Ben Ames has spent 20 years as a journalist since starting out as a daily newspaper reporter in Pennsylvania in 1995. From 1999 forward, he has focused on business and technology reporting for a number of trade journals, beginning when he joined Design News and Modern Materials Handling magazines. Ames is author of the trail guide "Hiking Massachusetts" and is a graduate of the Columbia School of Journalism.
The pharmaceutical supply chain moves billions of dollars worth of drugs and medical products each year in the U.S. alone. Like other supply chains handling high-value, time-sensitive goods, it faces increasing demands from shippers and consignees to maintain product integrity, and from the federal government to comply with regulations. All the while, it is striving to prevent theft and counterfeiting.
The financial impact is enormous. The flow of counterfeit pharmaceuticals is on pace to equal 5 percent of the global drug market by 2016 and to cost the pharmaceutical industry about $70 billion in worldwide sales, according to a 2013 study, "Building New Strengths in the Healthcare Supply Chain," by consultancy McKinsey & Co. But the problem goes beyond money. People suffering from diabetes, heart disease, HIV, and other diseases can become seriously ill if their medication lacks therapeutic value because it is fake or stale.
The solution to the twin challenges of improved compliance and reduced counterfeiting may lie with improving the supply chain's track and trace capabilities, an obligation that will fall partly on the shoulders of logistics professionals. The Drug Supply Chain Security Act (DSCSA)—a section of the Drug Quality and Security Act (DQSA) of 2013—calls for the 10-year phase-in of an array of requirements that will lead to the creation of an electronic track and trace system. Through this system, the Food and Drug Administration (FDA) will be able to pinpoint the location of any drug throughout the supply chain and drill down to the individual package level.
However, few in the field understand how to manage the flood of data that will need to be generated, stored, and retrieved in support of this ambitious system. Experts say that if companies want to avoid stiff fines for noncompliance, they will have to make significant investments in information technology and in increased training for supply chain personnel.
3PLs GET AHEAD OF THE CURVE
That's not to say shippers will have to cope with all this on their own. Many will turn to third-party logistics service providers (3PLs) for help. Although the new law relieves 3PLs of the most onerous regulatory burdens by identifying them as having only temporary possession of the drugs (not full product ownership as drug manufacturers, wholesale drug distributors, re-packagers, and pharmacies do), many have nonetheless developed state-of-the-art tracking and tracing capabilities.
"From a 3PL standpoint, we don't purchase or take ownership, but we are in possession of the shipment; it is stored in our facility and tracked in our WMS (warehouse management system)," said Tim Bishop, healthcare compliance manager for UPS Inc., the Atlanta-based transportation and logistics giant. "So the details of that particular drug are known to us: where it came from, where it went, when we shipped it, [and] how much we sent."
By working with a 3PL, pharmaceutical shippers can take advantage of that tracking data and work in concert with their carrier to stay in compliance with the new regulations. Some of the largest providers are already preparing for those partnerships.
Contract logistics firm Exel and its sister company DHL Supply Chain, both of which have worked in the healthcare supply chain for many years, have developed serialization systems to help life science and healthcare (LSH) companies manage the cost of complying with the new regulations. UPS has contracted with an unidentified technology provider to transact DSCSA-mandated shipping data, a service Bishop said will be invaluable to small to mid-sized businesses. UPS is also creating a digital repository to store the three types of required reports—transaction history, transaction information, and transaction statements—known in the industry by the abbreviation TH/TI/TS, or by the shorthand "T3."
Although the FDA will not require companies to shift from paper to electronic T3 records until 2017, many drug firms are making the switch now to be ready for the huge volumes of data that will need to be processed. Big healthcare distribution specialists like Dublin, Ohio-based Cardinal Health Inc., San Francisco-based McKesson Corp., and Chesterbrook, Pa.-based AmerisourceBergen Corp. have already migrated to digital systems to enable the transfer of data between supply chain partners.
"Paper is great ... but there are not enough filing cabinets in the world to store this much data," Bishop said. "And the law requires that you keep the data for six years and [be able to] produce it on 24-hour notice ... it's a little mind-blowing."
The current industry standard for handling digital records is through advance shipping notices (ASNs) transmitted via electronic data interchange (EDI). However, many smaller companies continue to use paper packing slips. That practice will evolve in coming years toward the EPCIS (electronic product code information services) data standard as shippers prepare for the full implementation of DSCSA regulations, tracking every saleable unit of prescription drugs by a unique serial number.
BIG PAYOFF
Investing in the adoption of a global data standard for pharmaceutical logistics could be money well spent, according to the McKinsey study. Establishing a single track and trace technology for medical products could cut counterfeiting in half, yielding $15 billion to $30 billion in sales by 2016 that would otherwise be lost to counterfeits, the study showed.
The DSCSA regulations also benefit pharmaceutical product distributors and 3PLs by setting a uniform set of supply chain rules, replacing the patchwork of state regulations that preceded the federal standard, according to Eric Newmark, program director for industry cloud and commercial life sciences at IDC Health Insights.
But the major benefits won't arrive until 2023, when the FDA fully implements its item-level and package-level visibility requirements. This will foster an efficient product recall process and enhance law enforcement efforts, experts said.
"There are enormous inefficiencies ... throughout the industry; this is a problem in the billions of the dollars per year in the global industry," Newmark said. "This is a huge guessing game. If you don't have visibility, you have to recall 10 times as many drugs."
CHALLENGES FOR SHIPPING DRUGS
When healthcare companies choose a 3PL to distribute their life science products, they should make sure the partner can overcome some common hurdles.
One problem with the precision tracking requirements is that warehouse workers can't retract a published ASN to correct a simple loading mistake. If workers ship 11 crates instead of 10, the transaction histories won't match up and the shipment will have to sit idle until the corrected paperwork catches up. That can be a slow and costly process.
Another common problem is shipping a load to the proper customer but to the wrong location. Some pharmaceutical products are temperature controlled, and the receiver may not want to return a valuable product and risk its becoming stale in warm weather. That can result in another costly delay while replacements are sent.
A third challenge may be training a warehouse management system (WMS) to recognize exceptions to DSCSA-controlled products. Most WMS platforms have no trouble tracking a batch of prescription pills, but the same pharmaceutical manufacturer may also ship related materials that do not fall under the act, such as over-the-counter medicines and simple medical devices that do not require strict tracking.
SOLUTION MAY BE IN THE CLOUD
Distribution center managers may not have to buy new material handling or tracking systems to comply with the pharmaceutical tracking law, but they will probably need to train floor workers and logistics coordinators to manage the immense amount of data that will be created.
"Visualization of products stops now at the lot level, but when you get down to the case and pallet level, and then the item level, you will be looking at a thousand or ten thousand times as much data being created, so there will be an enormous influx of data," said Newmark of IDC. "And they will need the ability to handle, organize, sort, and store all that data. That will be interesting."
That is why many businesses are choosing to bypass on-site servers entirely and subscribe to cloud-based supply chain transaction management solutions from providers like Axway, rfXcel Corp., and SAP.
"When the FDA comes calling, you'd better have maintained those documents," said Shabbir Dahod, CEO of North Reading, Mass.-based TraceLink, which offers a cloud-based track and trace network to subscribers. "As you pick and pack from your DC, you have to correlate that with the transaction history to prove the link to the product or ... that it was shipped to customers A to Z."
Smaller companies may not have the budget for these requirements, and even larger players may choose to avoid incurring the extra cost of IT support. By using a cloud-based solution, a 3PL provider can use a Web browser to track and trace all of its products, manage large-scale serialization of drug units, and exchange data with its trading partners, experts said.
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.
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.”
That result showed that driver wages across the industry continue to increase post-pandemic, despite a challenging freight market for motor carriers. The data comes from ATA’s “Driver Compensation Study,” which asked 120 fleets, more than 150,000 employee drivers, and 14,000 independent contractors about their wage and benefit information.
Drilling into specific categories, linehaul less-than-truckload (LTL) drivers earned a median annual amount of $94,525 in 2023, while local LTL drivers earned a median of $80,680. The median annual compensation for drivers at private carriers has risen 12% since 2021, reaching $95,114 in 2023. And leased-on independent contractors for truckload carriers were paid an annual median amount of $186,016 in 2023.
The results also showed how the demographics of the industry are changing, as carriers offered smaller referral and fewer sign-on bonuses for new drivers in 2023 compared to 2021 but more frequently offered tenure bonuses to their current drivers and with a greater median value.
"While our last study, conducted in 2021, illustrated how drivers benefitted from the strongest freight environment in a generation, this latest report shows professional drivers' earnings are still rising—even in a weaker freight economy," ATA Chief Economist Bob Costello said in a release. "By offering greater tenure bonuses to their current driver force, many fleets appear to be shifting their workforce priorities from recruitment to retention."