Cold Chain Logistics

Managing 3PLs (third-party logistics provider)

in Cold Chain Logistics
Introduction and Definition of 3PL
Scope of work for 3PL in Cold Chain Logistics
Execution
3PLs role in transport, storage and handling of
Cold Chain Products
 Third party or own account?
Outsourcing Channels
The most common channel decision for those operating in physical
distribution is whether to run an own-account (in-house) distribution
operation or whether to outsource to a third party distribution or logistics
service.
If the decision is to outsource:
how much of the operation to outsource
which of the many third party companies to choose to undertake the outsourced
operation
Operations and services outsourced include outward and inward physical
flows & supporting processes- logistics
 Contd
Reasons for using the continuum:
to identify where the major benefits of outsourcing might be found;
to make clear exactly what is included and what is excluded as far as the
contractor and the associated contract are concerned;
to make clear where the boundaries of responsibility change;
to identify the expected gains or wins from a contract, whether these
are cost- or service-related.
 Drivers and drawbacks of Outsourcing

The major drivers can be:

Organizational: to focus on core competence,
Financial: elimination of capital costs
Service: greater flexibility, value added services,
no difference for dedicated operations;
Physical: complexity of the global sources and
markets, industrial relations problems, the need
to relocate logistics facilities, some products
requiring special vehicle x-cs, some pdts being
incompatible (delivery x-cs),
 Drawbacks
Lack of appropriate experience of client
companies products & markets, cultural
incompatibility, loss of control over the
delivery operation, loss of control over the
companys logistical variables, loss of logistical
& distribution expertise, loss of direct
influence at the point of delivery, problem
with confidentiality of information, and brand
integrity cannot be guaranteed
 What are the critical factors of choice?

Reducing costs
Increasing customer satisfaction
Increasing speed of service
Improving supply chain management
Reducing staff headcount
Globalizing the supply chain
Increasing efforts on core competence
Lack of in-house skills
 Critical factors in choosing between different
providers
Service
Quality of people
Cost
Countrywide capability
National transport capability
Sector experience
Dedicated service capability
Size
Shared-user capability
Key steps of the contractor selection process
 3PLs vs. 4PLs
3PLs- first used in early 1970s to identify intermodal marketing companies
(IMC) in transportation contracts (involving only two parties).
When IMCs entered the pictureas intermediaries that accepted
shipments from the shippers and tendered them to the rail carriersthey
became the third party to the contract, the 3PL.
3PL is a person who solely receives, holds, or otherwise transports a pdt in
the ordinary course of business but who does not take title to the pdt.
Third-party logistics providers are:
Freight forwarders
Courier companies
Other companies integrating & offering subcontracted logistics and
transportation services
 Third and Fourth Party Logistics
Providers
Contd
3PL
4PL
Modes

Manufacturers
Parts and Raw

Consumers
Materials
3PL

Retailers
Distribution Centers
3PL
3PL
Management

11
 Why 3PL
Providing better quality service
Limiting investment opportunities
Cost reduction > Control
Political considerations
Focus on core competences
Customers demand order accuracy , excellent
service and time compression
 Outsourcing - Industry Trends
Findings of a Survey : Why company's Outsource

Avoid Capital Expenditures

Cut Costs

Increase Flexibility (service/financial)

Focus on Core Business

Improve Service

Lack of Scale

Acquire Talent

Avoid Labor Problems

Source: A.T. Kearney

Outsourced Logistics services
SOME OF THE MAJOR OUTSOURCED ACTIVITES
Advantages and Disadvantages of 3PL

CAN YOU THINK OF ANY OTHER ADVANTAGE OR DISADVANTAGE ?

15
 Cold Chain
 Introduction
There is a growing international demand for increasingly
expensive pharma and biopharma products
Life-saving products like vaccines are often temperature-
sensitive, requiring temperature-controlled shipping from
manufacturer to user
WHO reports show that recently, nearly half of all vaccines
were ruined in transit due to poor cold chain services=>
billions dollar worth products wasted with a significant
impact on world health
Effective cold chain shipping is, therefore, critical
particularly as pharma and biopharma cold chain
shipments in established and emerging market grow
dramatically in the coming years
 Contd
The temperature-sensitive product market has grown by more than
50 percent since 2004, and that trend looks to continue in the years
ahead.
Not only is product innovation driving the distribution of
temperature-controlled clinical trial products to remote locations
with hot climates, but the development and production of new
biologics also creates the need for temperature-controlled storage
and transport.
Product trends drive distribution trends. As new therapies and
vaccines emerge, manufacturers must take an early look at both
their goals and best practices for distributing temperature-
controlled drugs. And with advances in research and development
processes reducing time to market for these drugs, the window for
planning is shrinking. The time to evaluate logistics, costs and
potential partners is now.
 Contd
SCM is to produce and distribute merchandise in
right quantities, to right locations, and at the
right time, through integrating suppliers,
manufacturers, warehouses, and stores in
efficient approaches.
Lambert (2004) defines SCM as an integration of
key processes from end consumer through
original suppliers, which provide adding value
products, services, and information for customers
and other stakeholders.
 Contd
All vaccines are sensitive biological substances that
progressively lose their potency. This loss of potency is much
faster when the vaccine is exposed to temperatures outside
the recommended storage range. Once vaccine potency has
been lost, returning the vaccine to correct storage condition
cannot restore it. Any loss of potency is permanent and
irreversible. It will affect the efficacy and effectiveness of the
vaccine. Thus, storage of vaccines at the correct
recommended temperature conditions is vitally important in
order that full vaccine potency is retained up to the moment
of administration.
 Cold Chain
The cold chain is the name given to a system of people and
equipment which ensures that the correct quantity of potent
vaccine reaches the recipients who need it from the point of
production.
The system used for keeping and distributing vaccines in good
condition
It consists of a series of storage and transport links, all
designed to keep vaccine within an acceptable range until it
reaches the user
This is because vaccines are sensitive to heat and freezing and
must be kept at the correct temperature from the time they
are manufactured until they are used
 Contd
A cold chain is a monitored temperature-controlled supply
chain. The goal of the cold chain is to keep a sample or
material within a certain temperature range during all stages
of delivery, processing and storage. Cold chains are widely
used to ensure the viability of products in the pharmaceutical
and agricultural sectors, and are critical components of
vaccination programs and bio-medical surveillance activities.
Many biological samples deteriorate when exposed to heat,
sunlight, or fluorescent light. When transporting and storing
such biological substances, it is imperative that field and
laboratory teams control environmental conditions, ensuring
that exposure to potentially damaging environmental factors
is minimized.
 Contd
The cold chain refers to the transportation of temperature
sensitive products along a supply chain through thermal and
refrigerated packaging methods and the logistical planning
to protect the integrity of these shipments.
 Pharma Logistics
Deals with the handling, movement and storage of pharma
products from supplier to consumer
Involves transportation, packaging, inventory, warehousing,
service/support/maintenance, materials handling, disposal,
orders, site, forecasting
Biopharma prods are temperature sensitive
Short time frame to realise profits
Cost reduction (inventory)
Global supply chain (manufacture site packaging site
market)
Expansion to new markets
Weakest Links in the CC
 Contd
The cold chain system comprises three major
elements:
Personnel, who use and maintain the equipment and
provide the health service;
Equipment for safe storage and transportation of
vaccines; and
Procedures to manage the program and control
distribution and use of the vaccines.
Even the most expensive and sophisticated
equipment will not ensure an effective cold chain
if not correctly used and managed by trained
health personnel.
 Key Elements of CC
Product -A product is characterized by physical attributes
requiring specific temperature and humidity conditions (e.g.
perishability, fragility)
Origin / Destination -The respective locations where a
temperature-sensitive product is produced and consumed. It
is indicative of the potential difficulty of making a product
available at a market.
Distribution -The methods and infrastructures available to
transport a product in a temperature-controlled environment.
 Contd
The Basic cold chain equipments are
For vaccine storage : Refrigerators, Freezers and
Cold-rooms
For vaccine transport: Cold boxes, Vaccine carriers,
Day carriers and thermos flasks
For cold chain monitoring : Thermometers, Cold
chain Monitors, Vaccine vial Monitors and Freeze
watch monitors, Electronic temperature
monitoring devices.
Vehicles
 Contd
Vaccine handling occurs mainly at National,
District and institutional levels and at each
level different members of the health team
are responsible for the maintenance of cold
chain.
 Contd
Vaccine Stock Management
Having too much vaccine for too long in one level of the cold
chain increases the risk of some vaccine reaching its
expiration date and having to be wasted. In contrast, when
too little vaccine is available, not all the recipients in the
target population can be vaccinated.
 Contd
To be sure that the appropriate amount of vaccine is available,
vaccine stocks must be checked continuously, and records
kept of all movements of stocks in and out of storage.
Accurate vaccine forecasting and ordering depends on
knowing the quantity of vaccines in stock at all times.
Whenever vaccines and diluents enter or leave a storage, they
should be counted. Ordering should be based on a physical
count of vaccine stocks rather than on stock records alone.
 Contd
Vaccine storage
Cold Chain equipment designed for vaccine storage has to
meet two major requirements:
It must ensure optimum temperature conditions for vaccine storage at
all the time.
It must be large enough to hold the maximum vaccine stock to be
stored at the level of the cold chain where it will be used.
Refrigerators and deep-freezers are used for storage of
vaccines in MOH offices. These refrigerators and deep
freezers should be identified only for vaccine storage.
 Contd
A refrigerator at a national level should be
able to hold
A one month supply of vaccines and diluents
A one month stock of vaccines and diluents as
buffer stocks
Diluents next to the vaccines with which they
were supplied
Frozen ice packs in the deep freezers or bottles of
water in the bottom of the refrigerator to keep it
cool during power failures.
 Contd
Vaccine transport
Transport of vaccines is done under cold chain conditions
using cold boxes and vaccine carriers. Cold boxes are normally
used to transport vaccine from the central level to districts,
and sometimes from districts to the central level. Vaccine
carriers, which are more portable, are commonly used to
transport vaccine from central to smaller health facilities and
to outreach immunization clinics. Vaccine carriers also can be
used to carry vaccine from institutional vaccine refrigerator to
the institutional immunization clinics and wards.
Achieve Temperature Controlled Environments

Different products require different temperature level maintenance

to ensure their integrity throughout the travel process. For instance,
the most common temperatures are "banana" (13 C), "chill" (2 C),
"frozen" (-18 C) and "deep frozen" (-29 C).
Proper temperature control depends on:
Temperature of product at origin
Desired temperature range
Duration of transit
Size of the shipment
Nature of product
Packaging
Ambient or outside temperatures
Targeted ending temperature of product at destination
 Organization of Cold Chains
Shipment preparation. Cold chain devices are commonly
designed to keep temperature constant, not to bring
shipment to desire temperature
Modal choice. Based on distance between origin and
destination, size and weight of the shipment, exterior
temperature environment and time sensitivity changes
The "Last Mile". Must match receiving requirements & final
transfer of shipment into storage facilities
Integrity and quality assurance. Share data from temperature
recording devices & smart seals
Custom procedures. Must be familiar with Customs
procedures to avoid delays
 Cold Chain Products
Food fruits, vegetable, meat, prepared food
Beverages wine, beer, juice, bottled water
Pharmaceuticals bio-engineered drugs, antibiotics,
experimental drug compounds
Medical products - IV solutions
Specialty chemicals
Water based paint & adhesives
Human organs
Containerization & the Flexibility of CCs
 Contd
CCL also called cold chain management (CCM), which could be
categorized into chain logistics or supply chain management
(SCM).
CCM is a special type of supply chain and is established for
temperature sensitive and perishable products. Bogataj et al.
(2005) conclude that the process of planning, implementing
and controlling flow and storage of perishable goods, related
services and information, is cold chain management.
 Contd
Reasons for CCL development
Products that have limited shelf life and require
special equipment & facilities for sale, storage &
distribution
Perishable products: medicine, food, flowers, blood
Maintaining temperature for perishable products
which is vital for product safety and quality
Improper use of CC can increase the possibilities of
food borne disease caused by microbial hazards
Health and food safety requirements
 Contd
Within the pharmaceutical industry for instance, the testing,
production and movement of drugs relies heavily on
controlled and uncompromised transfer of shipments.
According to the Healthcare Distribution Management
Association, of the close to 200 billion dollars in
pharmaceutical distribution, about 10% are drugs that are
temperature sensitive (Quinn). This makes the cold chain
responsible for transporting a near 20 billion dollar
investment.
 Components of CCL
Cold chain services of 3PL companies can be classified into
three processes Cold processing, Cold storage and Cold
transportation and distribution:
Cold Processing the process of primary chilling and
secondary cooling
The temperature of this stage is vital for safety and quality
Cold Storage- process that stores perishable foods,
pharmaceuticals or other items under refrigeration
Cold Transportation and distribution- the process of sorting,
distributing & transporting various cold, chilled, frozen and
fresh products
 Contd
There are various technologies used in CCL processes
Radio-frequency identification (RFID) tag is a wireless
microchip product identification tool, and the
reading process is fast and automatic
 Relations Fundamental in Cold Chain Operations

Conditional demand -The demand of a product at a market (or

place of consumption) is conditional to its qualitative attributes
(freshness, number of days left until expiration date).
Load integrity- Relates to the load conditions that must be provided
to ensure that a product keeps its value during transport. It can
include adequate packaging and packing, as well as the conditioning
that the product must go through before transport (e.g. fruit
washed and cooled down prior to transport & storage).
Transport & Storage integrity- The temperature controlled
environment remains constant during transport, at the terminals
and at the distribution centers involved in the transport chain
 Cold Chain Planning
The first step in implementing the cold chain is planning. Your
team must identify the cold storage needs for your sampling
activities, then identify and procure all necessary materials
and resources. In addition, it is critical to train your team to
understand the logistics of the cold chain, how to monitor
cold chain temperature, and how to maintain system records.
 Considerations for Cold Chain Planning:
What is your surveillance plan and what type of cold chain is
appropriate for that plan? What types of samples are you
collecting? What are the temperature requirements for safely
storing these samples?
Assess local context and conditions. Do you have access to
long-term sample storage facilities? Are your sampling
activities located in remote rural locations several days or
weeks from the project infrastructure or laboratory?
Determine where the cold chain ends. If your field team
delivers samples to a laboratory with an ultra low
temperature freezer, then initiating your cold chain may
require simply extending it from laboratory to sampling site
 Contd
Determine the maximum amount of time samples will be
located outside of long-term cold storage. If your field
activities are 5 days away from long-term storage, then you
will need a minimum of 5 days mobile cold storage. If you plan
to export samples, how long will it take to ship from origin to
destination?
Determine the minimum amount of time samples will stay in
long-term storage. Planning for long-term storage requires
assessing the space necessities of your cold chain. Are you
maintaining a sample bank or archive? If so, you will need to
plan for sufficient storage space for the life of the project to
preserve sample viability.
 Contd
Establish procedures for monitoring the cold chain and
tracking the samples moving through the cold chain. Confirm
all team members have been trained in cold chain
maintenance and record keeping. Prepare forms for data
logging and recording. Prepare a schedule for re-filling
containers and contingency plans for equipment failure.
 Challenges
Lack of road infrastructure
Continuity of the cold supply chain
Uneven distribution of cold chains
High capital investment
Power supply- costly e.g., 30%
Management of different temperatures
Awareness and mindsets
Error irreversibility
Highly temperature sensitive cargo
 Contd
3PLs
Manual-handling reduces the product quality
and life
Lack of end-to-end solutions- one can also
adapt state-of-the-art techniques such as
cross-docking that will reduce the transit
times and inventory
Discontinuous power supply