1

Cold Chain DistributionLondon, 3rd December 2013

SEA FREIGHT – An Evaluation Of The Opportunities

& Risks When Moving Pharma Shipments By Sea Instead Of Air

Mark Edwards – Global Freight Manager - Actavis

What will we look at today?

• Modal characteristics

• When to use seafreight

• Benefits of seafreight

• Drawbacks of seafreight

• Temperature excursions

• Insurance

• Roles and responsibilities

• Summary

Modal characteristicsRoad

• Typically used for trans-continental movements

• Well set up hub and spoke systems

• Temperature-controlled “groupage” services becoming widely available

• Security risk higher than other modes – primarily through theft

Modal characteristicsAir

• Typically used for inter-continental movements

• Primarily point-to-point operations but some hub and spoke systems

• Varying degree of “pharma” services offered by airlines

• Ground handling often of a poor quality

• Fast transit times

• Commensurately expensive

Modal characteristicsSea

• Typically used for inter-continental movements

• Primarily hub and spoke systems through “feeder” and “mother” vessels

• Slow transit times

• Commensurately less expensive

When to use sea freight

Transit time is less important

• India to Europe 22 to 24 days

• Air freight 1 week – sea freight 4 weeks

• Transportation costs need to be minimised

• Air freight +1000% the cost of seafreight

• Regular supply of larger volume products

• Sea freight container takes 23 to 24 pallets single-stacked

When to use sea freight

Enhanced security required

• Few parties are involved

• Containers can be loaded and sealed at your own site

• Containers stay sealed through to unloading destination

• Negotiable documentation

Benefits of sea freight

Cost

• Typically over 1000% lower than airfreight costs

• More secure mode of transport

• Air freight involves multiple hand offs & regular trans-shipment

• Air freight handling is a low-skill environment

Benefits of sea freight

Lower risk of temperature excursion

• Units are sealed throughout journey

• No physical handling of product

• Possibility to defer inventory

• Take advantage of the longer transit

• Use of the right Incoterm

Drawbacks of sea freight

Variable quality & availability of equipment

• Use containers less than 5 years old

• Communicate requirements in advance

Drawbacks of sea freight

Reliability of shipping schedules

• Partner with high quality forwarder and shipping line

• Construct reliable supply chain to take account of such factors

Temperature excursions

Equipment quality is the key factor

• Use containers less than 5 years old

• Ensure containers are pre-conditioned to your required temperature

• Load and seal containers at your temperature-controlled warehouse

• Unload containers at your temperature-controlled warehouse

Insurance

Sea freight is governed by very old rules

• All parties with product on a ship are deemed to have an “interest” in the voyage

• This means you are proportionately responsible for serious incidents where a “general average” is declared

• Typically this would be a serious collision or pollution incident

• SO………..

Insurance

Always have marine cargo insurance

• Most policies do not cover temperature excursions - ensure yours does

• Ask your broker to investigate a “risk of loss” clause

Insurance

Shipping lines and freight forwarders have a

very small, limited liability

• All work to internationally agreed amounts

• All will reject your claim and point you to your own insurance

Roles and responsibilities

Shipping lines • Provision of equipment – container and ship

Freight forwarders

• Liaison with shipping line

• Customs & documentation services

You

• Liaison with your supplier / own factory

• Temperature information

• No different to current supply chain

Summary

Sea freight is an excellent solution in the right circumstances

Have a full understanding of your current supply chain before making any changes

Finding the right freight forwarder is a critical success factor