR, Air cargo not ready for ‘biggest product launch in history’ – the vaccines, and Vaccine charter flights: carriers get set to chase a slice of the Covid cake
- American Shipper, Will we really need 8,000 jumbo jets to transport COVID vaccines?
- FIERCE Pharma, Planes, trucks and ultracold boxes: Pfizer preps massive COVID-19 vaccine distribution effort
