The state of California has postponed its e-pedigree requirement to 2011, giving manufacturers more time to assure that all drugs distributed within the state's borders are accompanied by electronic pedigrees that document their history.
John Johnson joined the DC Velocity team in March 2004. A veteran business journalist, John has over a dozen years of experience covering the supply chain field, including time as chief editor of Warehousing Management. In addition, he has covered the venture capital community and previously was a sports reporter covering professional and collegiate sports in the Boston area. John served as senior editor and chief editor of DC Velocity until April 2008.
Cardinal Health's state-of-theart distribution center in Sacramento, Calif., is all dressed up with nowhere to go. More than six months ago, the pharmaceutical and health-care products distributor fully equipped its DC with RFID technology to meet California's upcoming electronic pedigree (e-pedigree) requirement.
But now that Cardinal Health is fully compliant, it can't find a dance partner. Although it conducted successful RFID e-pedigree trials with several pharmaceutical manufacturers last year, none will be ready to apply RFID tags to all of the products they ship to Cardinal Health anytime soon. So while Cardinal Health is ready to move forward, it has no choice but to put its plans for full deployment on hold until its manufacturing partners are ready.
"In order to meet the California requirement, we'd have to receive all products with RFID tags and [the industry] just isn't there yet," says Tara Schumacher, a spokeswoman for Cardinal Health.
Currently scheduled to take effect on Jan. 1, 2011, California's law is by far the most aggressive drug pedigree law in the United States as well as the only one to require electronic tracking. As of that date, the state will require that all drugs distributed within its borders be accompanied by an electronic pedigree that documents their movement through the supply chain. The measure calls for pharmaceutical manufacturers to originate item-level e-pedigrees for their drugs and requires companies within the pharmaceutical supply chain (including distributors like Cardinal Health) to update those pedigrees upon each change of ownership. Although the law does not mandate the type of technology to be used, most manufacturers and wholesalers are turning to either RFID tags or two-dimensional (2D) bar codes, which hold more information than a traditional bar code.
Penalties for not falling into line could be severe. Dr. Paul Rudolf, a former senior adviser for the Food and Drug Administration who has been helping the drug industry decipher the California law, says that companies that don't comply face the possibility of fines of up to $5,000 per occurrence; for one shipment of 100 units that don't meet the e-pedigree standard, that equals a $500,000 fine. However, in a Webcast on the subject, he noted that it's possible that California will issue warnings first, allowing companies some additional time to meet the mandate.
Meeting the mandate appears to be a serious stumbling block right now. Although many drug wholesalers and distributors are prepared for the initiative, drug manufacturers have lagged. In fact, the California State Board of Pharmacy (CSBP) has been flooded with requests to postpone the effective date of the legislation for up to two years. As for why so many manufacturers are apparently unprepared, Carol Rozwell, vice president and distinguished analyst at Stamford, Conn.-based research and consulting firm Gartner, says it's partly because they haven't been drawn into the pedigree fray until now. Laws in other states don't require tracking until after the product has been shipped to a wholesaler.
The CSBP, however, is holding firm to its January date. The board believes that the e-pedigree mandate represents the best remedy for what ails the pharmaceutical supply chain—mainly, counterfeiting and theft. And it plans to go forward with the mandate this January.
Startup hurdles
But several things must fall into place for that to happen. Under the California law, drug makers must initiate e-pedigrees with unique identification numbers for each of their products at the smallest saleable unit level. For this to occur, the pharmaceutical industry must first agree on a standards-based approach and a single RFID protocol and technology, said Cardinal Health in a statement issued last year. Otherwise, the industry will be dogged by significant process and cost inefficiencies.
There are also some technical issues to be resolved with RFID. Steve Inacker, executive vice president of global supplier services at Cardinal Health, says that technology and process improvements are needed to consistently achieve acceptable read rates at all packaging levels.
And right now, cost remains a barrier—at least to RFID adoption. Greg Cathcart, senior vice president of sales, marketing, and services at SupplyScape, a Woburn, Mass. based e-pedigree-solutions provider, says that 80 percent of pharmaceutical manufacturers have adopted the less expensive 2D bar-code option. However, with new RFID-based solutions hitting the market at a fast pace, some analysts predict a wholesale shift from 2D bar codes to RFID over the next 12 months.
Though the masses may be flocking to bar codes, there are still a number of companies, including some industry heavyweights, that have been using RFID for some time now. Pharmaceutical giant Pfizer has been tagging every bottle of Viagra it produces since the end of 2005, and last year, the drug maker announced plans to begin tagging cases and pallets of overthe-counter pain reliever Celebrex. Speaking at the RFID Healthcare Industry Adoption Summit in Washington, D.C., last year, Byron Bond, director of trade operations and customer service for Pfizer, said the first RFID-enabled cases and pallets of Celebrex would be ready to roll off the manufacturing line by late last year, with tagged product working its way to wholesalers and pharmacies by early 2008.
Applying tags to cases and pallets of Celebrex is much more complicated than tagging Viagra, which is produced on a single production line in France. Celebrex is produced on four high-speed lines at Pfizer's manufacturing facility in Puerto Rico.
"We wanted to roll out the technology being applied to Viagra somewhere else. Celebrex far outsells Viagra and it's a high-volume product," Bond said at the time. "Within the next four to six years, we expect to have something close to a universal track and trace [e-pedigree mandate], so we realize we need to spread our RFID capabilities into other areas."
Another RFID veteran is Purdue Pharma L.P. Purdue has been using RFID as a security measure for its narcotic painkiller OxyContin since 2005. The drug maker has also been tagging another potent painkiller, Palladone, for just over three years.
A productivity cure, too
Once the industry settles on an e-pedigree solution, the benefits should go well beyond track and trace capabilities for drug wholesalers, especially those that embrace the change as an opportunity to do more than just meet a mandate.
"Unfortunately it's too easy to just focus on compliance, with the attitude that meeting the regulatory mandate is just going to be a lot of hassle and expense," says Gartner's Rozwell. "But many companies are taking advantage of having this new information at a very detailed level about their products, and the fact that they have much greater inventory visibility. The upside is actionable intelligence that can be used to maximize efficiencies and re-engineer the business."
Cardinal Health understands fully what that upside can look like. The company plans to leverage the new data made available by RFID technology to identify opportunities to boost efficiency in key areas, including returns and order accuracy, which can deliver value to the entire pharmaceutical supply chain.
Global Pharmaceutical Sourcing (GPS), a Bethesda, Md.-based wholesaler of drugs and medical supplies, is also benefiting from an e-pedigree solution. The company has invested in a pedigree system from SupplyScape that allows it to track products carrying 2D bar codes as they enter GPS's distribution centers across the country.
Hani Eshack, senior vice president of technology at GPS, says the company began pursuing an e-pedigree system long before the California law entered the picture. One upside of that decision is that today, in addition to being in compliance with the California measure, GPS has begun realizing some in-house process improvements.
Among other benefits, GPS is saving vast amounts of paper, says Eshack. Under the company's paper-based system, a stack of paperwork almost an inch thick accompanied most orders out the door of GPS's DCs. "There was a huge amount of photocopying, paperwork, and faxing," recalls Eshack. With e-pedigrees, that is eliminated entirely.
In addition, the company's e-pedigree solution has reduced labor and expedited order processing, resulting in greater throughput in its distribution facilities. Yet in Eshack's eyes, there's an even bigger benefit. "More importantly," he says, "this is helping our company to realize some of the high ethical standards we set for the company about assuring ourselves and our customers—particularly the patient—that they are getting what they paid for and that it is authentic."
Most of the apparel sold in North America is manufactured in Asia, meaning the finished goods travel long distances to reach end markets, with all the associated greenhouse gas emissions. On top of that, apparel manufacturing itself requires a significant amount of energy, water, and raw materials like cotton. Overall, the production of apparel is responsible for about 2% of the world’s total greenhouse gas emissions, according to a report titled
Taking Stock of Progress Against the Roadmap to Net Zeroby the Apparel Impact Institute. Founded in 2017, the Apparel Impact Institute is an organization dedicated to identifying, funding, and then scaling solutions aimed at reducing the carbon emissions and other environmental impacts of the apparel and textile industries.
The author of this annual study is researcher and consultant Michael Sadowski. He wrote the first report in 2021 as well as the latest edition, which was released earlier this year. Sadowski, who is also executive director of the environmental nonprofit
The Circulate Initiative, recently joined DC Velocity Group Editorial Director David Maloney on an episode of the “Logistics Matters” podcast to discuss the key findings of the research, what companies are doing to reduce emissions, and the progress they’ve made since the first report was issued.
A: While companies in the apparel industry can set their own sustainability targets, we realized there was a need to give them a blueprint for actually reducing emissions. And so, we produced the first report back in 2021, where we laid out the emissions from the sector, based on the best estimates [we could make using] data from various sources. It gives companies and the sector a blueprint for what we collectively need to do to drive toward the ambitious reduction [target] of staying within a 1.5 degrees Celsius pathway. That was the first report, and then we committed to refresh the analysis on an annual basis. The second report was published last year, and the third report came out in May of this year.
Q: What were some of the key findings of your research?
A: We found that about half of the emissions in the sector come from Tier Two, which is essentially textile production. That includes the knitting, weaving, dyeing, and finishing of fabric, which together account for over half of the total emissions. That was a really important finding, and it allows us to focus our attention on the interventions that can drive those emissions down.
Raw material production accounts for another quarter of emissions. That includes cotton farming, extracting gas and oil from the ground to make synthetics, and things like that. So we now have a really keen understanding of the source of our industry’s emissions.
Q: Your report mentions that the apparel industry is responsible for about 2% of global emissions. Is that an accurate statistic?
A: That’s our best estimate of the total emissions [generated by] the apparel sector. Some other reports on the industry have apparel at up to 8% of global emissions. And there is a commonly misquoted number in the media that it’s 10%. From my perspective, I think the best estimate is somewhere under 2%.
We know that globally, humankind needs to reduce emissions by roughly half by 2030 and reach net zero by 2050 to hit international goals. [Reaching that target will require the involvement of] every facet of the global economy and every aspect of the apparel sector—transportation, material production, manufacturing, cotton farming. Through our work and that of others, I think the apparel sector understands what has to happen. We have highlighted examples of how companies are taking action to reduce emissions in the roadmap reports.
Q: What are some of those actions the industry can take to reduce emissions?
A: I think one of the positive developments since we wrote the first report is that we’re seeing companies really focus on the most impactful areas. We see companies diving deep on thermal energy, for example. With respect to Tier Two, we [focus] a lot of attention on things like ocean freight versus air. There’s a rule of thumb I’ve heard that indicates air freight is about 10 times the cost [of ocean] and also produces 10 times more greenhouse gas emissions.
There is money available to invest in sustainability efforts. It’s really exciting to see the funding that’s coming through for AI [artificial intelligence] and to see that individual companies, such as H&M and Lululemon, are investing in real solutions in their supply chains. I think a lot of concrete actions are being taken.
And yet we know that reducing emissions by half on an absolute basis by 2030 is a monumental undertaking. So I don’t want to be overly optimistic, because I think we have a lot of work to do. But I do think we’ve got some amazing progress happening.
Q: You mentioned several companies that are starting to address their emissions. Is that a result of their being more aware of the emissions they generate? Have you seen progress made since the first report came out in 2021?
A: Yes. When we published the first roadmap back in 2021, our statistics showed that only about 12 companies had met the criteria [for setting] science-based targets. In 2024, the number of apparel, textile, and footwear companies that have set targets or have commitments to set targets is close to 500. It’s an enormous increase. I think they see the urgency more than other sectors do.
We have companies that have been working at sustainability for quite a long time. I think the apparel sector has developed a keen understanding of the impacts of climate change. You can see the impacts of flooding, drought, heat, and other things happening in places like Bangladesh and Pakistan and India. If you’re a brand or a manufacturer and you have operations and supply chains in these places, I think you understand what the future will look like if we don’t significantly reduce emissions.
Q: There are different categories of emission levels, depending on the role within the supply chain. Scope 1 are “direct” emissions under the reporting company’s control. For apparel, this might be the production of raw materials or the manufacturing of the finished product. Scope 2 covers “indirect” emissions from purchased energy, such as electricity used in these processes. Scope 3 emissions are harder to track, as they include emissions from supply chain partners both upstream and downstream.
Now companies are finding there are legislative efforts around the world that could soon require them to track and report on all these emissions, including emissions produced by their partners’ supply chains. Does this mean that companies now need to be more aware of not only what greenhouse gas emissions they produce, but also what their partners produce?
A: That’s right. Just to put this into context, if you’re a brand like an Adidas or a Gap, you still have to consider the Scope 3 emissions. In particular, there are the so-called “purchased goods and services,” which refers to all of the embedded emissions in your products, from farming cotton to knitting yarn to making fabric. Those “purchased goods and services” generally account for well above 80% of the total emissions associated with a product. It’s by far the most significant portion of your emissions.
Leading companies have begun measuring and taking action on Scope 3 emissions because of regulatory developments in Europe and, to some extent now, in California. I do think this is just a further tailwind for the work that the industry is doing.
I also think it will definitely ratchet up the quality requirements of Scope 3 data, which is not yet where we’d all like it to be. Companies are working to improve that data, but I think the regulatory push will make the quality side increasingly important.
Q: Overall, do you think the work being done by the Apparel Impact Institute will help reduce greenhouse gas emissions within the industry?
A: When we started this back in 2020, we were at a place where companies were setting targets and knew their intended destination, but what they needed was a blueprint for how to get there. And so, the roadmap [provided] this blueprint and identified six key things that the sector needed to do—from using more sustainable materials to deploying renewable electricity in the supply chain.
Decarbonizing any sector, whether it’s transportation, chemicals, or automotive, requires investment. The Apparel Impact Institute is bringing collective investment, which is so critical. I’m really optimistic about what they’re doing. They have taken a data-driven, evidence-based approach, so they know where the emissions are and they know what the needed interventions are. And they’ve got the industry behind them in doing that.
Chief supply chain officers (CSCOs) must proactively embrace a geopolitically elastic supply chain strategy to support their organizations’ growth objectives, according to a report from analyst group Gartner Inc.
An elastic supply chain capability, which can expand or contract supply in response to geopolitical risks, provides supply chain organizations with greater flexibility and efficacy than operating from a single geopolitical bloc, the report said.
"The natural response to recent geopolitical tensions has been to operate within ‘trust boundaries,’ which are geographical areas deemed comfortable for business operations,” Pierfrancesco Manenti, VP analyst in Gartner’s Supply Chain practice, said in a release.
“However, there is a risk that these strategies are taken too far, as maintaining access to global markets and their growth opportunities cannot be fulfilled by operating within just one geopolitical bloc. Instead, CSCOs should embrace a more flexible approach that reflects the fluid nature of geopolitical risks and positions the supply chain for new opportunities to support growth,” Manenti said.
Accordingly, Gartner recommends that CSCOs consider a strategy that is flexible enough to pursue growth amid current and future geopolitical challenges, rather than attempting to permanently shield their supply chains from these risks.
To reach that goal, Gartner outlined three key categories of action that define an elastic supply chain capability: understand trust boundaries and define operational limits; assess the elastic supply chain opportunity; and use targeted, market-specific scenario planning.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”