Logistics - Globalization, outsourcing and a trend towards generics and biopharmaceuticals are some of the key factors shaping todays supply chains for the life sciences and healthcare industries. Logistic providers such as DHL offer special solutions to serve their customers in these industries.

Dr. Sonja Andres asked Angelos Orfanos, President, Life Sciences and Healthcare, DHL Customer Solutions & Innovation, about performance requirements, the impact of stricter regulations and the influence of Emerging Markets.

CHEManager Europe: Mr. Orfanos, please tell us about your general product structure in the life science and healthcare market. What are the "key markets" for these products and what are their estimated volumes? Is DHL targeting some of these markets more than others?

Angelos Orfanos: Across all of our four operating business units under the DHL brand we have customised services and solutions for the Life Sciences and Healthcare market. DHL's core services are warehouse and order fulfilment as well as transportation management. Additionally we offer secondary packaging, hospital logistics, cold chain airfreight, cold chain road freight and clinical trial logistics - and we support the industry across the entire value chain.

Regarding what markets we service more than others: in terms of production the US market and the Western European market continue to be the largest markets. They are forecasted to stay the largest markets until 2020. India has evolved into the third largest production site country and China, which was number ten a year ago, is projected to move up into the top five by the year 2020. China will grow significantly in terms of production particularly in active pharmaceutical ingredients.

In terms of consumption the US, Japan, Germany, France, and China make the top five today. Brazil, Russia, India, China, as well as Mexico and Turkey are the emerging markets. Those will be the markets of growth for the future as the traditional markets continue to stay strong. The industry is investing in those markets and so are we. That is where we see ourselves investing and developing services.

What must be done to ensure a good performance in logistics to these markets?

Angelos Orfanos: We take a look at the market place to define good performance. Life Sciences and Healthcare products are very different to, say, car tires or clothes. They demand a higher degree of quality. Performance is driven by not only on-time delivery and efficient supply, but also by handling those products, moving them around the world and storing them.

To meet those performance requirements we as the logistics provider for the Life Sciences and Healthcare industry provide our customers with the industry's most advanced infrastructure and network, irreproachable service quality, innovation and simplicity of solutions as well as unsurpassed expertise and know-how.

Have there been crucial changes in the basic conditions in the last years?

Angelos Orfanos: We see three main key trends within the market. The first thing which changed the conditions in recent years is globalization. Manufacturers are moving to different sites around the world.

This shift in consumption and production is changing the logistics, as well as the supply chain of the industry. Therefore we invest in sector-specific expertise and infrastructure, like opening Life Sciences and Healthcare Competence Centers in key markets or multi customer sites.

Outsourcing is the second major shift. The whole supply chain is becoming more relevant. DHL has successfully implemented innovative products and supply chain solutions for hospital and clinical trial logistics as well as for the distribution of pharmaceutical and medical devices supporting this outsourcing trend.
The third trend for the next couple of years is one towards generics and biopharmaceuticals. This has a great impact on the requirements of the supply chain. A manufacturer who is distributing a lower priced product is seeking more cost-effective ways to move it, while he is at the same time being challenged with maintaining the quality requirements needed to transport and to store that product. Those manufacturers might be in India, Korea, or China, which creates specific transportation, storage and compliance requirements.

Biopharmaceuticals represent a strong-growth segment of pharmaceuticals that have specific temperature requirements along the entire transport and storage chain, from better packaging, to better processes and capacities, up to better infrastructure. DHL can support these specific needs and the demands of our customers for example with our European cold chain less-than-truckload network.

How do you judge new guidelines and regulations - like EU Guidelines for GDP - for the Life Science sector?

Angelos Orfanos: As we speak, the European GDP guidelines are being re-written, based on significant input from the industry as well as from DHL. We participate and submit our thoughts, using our expertise to add input to the development of those guidelines. And we will see what we end up with in the next draft and whether there is further need for consultation. For sure, regulations for the storage and movement of Life Sciences products are becoming stricter.

From our perspective, trade barriers for Life Sciences products haven't changed globally across the sector - and I don't see that they will in the near future. I think the key drivers are going to be the regulations towards patient safety and product integrity, especially on things like counterfeiting and product condition. DHL has developed solutions along the regulations that have been made. They help our customers to continue to do their business and reach the markets with their products.

More and more pharmaceuticals and medical products have to be stored and distributed at defined temperatures - is this a growing logistic challenge or even a problem these days?

Angelos Orfanos: I would define it as a challenge rather than a problem, because the problem is solved. There are already solutions in the market place which help to move temperature-controlled products. The challenge is to do it cost effectively.

We see pharmaceuticals that need to be maintained with very precise temperature ranges. So it is challenging to move products to the right place, in the right time, and in the perfect condition. We have worked on developing a disciplined cold chain process and procedures to secure that this kind of shipment meets the requirements of our customers.

Looking at the cool chain - what are the obstacles? How shall supply chain management look like to ensure smooth processes?

Angelos Orfanos: I see three major enablers. First of all you need infrastructure to enable the cold chain. Secondly, you need optimized processes and finally it is about people.

DHL has highly developed specialised services. Our DHL Airfreight Plus Pharma service, for example, is a door-to-door overnight service across Europe, designed for end-to-end transportation for the Life Sciences industry. Our cold chain network is another product we have developed through our freight organization. "LTL Coldchain", for example, caters to the demand for having less-than-container load, less-than-truck load shipments that might go from one part of Europe to another.

All involved partners need to be in sync, and the infrastructure has to be able to enable the movement of these goods. Furthermore, people you need within the infrastructure are an important enabler- dedicated people who understand the business and the idiosyncrasies of handling this type of freight. You need the processes documented specific to products, regions, and services.

What do you think about Emerging Markets in life science and healthcare - currently and in the future? Will this affect the supply chain substantially?

Angelos Orfanos: Emerging markets are being looked upon by the major manufacturers as their growth areas. As Europe and America are single-digit growth environments for them, it is the emerging markets that present the larger growth opportunity as the consumer base grows there and as manufacturing and sourcing moves there as well. We definitely see emerging markets having a big impact on the industry. Cold chain logistics will be an inherent part of that trend.

We see huge growth areas in countries like China and India, where the population is becoming wealthier and consuming more, and manufacturers are opening local sites. This is going to change the balance of how pharmaceuticals are consumed and medical devices are used and moved around the world. I think the challenge for us is going to be to adjust to that growth and provide the services that the customers need.

From your perspective: What will be the main challenges in the future in handling and distribution of pharmaceuticals around the globe?

Angelos Orfanos: Manufacturers are influenced by rising cost pressure, which is driving a certain change to globalization and creating an outsourcing trend. New locations need to be serviced with the right type of infrastructure to accommodate both the globalization and the outsourcing.
Another impact due to the cost pressure is increased market consolidation through mergers and acquisitions. We see co-manufacturing, co-marketing amongst different manufacturers in the industry. This results in consolidation and is changing the route to market. Regulatory conditions will continue to create challenges and opportunities to support the industry demand and the requirements.

We are going to see the big countries like China, India, along with Africa and Latin America as continents,, with significant growth prospects. Other parts of the world will catch up and emerge in terms of consumption as well. All of this will influence the supply chain behavior of manufacturers. From my point of view, these are the main challenges as I look into the future of the pharmaceutical supply chain.