Market Overview
- According to government data, India has over 27,000 functional cold chain points, of which around 3 per cent are located at a district level and above.
- Due to the COVID-19 vaccination drive, India’s Government plans to use 29,000 cold chain points, 240 walk-in coolers, 70 walk-in freezers, 45,000 ice-lined refrigerators, 41,000 deep freezers, and 300 solar refrigerators.
- We expect the growth of the cold chain market for healthcare in India to be more than 20% by the end of 2021.
In the billion-dollar healthcare industry, one part still needs to be exploited – Healthcare Cold Chain. DingDelivering medicines, vaccines, surgical items, and biologics to the destination is not easy. A single mistake during the supply process can cost billions of dollars and sometimes patients’ lives. Effective and efficient delivery of temperature-controlled healthcare products requires lots of planning and management.
According to Deloitte, spending in healthcare is expected to rise at a CAGR of 5% in 2019-2023 globally, which means the industry will need a robust cold chain infrastructure. According to DHL, one of the leading logistics companies actively involved in the healthcare cold chain says that, due to limited facilities to control the temperature for certain types of medicines and vaccines, the industry loses products worth $2.5 billion to $12.5 billion annually. It shows a massive industry gap that needs to be addressed quickly. Healthcare cold chain logistics includes biologics, clinical trials sample, and other drugs and medication, which require a constant temperature or are sensitive to heat, humidity, and even light.
Cold chain logistics include various steps such as storage and handling of refrigerated and frozen vaccines, supply chain management, inventory management (cold chain warehouses), and handling of delicate drugs and vaccines. One of the significant elements in the cold chain is temperature-controlled packaging. Many healthcare products become inefficient due to temperature mismanagement, and many of these issues are not detected until the products reach patients. The continuous demand for the development of new vaccines and drugs and the ever-growing healthcare sector has increased healthcare cold chains’ need.
The healthcare cold chain market will grow with the help of the right Government policies in place, as it is the need of the hour, which we have seen during the pandemic situations like in MERS-Cov in 2012 and COVID-19 recently. Immediate measures, many clinical trials, and efficient and effective cold chain logistics are essential. The different regulations for different regions affect the growth of the market and service providers. These days, we also see new packaging material and equipment to handle the pharma products to reduce wastage and losses to a bare minimum.
The trend of shipping healthcare products by air is increasing as many high-risk, time-sensitive products cannot wait for long, and because of this, the lead time has become a critical factor in the healthcare cold chain market. Logistics companies are trying to find new and innovative ways to deliver efficiently and reduce energy requirements. The same government guidelines for all regions may decrease the lead time and help all the market segments grow.
MARKET DYNAMICS
The growth of the healthcare cold chain market depends on how efficiently all the required healthcare products, which need a temperature-controlled environment, reach their destination. In a pandemic like COVID-19, when pharma companies will produce billions of doses of vaccines, they need to be called every corner of the world. As per Credit Suisse, only India will need 1.7 billion COVID-19 vaccine doses, so cold chain infrastructure will play a crucial role as all countries are not ready to handle such quantities. Some of the factors that will impact the growth of the healthcare cold chain market are:
- The need for a temperature-controlled warehouse will increase.
- Need to train the staff to handle time & temperature sensitive biologics
- Demand for new and improved packaging will increase.
- Ensure proper monitoring capabilities to keep the biologics integrity intact
Contrary, the industry is also facing some significant challenges, mostly in developing and under-developed countries:
- Poor infrastructure to store and handle temperature-sensitive vaccines
- In a situation like COVID-19, delivering billions of effective doses in populated countries require quick and efficient transport and distribution, which seems complicated because of the lack of roads in the impoverished region.
- Lack of clarity in Government policies
UNICEF procured $100 million of cold chain equipment 2018 to ensure that it continues to work efficiently and effectively in every country. Still, this is not enough for some countries. Lack of proper knowledge and healthcare delivery in some regions resulted in the wastage of essential drugs.
Air and sea transport will shape the logistics industry in healthcare, as not every country has the privilege of having a mass manufacturer which can fulfil that country’s requirements. Air transport is the fastest option, but at the same time, it is risky. Some mishandling, like not setting or maintaining desired temperatures throughout the supply chain or using faulty equipment to store biologics, will result in significant losses across the value chain. Sea transport is slower than air transport but can carry bulk orders in a single journey. It also needs constant monitoring to ensure that the journey does not damage healthcare supplies.
In the coming years, healthcare demand will grow exponentially as more people will move to the upper-income level and require better and faster healthcare facilities. The Government must gear up and start planning to develop the infrastructure and set up research labs/centres, medical laboratories, and path labs to fulfil their needs. Simultaneously, logistics companies must work to transport sensitive products safely and improve last-mile connectivity. The investment by supply chain firms in better quality service, better packaging techniques, and technology to improve the monitoring and handling of biologics will benefit them in the future.
VALUE CHAIN ANALYSIS
The healthcare value chain includes multiple stakeholders, from raw materials suppliers to final product sellers. The manufacturers of cold boxes, vaccine carrier boxes, ice packages, dry ice, refrigerated trucks, etc., come under the purview of the healthcare cold chain’s value chain. They procure different material types from their suppliers, including plastics, metals, cold storage panels, machinery, etc. Ideally, they should prefer local suppliers to save time and money. Such manufacturers then supply the final products to end-users, including hospitals, urban health centres, research centres, laboratories, etc. All provide healthcare supplies to their patients across the nation.
Companies like JCB International, which makes refrigerated vans and trucks, should partner with local logistics players in other nations to expand their support for the healthcare cold chain during a pandemic. Instead of completely relying on a few logistics players, vehicle manufacturers & OEMs can also sign deals with small and mid-sized logistics companies to rent vehicles for a shorter and longer duration, as and when required. It will help to deliver better and faster healthcare services.
World’s leading logistics companies, including FedEx, DHL, and UPS, cannot reach the smallest part of the world to provide cold chain services. So, they should consider partnerships and collaborations with local logistic companies to carry out their operations in those regions. They can also collaborate with local cold storage and warehouses to support the distribution process across the region. It would help them save big on their operations and help them increase their reach to untapped markets.
Small and mid-sized cold chain equipment manufacturers that already have tie-ups with local hospitals, clinics, and pathology labs, should approach leading logistic companies to be a part of the global supply chain network. For example, DHL has opened a temperature-controlled facility in Hyderabad, India, to meet pharmaceuticals’ different needs. These firms can tie up with start-ups such as Blackbuck and Rivigo (in India) that provide trucking facilities.
A significant challenge manufacturers face in providing an end-to-end cold chain solution is limited or no electricity in some parts of the world. They must develop innovative solutions such as dry ice, ice packs, and battery-powered cold boxes to deliver adequate medical supplies and vaccines to such regions. In most cases, renewable power sources play a significant role, such as solar-powered cold storage and vans.
IMPACT OF EMERGING TECHNOLOGIES
Technology plays a crucial role in the supply chain management process. As the latest technologies are impacting the healthcare sector, supply chain logistics must also gear up to adopt these technologies to increase efficiency and save costs:
- Smart Trucking System: Using smart trucking technology by DHL identifies the shortest and fastest route in real-time and reduces the transit time by 50%, giving them an edge over competitors. Logistic companies use smart connectivity networks to reduce transit time.
- QR Code / Barcode: A coding system must be used throughout the supply chain to deliver the package accurately. In vaccines, the vaccine manufacturer would mark the entire batch with a QR code, or Barcode meant to be delivered to a specific location (hospitals, labs, etc.). So once had, the recipient can confirm the code and check for the delivery. It will also help the GovernmentGovernment to track the vaccination progress.
- Internet of Things (IoT): Logistics companies can monitor and change temperature settings remotely when the package is in transit to check the reaction to local climate change, product damage, unexpected delays, and even human error. The level of insight provided by IoT technologies enables companies to take preventive measures and preventive maintenance. It helps in reducing financial losses and wastage.
- Blockchain Technology: Blockchain technology reduces inadequate record-keeping and authentic transactions, mainly in import-export and cross-border supplies. It ensures the privacy of important information and improves traceability. Huge transactions between participating parties in the supply chain can be done securely.
- Temperature-controlled Vehicles: The close monitoring system inside the refrigerated vehicles helps keep the temperature at the desired level per the requirements. If time-sensitive pharmaceutical products are exposed to the environment outside their prescribed range, they may be damaged and be effective when used. If a constant monitoring system is deployed inside the container, the sensors will immediately alert concerned departments in case of an anomaly.
- Radio Frequency Identification (RFID): RFID has brought more transparency to the supply chain and made data capturing more hassle-free. Like the QR Code and Barcode, RFID helps consumers to track and trace their deliveries. The only advantage of RFID over the QR Code and Barcode is scanning the RFID tags without touching any scanner or the package. It provides contactless and faster scanning capabilities.
- Renewable Energy Sources (Solar and Wind): Renewable sources are rising. It will be useful in those places where sunlight and wind are abundant. Logistics companies should harness these sources at places with minimal or no electricity to keep running the cold chain supply. Solar-powered vehicles are also trending these days. That can be used for shorter distances and help logistics companies save fuel costs.
CONCLUSION AND RECOMMENDATIONS
Overall the healthcare supply chain market is attractive but dominated by some large players at the global level. The industry is also attractive for small players who can operate in local regions, and they can collaborate for broader reach and better operations. The need of the hour is to be ready with the cold chain infrastructure for the COVID-19 vaccination process. Countries like India urgently need to adopt innovative ways and emerging technologies to cope with the massive demand for healthcare supplies for such a vast population.
Here are some of our recommendations for the healthcare cold chain market:
- Improve last-mile connectivity so that far-off regions can also be benefitted
- Adopt technologies that can reduce energy costs in the long run, such as solar and wind power
- Tie-ups with small Labs and test centres to store extra biologics, which can be used for just-in-time delivery
- Create a centralised system where all stakeholders can track the deliveries
- Adopt innovative packaging solutions to reduce spoilage and wastage
