Damaged or defective products often can be returned, refurbished and resold. Not so with vaccines and other pharmaceuticals. Temperature variance is generally what renders these products unusable. So, given their high cost, it's imperative that delivery be right the first time.
Cardinal Health specializes in delivery of healthcare items, such as pharmaceuticals and medical-surgical products to retail pharmacies, hospitals, mail-order facilities, physician offices, surgery centers and long-term and other alternate care facilities. But it was shipment of vaccines and pharmaceuticals that called for better packaging to ensure product viability and quality.
With its partner, Entropy Solutions - which later sold certain rights to ThermoSafe - Cardinal designed and implemented an innovative, refrigerated packaging solution to ensure product integrity from the point of shipment to delivery at its many customer locations nationwide. The solution uses a renewable, reusable, non-toxic, environmentally friendly, USDA "bio-preferred phase change material" made of plant oils that work together to maintain the narrow product storage range of 4 degrees Celsius regardless of the environment or season.
This new process impacts delivery of more than 40,000 totes a day and approximately $17bn of critical pharmaceuticals a year, according to Cardinal. But its use only came after exhaustive research, customer betas and pilots, education and marketing. "It challenged the pharmaceutical industry wholesale and distribution standard that existed for 25 years," says Chris Anderson, Cardinal's director of quality systems.
Relatively inexpensive, frozen gel-packs have been the industry norm, but they are potentially harmful to temperature-sensitive pharmaceuticals. Return losses for so-called "warm" product can run into the millions, according to Cardinal officials. They sought to find a solution that would stop wastage, save money and ensure quality control.
This project's official start was December 2006. The product volume in scope for the base year (a rolling 12 months at the report time beginning March 2006) was $9.8bn. Product returns financially written off due to damage in the shipping process or reported as "warm" by the customer were $4,087,675 or 0.04 percent. Excluding insulated totes (excluded since these are still in use with the new process) Cardinal was spending $679,347 on refrigerated packaging (corrugate, gel-packs and foam coolers) from 56 suppliers.
There is a huge amount of government oversight in shipping such products, but much of the regulatory language is vague. This is true on both the federal and state levels. The lack of regulatory clarity led Cardinal to survey its suppliers in 2007 concerning preferred shipment temperatures and stability data. At that time, Cardinal distributed 1,063 refrigerated pharmaceuticals supplied by 121 manufacturers.
Extensive tests quickly determined that for the totes the traditional water-based gel-packs were not going to work due to the shape and design of the totes. As research continued, the regulatory climate on cold-chain shipments did as well.
Enter Entropy Solutions, which developed prototypes that included a frozen and refrigerated pillow panel. Betas began with 10 customers requiring vaccines. Modifications and adjustments met customer objections - some quite negative.
Eventually, there was highly positive feedback on Entropy's phase change panels, which change physical state, liquefy or solidify (freeze) at specific temperatures. Phase change materials recharge as ambient temperatures fluctuate, making them ideal for maintaining a 2-8Â°C environment. They are safe, non-toxic, bio-friendly, biodegradable, made of 100-percent renewable resources, plant-based oils and fatty acids, and are approved by the USDA as a bio-preferred product. They are capable of thousands of melting and freezing cycles without performance degradation.
The refrigerated orange panels (one per small tote and two per large tote) start their journey refrigerated (to protect from freezing conditions); green panels start frozen (to protect from heat). The orange panels absorb the energy from the green panels (as well as external winter temperatures) and begin to solidify (freeze) at a temperature of approximately 4Â°C, protecting the product from experiencing temperatures below the labeled range. As the temperature inside the tote changes, the physical state of panels changes between solid and liquid in order to maintain 2-8Â°C within the tote during 8 shipment.
When delivered to customers, the orange panel may be frozen (solidified), having absorbed the cold energy from the frozen green panel in addition to external winter temperatures, or it may be slushy or cool to touch (like a refrigerated liquid). The phase change panels are reacting to temperature extremes to maintain the 2-8Â°C target range.
Cardinal began an implementation pilot phase at its Aurora, Ill., distribution center. It was selected based on its being one of the company's highest volume centers as well as serving a large metropolitan area (Chicago) and many rural areas in the Midwest.
The pilot resulted in some operational changes, and in strengthening the phase change panel packaging to stop leakage.
A final test implemented all Cardinal customers in the West. During that critical phase, Entropy Solutions sold its phase change licensing, marketing and manufacturing rights to Tegrant's ThermoSafe business for the biological and pharmaceutical market. ThermoSafe quickly adjusted to the wholesaler business, to include picking up and delivering a huge order for the implementation while working closely with Cardinal Health to make important improvements.
The biggest challenge initially was in educating associates and customers about the science of the phase change material. An ongoing challenge is in returns necessitated by customers not correctly following the process for conditioning panels and packing the tote correctly for a return. "One leaker is one too many in our world," says Ken Maltas, director of engineering at ThermoSafe.
While it may still be too soon to quantify all of the financial benefits, signs are quite positive. For instance, in the first six months of full implementation, the damaged return financial write-offs continued to trend downward at what looks to be in excess of 85 percent or $2m annualized.
This biggest benefit of this project is patient safety through the implementation of a scientifically performance designed and qualified system packaging system that improves the integrity of the critical and sensitive pharmaceutical products that Cardinal Healthcare delivers.
Keywords: supply chain risk management, transportation management, transportation management systems, 3PL, third party logistics, logistics management, logistics services, quality assurance
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