Case study: Innovative cold chain can maximize profits and customer retention

In this article we present a real-world business case that shows how innovative cold chain solutions can secure transportation at year-end, thereby maximizing long-term profits and improve customer retention for the forwarder.

Background: Delays at year-end imply significant risks for pharmaceutical companies

The last years’ growth in global air trade has led to considerable capacity constraints. Especially at year-end, the high demand for express delivery increases the risk of less prioritized goods being bumped and left on the tarmac. For the healthcare industry, failure to deliver products on time could have dire consequences:

• Sales cannot be included in the annual reports, leading to an increased financial risk when the companies cannot live up to sales expectations.
• Pharmaceuticals have to be stored temporarily at the airport, or be rerouted to another airport with more capacity. Any delays increase the risk of temperature excursions. For the growing amount of precious biologicals, products must be scrapped if not kept at a constant temperature. This will lead not only to a loss of sales and increased costs of damaged products, but potentially also to a loss of market share and brand reputation.
• The healthcare industry is constantly working on reducing their environmental impact, which is often reflected in the annual reports. Having to scrap large amounts of products that have been left on the tarmac is simply not compatible with the companies’ own policies – as well as with the regulations surrounding cold chain transportation. Increased environmental costs could also have a negative effect on the company brand.

For forwarders, cold chain transportation of sensitive pharmaceuticals is less risky, at least in the short run. In the long run, however, repeated failure to deliver on time will lead to customer dissatisfaction and will more or less have the same consequences as for the healthcare companies – loss of customers/sales, loss of market share and a devaluation of the brand.

Instead of facing the risk of losing customers in the long run, capacity constraints at year-end could become a business opportunity for forwarders

Instead of facing the risk of losing customers in the long run, capacity constraints at year-end could become a business opportunity for forwarders by developing more secure transportation solutions for pharmaceutical companies.

The business case: Innovative solutions for secure transportation at year-end

A large European company had for some years used a high-end passive packaging solution for cold chain transportation of their sensitive pharmaceuticals. The packaging had worked quite well, but it had a high chargeable weight. The packaging was supposed to be reused several times, but on the major trade lanes it was only used once and therefore contributed to a certain amount of waste.

Some time ago, the company faced two obstacles simultaneously. Firstly, they had to reduce the cost of logistics. Secondly, they started to have problems with delayed deliveries at year-end. The challenge for them was to get priority shipping and to get everything delivered on time – to a reduced overall cost of cold chain transportation.

The answer to this challenge was to switch to active temperature-controlled containers. Using a Total Landed Cost comparison, it turned out that they could exchange ten passive pallets for one RAP e2 container. For one trade lane only, they could exchange more than 200 passive pallets to only 20 containers a month. The reduced volume also meant a saving in container/packaging costs, effectively killing one of the myths that active is more expensive than passive. In addition, an active container has priority over general cargo and therefore increases the probability of a timely delivery. In this particular case they chose the Envirotainer RAP e2 which is an extremely cost efficient and high performing solution compared to other active and passive alternatives.

Envirotainer’s RAP e2 container has proven its robustness since its inception and has to date shipped over 150,000 pallets with 0.00% product loss. Thus, by switching to active, temperature-controlled containers, the company had a much more secure transportation solution, with active temperature-control and with a higher probability of getting shipped on time. An additional benefit is the reduced risk in the overall temperature-controlled supply chain and uncomplicated SOP’s for active ULD solutions which equals significant process savings for the pharmaceutical company was well as for the forwarder.

A value creating selling approach by being flexible and innovative

For the forwarder, the business opportunity in cases like this is to take a more consultative role and solve the customer’s challenges, which is key to a value creating selling approach. While transportation can be carried out as usual for most part of the year, an innovative, alternative solution can be offered at peak season – or as an attractive all-year solution. A peak-season challenge like this one can help forwarders re-think their approach and implement an all-season, year-round transport solution for temperature sensitive pharmaceutical products.

The business opportunity in cases like this is to take a more consultative role and solve the customer’s challenges, which is key to a value creating selling approach

By coming up with innovative solutions to secure transportation of precious pharmaceuticals, the forwarder will be seen as a strategic and important partner for cold chain logistics and will improve the chances of expanding his business with clients. To come to this stage, it is necessary to offer flexible and creative solutions and invest time in building long-term partnerships with customers as well as with other stakeholders across the logistics chain.

About Envirotainer

Envirotainer has been the market leader in secure cold chain solutions for pharmaceutical transport for more than 30 years. We believe that collaboration and partnerships among logistics providers are fundamental for successful delivery of temperature-sensitive pharmaceuticals across the globe.