Cold Chain Logistic in Chinese Medical Industry Dissertation

Outline

China is known to be lagging in the construction of facilities on cold chain logistics that has led to a considerable amount of pharmaceutical wastage in addition to hindering the speed with which the country’s pharmaceutical industry can make a stronghold in the international market. The globalization process has led the world to become a much smaller place in terms of distance but the perspective of physical separation is still relevant in the context of freight that has to be safely transported between different regions in the world. If the physical distance is large there is a greater likelihood of the freight being spoilt within the complex transport mechanism that is involved in the transportation of products such as medicines and health care products. The cold chain systems in China are presently undergoing considerable development and are slated to achieve global standards in the coming years. This research paper will examine the issue of China’s increasing potential in cold chain logistics in the pharmaceutical sector and the factors that characterize its present nature in the economy. The entire circumstances will be examined in the light of factual information that is available in the context of the medical industry in the country.

Introduction

The globalization process has led the world to become a much smaller place in terms of distance but the perspective of physical separation is still relevant in the context of freight that has to be safely transported between different regions in the world. If the physical distance is large there is a greater likelihood of the freight being spoilt within the complex transport mechanism that is involved in the transportation of products such as medicines and health care products. A great deal of time and coordinative efforts are required to efficiently transport pharmaceutical products to save them from getting damaged and unfit for human use. Cold chain logistics relates to transporting temperature susceptible products in a supply chain system by making use of refrigerated packing processes and logistics planning so that the integrity of such consignments is protected.

It is well recognized that a chain can be as strong as its most vulnerable links. This concept is more relevant in a cold chain that can preserve the characteristics of a product by ensuring that the temperature is maintained within the required temperature limits; usually between 2 degrees to 8 degrees C. Pharmaceutical products can be quickly damaged if they are not stored or transported in the given temperature limits. Therefore, the integrity of the supply chain in the context of products that are susceptible to getting damaged in high temperatures implies that additional conditions have to comply in the context of adequate packaging, monitoring, and temperature controls.

Some pharmaceutical products are very valuable and sent in shipments as small packages of refrigerated trailers but are not considered to be safe primarily because of failure in the monitoring and maintaining of temperatures. Modern methods of cold chain logistics favor the attaching of monitoring instruments with the freight to ensure that the recipients are satisfied with the product integrity during shipment. Whenever there is any contravention it can be located at a specific place of the supply chain and liability can be fixed against the defaulters. Reefers are now being increasingly used in cold chain logistics because they allow the transport of pharmaceutical products under tight temperature controls. The cold chain can however result in certain breaches when cargo gets exposed during the unloading process or when the product is stored at temperatures below the specified levels (Estrada-Flores, 2004).

Presently only about 15 percent of pharmaceutical and food products are transported through cold chain systems and the distribution systems have now begun to adopt measures whereby the shelf life of food products, vegetables, and pharmaceuticals is ensured. The main problems faced by US exporters in the context of reaching their pharmaceutical products to the majority of people in China pertains to their inability to transport their products to interior regions in China because of a shortage of cold chain logistics. This shortcoming certainly proves to be a big trade barrier for not only multinational companies but also for local companies that are attempting to enhance their productivity and increase their market presence. Concurrently, such circumstances have proved to create a lot of opportunities for logistics companies that are attempting to sell their cold chain systems in the country. Given that the cold chain industry in China is still in the infancy stage, there is no clear way to determine when sufficiency will be achieved in cold chain logistics.

The pharmaceutical distribution market in China is presently worth over $44 billion and is consistently faced with major challenges. China has massive potential because of its huge rural population and the present availability is not sufficient in terms of logistics and infrastructure, which makes it difficult to ensure the delivery of medicines to patients in time through safe and cost-effective measures. Although the government in China is taking proactive measures in meeting the challenges, the present structure of the distribution networks that comprise primarily of thousands of local and small distributors has created lots of difficulties for the government to keep track of manufacturers and products and to ensure timely delivery to end-users. But a combined effort is being made by involving government initiatives, foreign involvement, and market mechanisms to assist the sector is gradually improving the distribution systems in the sector (Wagstaff and Lindelow, 2008).

The major criteria for cold chain operations are to drive processes from end to end to achieve efficiencies. What is required is to have coordinated temperature-controlled drugs in addition to proper warehousing and technologically advanced tracking and traceability systems. Companies have to consider the geographical aspect because products have to be transferred from one end of the country to another and distribution centers play a major role in this regard because they can provide multiplayer services in the distribution systems, which further enhances supply efficiency.

It is quite expensive to operate cold chains and most efforts are made by companies to adopt coordination measures in cold chain operations. In the pharmaceuticals sector, most of the companies have the resources to establish their facilities but companies that lack capital and technical expertise, it is required to initiate steps to develop cold chains through consortiums. Such consortiums are responsible for adopting predetermined industry standards that have to comply with government regulation. It can be expected as per experience in different developed countries that in China also more and more companies will join consortiums relating to cold chain logistics. It is also understandable that it is not practically possible for every company to have adequate resources to fund cold chain logistics. At the same time, it is more evident that the entry of foreign retailers in China has contributed greatly in introducing expertise relating to cold chain logistics, which has considerably improved efficiency and reduced margins in the entire system.

Background and Rationale

As living standards in China improve, cold chain logistics on storage technologies of pharmaceuticals and drugs have been well-received by consumers through community stores and supermarkets in terms of frozen food and pharmaceuticals that are distributed in keeping with cold chain technologies that have been comprehensively used and quickly developed in the whole of China. Cold chain logistics has now become a major thrust area in China, especially in food and pharmaceutical products. In comparison with other developed nations of the world that have significantly developed in terms of cold chain logistics, China is characterized by considerable shortcomings in terms of its cold storage industry and transport facilities, refrigerating capacities, logistics, and technological equipment.

Undoubtedly there is immense potential for cold chain logistics in the country and in recent years there have been significant efforts to apply the technology of cold chain logistics and drug safety management. The pharmaceutical cold chain logistics focuses upon developing the core capabilities and lessening costs of logistics in terms of the rush that has begun in developing third party logistics in the cold chain markets (Wright, 2008).

A lot of capital needs to be invested in establishing cold chain systems and companies have to adopt long-term perspectives in the context of technology investment. Most of the time the required technology and equipment are readily available but most firms are unable to afford the huge investment and do not have the technical expertise to enjoy economies of scale. Indeed, it is a major challenge for Chinese authorities to find companies that are willing to make investments in cold chain logistics while they make entry into the Chinese markets. There is also a strong need for focusing on education in enhancing the efficiency and availability of cold chain logistics in China. The Chinese government can start conducting training and workshops in educating and informing firms and distribution companies about impending challenges and how they can be overcome. It is now widely accepted that the cold chain is a crucial element in international trade for almost all products because of which it is becoming an important element of supply chain strategies. A necessary condition for improving cold chain logistics in China is to reduce waste and to improve quality (Bishara, 2007).

In having unique eating habits and weather conditions China needs to establish standards that are acceptable by the US and the European Union. Specialization in cold chain logistics has led many companies to become dependent upon foreign shipping services but there are concrete and visible signs of niche logistical services being established for temperature-sensitive pharmaceutical products. For multinational companies to succeed in cold chain logistics whereby the distribution of products can be made in far-flung areas of China, they need to become well conversant with the local rules, traditions, and environmental circumstances in addition to estimating the time taken for distributing their products within China. Consequently, the logistics industry in the country has experienced considerable growth in terms of segmentation and specialization of the cold chain logistics systems (Feuling, 2007).

Wang (2005) has researched found that it is required for China to respond to such problems by reducing the number of intermediaries and providing end-to-end distribution and transport of temperature-sensitive drugs. Positive developments in this regard relate to the establishment of facilities by global courier companies, such as FedEx, DHL, and UPS that have begun to source a large number of compressor-driven technologically advanced containers. Cold chain logistics provide for temperature-controlled shipping containers that can control temperatures between 4° and 25° C. It is predicted that the life sciences segments in the pharmaceutical industry in China will continue to grow at compounded annual rates of 12 percent for the next few years, which will entail that the temperature-controlled portions of the distribution segments will also grow significantly in the coming times.

Research Objective and Question

While the goods are being loaded and unloaded for being warehoused, several potential reasons can lead to the compromising of the cold chain. Some warehousing facilities may be having improper maintenance and controls of temperatures. In effect, it is essential to maintain drug safety in cold chain logistics. China is known to be lagging in the construction of facilities of cold chain logistics that has led to a considerable amount of pharmaceutical wastage in addition to hindering the speed with which the country’s pharmaceutical industry can make a stronghold in the international market. The food safety and pharmaceutical safety laws were formally introduced in China on the 1^st of June 2009, whereby several strict conditions were imposed for drug safety and cold chain logistics systems. The cold chain systems in China are presently undergoing considerable development and are slated to achieve global standards in the coming years. This research paper will examine the issue of China’s increasing potential in cold chain logistics in the pharmaceutical sector and the factors that characterize its present nature in the economy. The entire circumstances will be examined in the light of factual information that is available in the context of the medical industry in the country.

Literature Review

The Pharmaceutical and Medical Packaging News has found that there are more than 135 million consignments of pharmaceutical products that are temperature-sensitive and transported every year between different regions of the world. Because of the exponential growth of pharmaceutical shipments that require temperature controls, specific precautions have to be taken in identifying the destinations along with the circumstances and equipment whereby breaches in integrity can become possible. The major issues in this regard pertain to transportation and trans-shipment and warehousing. The prevalence of specific situations will enhance the wear and tear of the reefer and make the equipment defective, thus resulting in inefficient cold storage situations. The quality of the circulation will be poor and ineffective installation will render the consignment to get damaged. Drivers of vehicles sometimes switch off the refrigeration units to save on gas or leave the doors of the vehicle open for long periods, which also results in the deterioration of perishable items (Findlay, 2005).

Cold chain logistics infrastructure

According to Forcino (2006), cold chain logistics infrastructure is considered to be essential in the pharmaceutical sector because different pharmaceutical products require different temperature environments to remain the same in terms of their characteristics. Different items may be required to be frozen, medium, or cold chilled, which depends upon the product. There is now a growing demand for storing and distributing temperature-sensitive pharmaceutical products at the desired potency levels, which has made organizations to seek more efficient solutions in maintaining and monitoring cold chains. The success of cold chains depends upon consistent monitoring of the apparatus across the entire distribution process and needs the involvement of personnel that takes corrective measures in ensuring such conditions. An efficient cold chain logistics system reduces costs, improves product integrity, increases customer satisfaction, and reduces wastage and returning of expired pharmaceutical stocks (Heap, 2008). The major cold chain technologies make use of the following:

• Dry ice, which is solidified carbon dioxide is frozen at about -80° C and can keep shipments in frozen form for long periods. It is more specifically used for the shipments of pharmaceuticals. The main characteristic of dry ice pertains to the fact that it does not melt but just evaporates upon coming into contact with air.
• Gel Packs contain characteristic features whereby they can be used as solids and liquids to control varied temperature environments. Most of the shipments are characterized as chilled products, implying that they have to be kept in temperature ranges between 2° and 8° C. Gel packs can be used either in frozen states or refrigerated environments.
• Eutectic Plates involve similar technology as gel packs and the only difference is that the plates include liquid material that can be used several times.
• Liquid Nitrogen is considered to be a cold substance that maintains a temperature of -196° C and helps in keeping consignments frozen for long periods.
• However, it is considered to be considered hazardous during transportation.
• Quilts are insulated pieces that allow frozen items to remain frozen for a considerable length of time, which is long enough to prevent the use of expensive refrigeration items. Quilts can also be used in keeping perishable items at room temperatures even if the outside temperature is higher.
• Reefers are the common name for a container that maintains temperature. It can be an international container, a small truck, or a van. Such containers are insulated and specifically designed in allowing temperatures to be checked and kept under control through the use of their refrigerated plants that are attached to them.

China’s reforms and other initiatives that were introduced in the eleventh five-year plan in 2006 have proved to be catalysts in significantly enhancing activities in the health care and pharmaceutical industry. The government initiated new measures in the sector in September 2006 that were aimed at creating health care initiatives across the nation for more than 700 million people in the rural segment, which has created an increasing demand for health care services and medicines, thus creating the need for the development of cold chain logistics on a larger scale. Such exponential potential for growth has led to a large number of investors to invest in the sector (Rodrigue and Matthew, 2010).

China’s Medical Technology Sector

The medical technology sector has now become a major part of China’s fast-expanding biomedical science industry, which is evident from the fact that in 2007, the sector accounted for over $7 billion and an increasing pattern of employment generation. Many multinational companies are being attracted to setting up med-tech companies and manufacturing facilities. Amongst major global companies that have established facilities in the country are Siemens Medical Instruments, Japan Medical Supply Company, Hoja Healthcare, Thermo Fisher Scientific Company, Ciba Vision, and several others that have found China to be an important destination to meet their expansion needs. These companies have added to the country’s potential to provide technologically advanced health care items such as hearing aids, catheter instruments, syringes, scientific pieces of equipment, and technologically advanced research instruments. Global challenges are increasing and competition demands from local pharmaceutical industries to remain cost-effective without making a compromise on quality. Because of the presence of such an environment, more and more pharmaceutical companies are making a beeline in China for exploring opportunities for options related to outsourcing (Freight, 2010).

The coming decade is set to experience the power of the middle classes and very soon China will become the world’s third-biggest consumer market. In being a typical example of an emerging economy that is rapidly experiencing an increase in incomes and enhanced knowledge about health care issues, the consumer health care market is being driven upwards at a rapid pace. This would require the added transportation of health care products and medicines in every corner of the country and given China’s diverse climatic conditions the need for cold chain logistics becomes more pertinent. Many sectors in China have also started to experience the advantages associated with changing attitudes in terms of seeking products and treatments to check lifestyle and old age-related complexities. For instance, there is a marked pattern whereby cardiovascular issues are increasing and digestive remedies are being sought by a larger number of people. People in China are now ready to take medicines for ailments that were once considered taboo in society. The major push factors in this regard are hemorrhoid medications and vaginal yeast ailments. Moreover, the government has been actively engaged in promoting emergency contraceptive measures through high profile initiatives (Hoppough, 2006).

China’s Status in the Pharmaceutical Industry

It is noteworthy that China is ready to become the fourth biggest pharmaceutical market in the world by the year 2012. New operational networks have been put in place and the industry is looking forward to setting up additional pharmaceutical companies including clinical research laboratories to enhance the effectiveness and efficiency of cold chain logistics, which has become a vital though complex requirement in the country. China has been presented with a large number of infrastructure challenges in the context of providing clinical trial shipments and temperature-controlled facilities. Moreover, transport companies within the country are presently not completely ready to recognize and comply with global standards while handling such kinds of shipments.

A major concern of the pharmaceutical industry in China is to address issues of cold chain logistics by using the latest technological options that are presently being used across the world. Global cooling companies have also established facilities in China so that pharmaceutical clients can be provided with all requirements of clinical trial shipments and temperature-sensitive shipments that can be handled with competence and with trained people as per norms established by global bodies and the standards set by the IATA. Gold et al (1999) have held that cold chain logistics demand that specific styles of packaging have to be adopted that are acceptable to industry standards, temperature recording instruments, and cold packing mediums. With the increasing number of global courier and transport companies that have set up facilities in China, most of the major cities in the country are now well connected with transport facilities relating to cold chain logistics (Jol and Kassianenko, 2006).

As more and more experienced biopharmaceutical transport companies establish themselves in China, cold chain logistics services about biotechnology and pharmaceutical products have begun to be widely available in most parts of China although there is a significant gap in the context of perfection being achieved in such systems. As the world continues to experience the economic crisis and the developed world is experiencing bleak business environments, China is amongst the few nations that provide a warm ray of hope for many companies. The country is slated to grow in economic terms by about six to eight percent per annum for the next few years. Such predictions cannot be taken for guaranteed but they appear to be quite robust amidst circumstances surrounding the global economic environment. China’s outlook for the pharmaceutical sector is one of transformation whereby reforms and opportunities for manufacturers will be created in improving their profitability and prospects (Goff, 2006).

China is presently considered as occupying a position amongst the top 10 nations in terms of potential for pharmaceutical and drug sales and there are predictions that the sector will continue to grow at a fast pace until the year 2025 is being pushed by the fast pace of urbanization amongst its population. China has a considerably large young population and the income levels are predicted to rise consistently that has provided considerable impetus for economic growth in the country. But the country’s pharmaceutical industry is experiencing difficult challenges (ResearchinChina, 2009). The sector is currently characterized with:

• Large-scale presence of generic circumstances.
• Low levels of affordability.
• Higher prevalence of price control and cuts by the government.
• A complicated regulatory system.
• Meager provisions for health insurance in rural segments where a major part of the population resides.

There are a lot of multinational companies in the pharmaceutical industry but profitability is limited because of intense competition amongst thousands of standard producers and because distribution costs are not optimum (Sloan and Hsieh, 2007). Therefore, the medicine market is dominated by hospital sales and multinational companies mostly target major health care centers in first-tier cities. Small players in the pharmaceutical industry have also created a stronghold in providing niche health care and pharmaceutical products.

China’s most significant reform plan in the pharmaceutical industry was passed in January 2009 that was long expected, whereby more than $125 billion has been allocated to be utilized by 2011 in establishing universal health care services. The new provisions include the setting up of a countrywide essential medicine supply system and the reformation of government hospitals and the improvement of funding systems. The changing social structure and health care environment has been putting pressures upon the conventional business models in the sector. Pharmaceutical companies aim at bringing cost efficiencies amidst formidable challenges imposed in the global markets that have further added to the strong need for introducing changes. Such factors have opened up fresh opportunities for creating distribution collaborations, which have effectively delivered the desired results by way of business outcomes (Jones Lang Lasalle, 2009).

Changing Environment

A few years back pharmaceutical firms in China were selling by approaching health care centers and hospitals. However, the approach now is changing because the economic environment demands that suppliers get higher returns on costs incurred for conducting marketing and sales. Simultaneously most of the major health care centers and hospitals have started feeling the need to make sure that customers remain satisfied. Moreover, there is a marked growth in business amongst smaller clients that have contributed to transforming the marketing mix for pharmaceutical companies. Such a changing pattern has enabled efficient sourcing options for distributors that can now have flexibility in having a consistently functioning in the house marketing team. Such marketing efforts have also enhanced the need to transport larger quantities of pharmaceutical products to different parts of the country, which has increased the potential for these companies to have a broader trading mindset in aiming towards higher profitability.

The need to transport larger numbers of consignments of pharmaceutical products has widened the scope of cold chain logistics in the country. However, the present structure continues to be characterized by a lack of IT hardware and inadequate provisions for efficient customer service in the sector. There is a need to have multi-tier distribution structures and standardization of working processes in all parts of the nation to resolve the present complexities(Quinn, 2006).

Distribution Models

The most dominant distribution model for multinational companies in China pertains to complicated structures that impact efficiencies and effectiveness. Major issues of liquidity and credit problems have been known to reduce the speed of supply to second levels and in the squeeze on margins that impact supply issues of second levels. The sector is characterized by inefficient operations at the first level whereby there is a limited capability in quickly reacting to new developments. It is difficult for distribution companies in the pharmaceutical sector to keep track of rolling stock and data of sales that create a lot of difficulties given the large number of distribution players that are required for pharmaceutical products before they can reach their destinations.

According to PriceWaterhouseCoopers (2010), with the changing market environment, the complicated wholesaler model in the pharmaceutical sector has come under intense pressure. There are other challenges relating to capacity in dealing with the expansion of markets and distribution channels. There is a strong need to improve the coverage amongst third and fourth-tier cities, which requires widespread geographical operations and the ability to be responsive to the increased regulatory requirements and a consistently transforming environment (Sulista, 2009). According to Kartoglu et al (2009), firms dealing with cold chain logistics in the pharmaceutical sector have to ensure that they can secure accuracy and punctuality along with having exhaustive knowledge about the market including the increasing cost of logistics.

Cold chain logistics in China needs to be simplified. Strategic approaches have to be used in leveraging a large number of capacity in the services that also include local and national direct distribution systems so that distribution channels are simplified. Cold chain logistics have to cover descriptions in the context of different therapies and categories including specialty distribution and import logistics. There is also a need to have specifically built state of the art cold chain facilities along with efficient management of the same. Cold chain logistics require local direct distribution and regional clusters in addressing the diverse needs of principles and different product categories along with a team of dedicated managers that can develop customized options for different varieties of portfolio and volume requirements of multinational companies and suppliers that provide niche products. Because health-care reforms in China are going to open up added opportunities in addition to the expanding markets beyond major cities, many distribution companies in China are adopting a wait and watch approach before expanding cold chain operations in the country. They feel that such a strategy will assist in enabling principal companies to adopt close relationships with customers in addition to increasing the speed with which they can reach markets and thus optimize the cost of distribution (McGuire, 2002).

Factors Impacting Performance of Cold Chains in China

According to DU (2004), distributors and the pharmaceutical industry play a very important role in cold chain logistics because wholesalers act as extended arms of the principles in different markets. A distributor can become successful if the principal is successful, which implies that the interests of both parties are aligned in keeping with marketing plans and motivation strategies that can drive price and channel controls in keeping with the strategy of the principal company. According to Bishara (2006), the pharmaceutical market in China is considered to be having a push characteristic whereby the principal company creates the demand and the distributors actively participate in driving supplies so that products can go down to the ultimate customer. Distributors are considered to be market partners of principal companies because they invest time in ascertaining and understanding the products and the principal companies’ positioning strategy. Advantages associated with strategies like this pertain to efficiency in inventory control and shorter time for collecting receivable accounts in addition to the reduced risk of returns. Therefore it is profitable for pharmaceutical companies to shift their marketing functions to smaller cities in also including rural markets and community hospitals that are being given more importance in the reformed environment (Taylor, 2006).

Remote distribution centers in the pharmaceutical industry in China provide logistics services and direct access to public hospitals because of which such companies are continuing to make investments and to make improvements in the economies of scale by way of acquisitions and mergers. In aiming towards maximizing the proportion of pharmaceutical products that are sent to pharmacies and hospitals, many multinational companies have started working with cautiously selected wholesalers on the basis of a therapeutic class that provides for different products to be defined and sold to targeted customers (Pipekamp, 2009).

Luo and Christopher (2006) have researched and found that flexibility in operations allow multinational companies to create customized distribution solutions in boosting efficiency through identification and implementation of the shortest channel routes, which is again effectively possible through cold chain logistics. By adopting regional quality management systems that operate across all regions of the country the firm can make significant achievements in the current context of maintaining strong business continuity planning, product integrity, and quality control. In having a multilayered distribution strategy that uses advanced IT systems, a firm can considerably bring a higher level of transparency in the supply chains. Information systems have to be specifically focused upon meeting the distribution needs of the health care and pharmaceutical industry (Eggleston et al, 2008). Consequently, principal companies can keep watch on the products that are failing in meeting consumer expectations. Concurrently, the timely availability of information on marketing strategies, sales, and inventory result in the creation of opportunities for taking proactive responses to the market situations (O’Donnell et al, 2007).

The Chinese pharmaceutical sector is presently characterized by extreme challenges about vaccine distribution because of a lack of adequate and efficient cold chain logistics that does not allow vaccines to reach required destinations in time and in good condition (Wawryk, Mavromatis and Gold, 2007). The lack of infrastructure beyond larger cities and the absence of transparency in the context of distribution networks of the Center for Disease Control (CDC) further enhance the need to introduce efficient models of distribution that are flexible and result in an increase in the numbers of direct suppliers. Authorities and multinational companies are making efforts to steadily enforce a de-layering model that has so far been used only in the context of pharmaceuticals. Import processes for vaccines have to be managed more efficiently and better warehousing facilities along with cold chain expertise introduced in different cities and regions. Moreover, a dedicated group has to be assigned so that vaccine distribution can be efficiently made through the CDC, which also includes a collection of data, collection of accounts receivable, order and returns management, and promotion of other nonstandard services (Emond, 2007).

Scope for Improvement

Cold chain management that results in reliability, efficient storage, and cutting edge management can greatly result in standardized processes with well-trained teams and appropriate backup alarm systems. Cold chain logistics require that quarterly temperature mapping exercises should be carried out in identifying weaknesses and other problem areas along with 24 hours temperature tracking to enable constant monitoring (Ruiz-Garcia, 2010). Manual tracking can also resort to daily that considerably depends upon the requirement of the consignments. In-bound quality assurance requires that temperature should be monitored and relevant data collected and out-bound checking be made in the context of protecting packaging as also for checking of cold chain labels. Trucks have to be provided with GPS facilities when they undertake long haul journeys so that constant surveillance can be done to achieve timely deliveries. A typical cold chain logistics system works on providing consultation for import and customs clearance, inventory, and storage management that is done under temperature-controlled and safe warehouses and dispatches to the required destinations. Cold chain management of pharmaceutical products requires that the products have to be maintained at the required temperatures under proper supervision and reporting (Metzger et al, 2007).

Any pharmaceutical product that has been exposed to temperature variations even if it’s a genuine product becomes entirely useless. Pharmaceutical companies have to be careful in maintaining product safety and ensuring that the supply chain assists in reducing the risks associated with issues relating to temperature control while transporting pharmaceutical drugs. If a pharmaceutical company can streamline its supply chain preferably through cold chain systems it can greatly help in resolving problems related to the deterioration of medicines. Because of fast track development in the sector, a great deal of responsibility has shifted to wholesalers that have an important role to play in cold chain logistics. If distributors can handle all the issues efficiently they can avoid a great deal of confusion in the context of channel integrities and pedigree. It is well accepted that pedigree does not lead to channel integrities, but they just record the details of people who have handled the distribution. They do not provide details of how it is done and how the product is handled, irrespective of whether it is distributed through cold chains or otherwise. This way the integrity of the channel is defined and the importance of pedigree is also established (Miller, 2010).

It is evident from the World Health Organization Report (2008) that most pharmaceutical companies are aware of the need to have good pedigree systems but they mostly define the narrow channels in terms of the product movement from manufacturer to distributor to the provider of health services. They frequently contribute to increased channel integrities as compared to what can result from the pedigree. If temperatures are monitored during shipments the technology in use can also be utilized to keep track of temperatures during transit.

Zhang (2005) has found that the prospects of introducing cold chain systems in the Chinese distribution and transport system have created exciting opportunities in terms of streamlining of cold chain systems. The latest technologies offer a variety of functions for consumers because if one has the latest gadgets it is possible to ascertain if the correct medicine has been received or whether it has been stored and transported within the given temperature ranges. Although the adoption of such technology has been restrained to some extent because of cost concerns and the development of specific standards there is also considerable apprehension about the influence of radioactive waves on proteins that could result from being transported in cold chain systems (Ludwig, 2004).

Pharmaceutical companies in China need to be aware that pharmaceutical products that are being distributed through cold chain systems require distributors and wholesalers to maintain at least 20 days worth of inventory. All pharmaceutical manufacturers and biotechnology companies have been entrusted with the responsibility to make sure that small and large molecule products reach their destination in unadulterated forms (Craig, 2003).

Efforts by the Chinese Government

The Chinese government has recently started making attempts to highlight the significance of cold chain logistics by arranging forums such as the China International Exhibition of Food Frozen & Refrigeration Technology Equipment and Cold Chain Logistics which will be held in 2010. Such platforms will help a great deal in popularizing cold chain logistics. There are advantages not only for manufacturers but also for the public at large. The exhibition will provide for the latest technology and world-class cold chain options in addition to creating a stage for leading domestic and foreign cold chains. It will also pave the way in providing direction for developing related industries and displaying corporate strength and images. In organizing such exhibitions the Chinese government is addressing the ongoing scientific issues and technological developments in the cold chain sector (Miller et al, 2004). This would also popularize scientific knowledge about cold chain systems and encourage co-operation and partnerships amongst domestic and overseas companies in the context of demand and supply for cold chain logistics. Along with the Chinese government, the following organizations and institutions have also initiated measures in cooperating with the government to popularize cold chains.

1. China Association of Warehouses and Storage (CAWS).
2. China Communications and Transportation Association (CCTA).
3. China Federation of Logistics & Purchasing (CFLP).
4. World Expo Group Shanghai FESCO International Exhibition Advertising Co., Ltd.
5. Cold Storage Branch Association of China Association of Warehouses and Storage (CAWS)
6. China Food Logistics Commission.
7. China National Food Industry Association (CNFIA).
8. Shanghai Association for Cold storage.
9. Shanghai Zm International Exhibition Co., Ltd.
10. Beijing Gold Trade International Exhibition Co., Lt.
11. Exhibition Dept. of China Food Logistics Professional Committee.
12. Automatic Identification Manufacture Association of China.
13. Global Cold Chain Alliance.
14. Circulation Industry Promotion Center, Ministry of Commerce, the People’s Republic of China.
15. China Logistics Technology Association.
16. GuangDong Association for Cold storage.

Given the exhaustive list of associations, organizations, and institutions it is indicative of the fact that hectic efforts are being made to make the cold chain logistics more effective and efficient in China. The changing pattern of dynamics in the food sector in China has provided lots of opportunities for developed countries to increase exports of agricultural products primarily because there have been considerable changes in the food habits of Chinese people that are now demanding more imported food products. Additionally, more and more US exporters and multinational companies are making attempts to enter the Chinese market to market their pharmaceutical products (Patton, 2006).

Income levels in China are growing and organization is taking place at a rapid pace because of which people have become conscious of quality and adherence to regulations in the context of drugs and healthcare products. People have also become aware of global standards of packaging and transportation. Many multinational companies from developed countries have begun to cash in on such circumstances and are now boosting exports to China, which will lead to an increasing pattern of foreign pharmaceutical goods supplies entering the Chinese market. However, with increasing demand for pharmaceutical products, more and more Chinese have become health-conscious; there will be a stronger need for such multinational companies to establish better cold chain logistics in the country. Analysts have concluded that the cold chain industry will prosper in the country because the importance of food and drug safety is being viewed very seriously (Black, 2003).

Brenner (2009) has asserted that the Chinese government is now very specific in asserting that if a product needs to be kept at a specific temperature, the manufacturing company is directly responsible to arrange for the transport of such medicines under strict temperature controls. If drugs have to be shipped from one point to another the manufacturer is to ensure that the products are adequately labeled so that they can be identified with the kind of temperature controls that they have to be kept in. If a company does not comply with such requirements the product will not reach its destination in time because it will require checks and analysis and may be declared unfit for human consumption. A lot of spoilage occurs with the combined accumulation range reaching specific time levels that are considered unacceptable by the quality control departments of pharmaceutical companies (Bogh-Sorensen, 2004).

Zhou (2007) revealed that the present transport patterns in China are indicative of the fact that other than pharmaceuticals, cold chains have become an important aspect in most markets including frozen foods, chilled juice, and meat products. In being an emerging economy the large population of young people in the country is driving up consumer demand. The increase in demand is also due to rapid urbanization that is happening across the entire country. The boom in the retail sector is also adding to the frenzy created for cold chain logistics. However, in other sectors also there are major challenges about dysfunctional supply chains in terms of high levels of fragmentation whereby they too have to struggle to achieve economies of scale from the retail and supply perspectives.

Nevertheless, just as there are immense opportunities in the pharmaceutical sector, in other sectors also there are considerable opportunities in terms of projected growth that can result from the current financial crisis that has gripped most parts of the world. Such situations have created the added potential for foreign companies to enter the Chinese market through the FDI route. Just as the pharmaceutical sector is handicapped because of inadequate cold chain facilities, other sectors too are suffering from the same problems in being unable to effectively expand to smaller cities in the country. Analysts have observed that even in tier-one cities such as Shanghai, multinational companies are struggling to find appropriate cold chain logistics partners. In effect, many foreign companies have been known to put off their investment plans in China because inadequate cold chains prove to become a major hurdle to market entries (Lewis, 2005).

Research Methodology

The methodology for this research is based upon the research philosophy that is about making analysis and application of cold chain logistics in the Chinese Medical Industry and focusing upon how cold chain applications can be designed to increase performance in the pharmaceutical industry in China. Such objectives have been achieved by examining the prevailing circumstances in the medical industry in the country and how efficiently they cater to the needs and expectations of industries in both the public and private sectors. A critical evaluation is then possible of the different circumstances that prevail in the country in comparison to the developed world in ascertaining the problems that are prevalent in the system. This will also allow the research to recommend to Chinese authorities the possible solutions for improving cold chain logistics in the country.

Research Design

This study will employ a quantitative research design for purposes of structuring the research process. According to Hopkins (2000), this type of research design will help the researcher to examine the issues at hand since the research is largely interested in evaluating the relationship between variables. Quantitative studies are either descriptive or experimental, but this particular study will employ a descriptive approach since the subjects, in this case, are the representatives of cold chain logistics firms and multinational pharmaceutical companies in China and will only be measured once (Sekaran, 2006).

Primary data was gathered utilizing undertaking an online survey specifically designed to measure the respondents’ perceptions, values, satisfaction, and opinion towards the performance of cold chain logistics in China. According to Sekaran (2006), a survey is effective when the researcher is particularly interested in the descriptive assessment of a particular phenomenon as is the case in this study. Secondary data was collected using undertaking a detailed review of related literature.

This research aimed at achieving the objectives of making adjustments about the current activities of cold chain logistics firms in China and identifying the barriers in this sector while making comparisons amongst them. Based on the literature review and the answers to questions that were forwarded to individual respondents via e-mail, it was proposed to ascertain the following:

• Whether cost-saving is the major driver for cold chain operations in China.
• Whether there are any barriers to cold chain logistics in China.
• Whether more and more firms in the medical industry in China prefer the use of cold chain logistics for the distribution and transport of pharmaceuticals.
• Whether cold chain logistics infrastructure in China is growing consistently.

This research used different characteristics that were present in every chosen company for this survey. Individuals were also chosen from diverse backgrounds to have a wide cross-section of respondents in enabling the study to have a broad perspective while concluding the findings. Industry groups were chosen that belonged to private and public sectors as also from multinational companies that have recently entered the country through the FDI route. Different individuals were invited to respond and the sample population comprised of individuals that were professionals, managers, and workers in the pharmaceutical sector in China. There were 20 individual respondents chosen from the industry that represented five business houses and the rest were individuals that were to respond in the context of their perceptions. Company representatives from multinational companies were required to respond in the context of their activities and their performance about varied parameters that were outlined in the questionnaire.

There were 15 questions asked in the questionnaire that focused on extracting information on the performance of cold chain logistics in the medical industry in China. The questionnaire was designed after conducting a mock pre-test by way of in-depth interviews amongst decision-makers in different pharmaceutical companies in China as well as amongst people from government offices. Attempts were made to represent the widest possible cross-section of individuals and businesses about cold chain logistics activities. The criteria used for selecting firms rested on the willingness of a given firm’s manager to be interviewed and that the firm should have been conducting cold chain activities for three years. Individuals were selected amongst a wide base in attempts to include people that we’re aware of and directly involved with cold chain logistics. Some individuals that had been involved in the sector but had changed their functions subsequently were also included. The average age of interviewed respondents was 34 years and 61 percent of respondents were from local medical industries while 39 percent represented multinational pharmaceutical companies.

Target Population and Sample

The target population for this study comprised of people that were directly engaged with cold chain operations and people from pharmaceutical industries in China. To get responses from individual respondents the email option was considered most meaningful because it allows having specific information from the perspective of the respondent’s confidentiality. Purposive and convenience sampling approaches were utilized for purpose of coming up with the desired sample. Purposive sampling was used to assist in the process of selecting a sample that has prior knowledge and understanding of cold chain logistics ventures (Cohen et al, 2007). Afterward, the subjects were requested to respond to the questionnaire under being in the right location at the right time, otherwise known as convenience sampling (Sekaran, 2006).

Data Gathering Instruments

Primary data for the study in the case of individual respondents was collected using an online semi-structured questionnaire schedule. A questionnaire is desirable in a descriptive study basically because it is easy to administer the tool in an online setting (Cohen et al, 2007). The tool has been designed to measure the respondents’ perceptions, attitudes, and values regarding cold chain logistics using a five-point Likert-type scale, and how these variables combine to enhance or lessen their opinion in the context of cold chain logistics in China. Apart from the ability to attain a high response rate, it is also easy to undertake a comparative analysis when using a questionnaire because most items consist of closed-ended questions (Sekaran, 2006). The questionnaire used in this particular study was also subjected to thorough testing to ensure that issues of data validity and reliability are appropriately dealt with. Secondary data for this study was collected through a comprehensive review of literature, sourced from reliable sources, including textbooks and journals.

Data Analysis

The study employed both quantitative and qualitative data assessment techniques for gathering primary and secondary data whereby quantitative assessment involved coding the data contained in the questionnaires and entering them into a statistical package known as SPSS. Afterward, cleaning and analysis of the data were performed using the same package to generate frequency distributions and descriptive statistics that were used to answer the study’s main objectives. Data was presented in different forms and the qualitative data generated by the open-ended questions was analyzed by using a process known as the qualitative content approach. This method involves cleaning, coding, and evaluating responses that were given in either verbal or written communication to permit them to be considered quantitatively (Sekaran, 2006).

Table I. Analysis of Cold Chain Logistics in China.

The table shows the number of respondents who asserted to or confirmed the providence of each theme in the context of their agreement with the prevailing cold chain logistics environment.

The responses from 1 to 5 pertained to the following:

1. Strongly Agree.
2. Tend to Agree.
3. Neither Agree nor Disagree.
4. Tend to Disagree.
5. Strongly Disagree.

All the people surveyed, are based in China and have been involved in cold chain operations for at least three years. It is evident from the gathered data that reducing costs and catering to new segments are the main motivating factors for most companies. Next in importance for firms is to increase their respective market shares. Thus, it appears that cost saving is a major objective of companies that are engaged in cold chain logistics in China. The main barrier for firms is identified as technology in terms of inadequacy and availability, which are considered as the most crucial by firms because they have been discouraging them from conducting cold chain logistics business on a large scale. The issue of funding was followed by organizational culture, lack of willingness to adopt the latest technology, cost of technology, and confidentiality. Therefore it appears that although security is considered a technological barrier, firms in China are open about conducting business by using higher levels of cold chain logistics. This is primarily because in most companies there is good infrastructure in terms of means of potential for cold chain operations.

The high potential for using cold chain logistics in China is present because of future possibilities of minimal technical complexities. Although it cannot be said that there are no barriers to adopting cold chain logistics in China, the present environment in terms of technical issues and availability of adequate funding for local companies are making many firms desist from excessively using cold chain logistics for their business respectively.

A major difference between the local and multinational pharmaceutical companies pertains to the difference in the structure of establishments. Multinational firms are characterized by high technology and willingness to make huge investments in cold chain logistics while local companies are mostly dependent upon distribution and transport companies for their cold chain logistics. For firms to be successful in cold chain logistics they have to provide high levels of service. They have now begun to make use of better technology to satisfy their customers. Thus it is true that more and more companies in China have begun to provide cold chain logistics services to pharmaceutical companies. The Chinese medical industry is characterized differently in the context of cold chain logistics as compared to other developed nations. In being an emerging economy, cold chain logistics in China have not been widespread so far but there is immense potential for its development in the country as more and more multinational companies establish facilities through the FDI option.

Given that China is ready to become the fourth biggest pharmaceutical market in the world, new operational networks have been put in place and the industry is looking forward to setting up additional pharmaceutical companies including clinical research laboratories to enhance the effectiveness and efficiency of cold chain logistics, which has become vital though complex requirement in the country.

China has been presented with a large number of infrastructure challenges in the context of providing clinical trial shipments and temperature-controlled facilities. Moreover, transport companies within the country are presently not completely ready to recognize and comply with global standards while handling such kinds of shipments. A major concern of the pharmaceutical industry in China is to address issues on cold chain logistics by using the latest technological options that are presently being used across the world. Global cooling companies have also established facilities in China so that pharmaceutical clients can be provided with all requirements of clinical trial shipments and temperature-sensitive shipments that can be handled with competence and with trained people as per norms established by global bodies and the standards set by the IATA. Cold chain logistics demand that specific styles of packaging have to be adopted that are acceptable to industry standards, temperature recording instruments, and cold packing mediums. With the increasing number of global courier and transport companies that have set up facilities in China, most of the major cities in the country are now well connected with transport facilities relating to cold chain logistics.

Findings and Analysis

While examining the issue of cold chain logistics in China it is important to mention that most commodities including agricultural products that are usually transported from farmers to traders to agents to wholesalers and eventually to retailers, had to undergo distribution networks through provincial distributors before they could reach the local market. Each of the processes in the traditional system adds to handling costs because there is very limited refrigeration used, and products are often exposed to the vagaries of nature and eventually end up as waste. There is a great deal of suffering in terms of quality because cold chains are limited and distribution is mostly subjected to delays. It has been reported by A T Kearney (2007) that in China, only 15 percent of the products that require cold chain logistics are provided with the same as compared to 85% in Europe.

It is therefore very crucial for all companies to fully recognize the importance of cold chain systems. Controlling temperature within given limits is a major requirement for distributing goods that are prone to get damaged during storage and transport. Just as it is relevant for pharmaceutical products, other products also are prone to get damaged in the distribution network, require greater investments in the packaging to be protected against temperature variation. This also allows the product to reach its destination in its original form without sustaining any damages. Any delay in the delivery of the products can result in severe damages to quality. Therefore, companies are expected to have backup arrangements because transporting products usually takes longer in emerging economies such as China.

The major criteria for cold chain operations are to drive processes from end to end to achieve efficiencies. What is required is to have coordinated temperature-controlled drugs in addition to proper warehousing and technologically advanced tracking and traceability systems. Companies have to consider the geographical aspect because products have to be transferred from one end of the country to another, and distribution centers play a major role in this regard because they can provide multiplayer services in the distribution systems, which further enhances supply efficiency.

It is quite expensive to operate cold chains and most efforts are made by companies to adopt coordination measures in cold chain operations. In the pharmaceuticals sector, most of the companies have the resources to establish their facilities but companies that lack capital and technical expertise, it is required to initiate steps to develop cold chains through consortiums. Such consortiums are responsible for adopting predetermined industry standards that have to comply with government regulation. It can be expected as per experience in different developed countries that in China also more and more companies will join consortiums relating to cold chain logistics. It is also understandable that it is not practically possible for every company to have adequate resources to fund cold chain logistics. At the same time, it is more evident that the entry of foreign retailers in China; such as Tesco, Wall-Mart, and Carrefour have contributed greatly in introducing expertise relating to cold chain logistics, which has considerably improved efficiency and reduced margins in the entire system (Bolton, 2006).

A lot of capital needs to be invested in establishing cold chain systems and companies have to adopt long-term perspectives in the context of technology investment. Most of the time the required technology and equipment are readily available but most firms are unable to afford the huge investment and do not have the technical expertise to enjoy economies of scale. Indeed, it is a major challenge for Chinese authorities to find companies that are willing to make investments in cold chain logistics while they make entry into the Chinese markets. There is also a strong need for focusing on education in enhancing the efficiency and availability of cold chain logistics in China. The Chinese government can start conducting training and workshops in educating and informing firms and distribution companies about impending challenges and how they can be overcome. It is now widely accepted that the cold chain is a crucial element in international trade for almost all products because of which it is becoming an important element of supply chain strategies. A necessary condition for improving cold chain logistics in China is to reduce waste and to improve quality (CRI, 2009).

Before cold chain logistics had become common in distribution channels, transporting perishable and temperature-sensitive products through long distances required the use of ice, which had several limitations. There have been some advancements made in technology related to cold shipping along with rapid delivery systems as provided by shipping companies that could transport perishable products through long distances. Pharmaceutical products are now transported across the entire country as also across the globe without impacting the integrity of the product. Indeed, the uses of cold chain logistics and related technology are very vast. The pharmaceutical industry places heavy reliance on cold chain systems for transporting vaccines, medicines, and other biological products (Burgess and McIntyre, 1999).

Additionally, perishable food products such as chocolate, meat, and dairy products are being transported across different regions using the same technology. Cold chain systems are specialized technology-based facilities whereby goods can be transported under strict temperature controls. Cold chain systems imply the presence of logistics whereby the temperature of the transported products, are controlled across all stages of the transportation process that includes storage, unloading, loading, and shipping.

Dry ice allows the shipment of refrigerated packets while keeping their contents at low-temperature while cold chain logistics technology eliminates most of the disadvantages associated with shipment made with the use of dry ice. While making shipments with the use of dry ice, several regulatory conditions have to be complied with and strict packaging protocol has to be adhered to as provided by the rules outlined by the United Nations. Although dry ice continues to be widely used for transporting temperature-sensitive goods, considerable innovation has been made in cold shipping technology that has made transport of goods from one country to another safer and removed the requirements as applicable in the case of hazardous materials (Logistics Insight Asia, 2010).

The latest addition to cold chain logistics and the transshipment and transportation of temperature-sensitive products is the introduction of water-based gel refrigeration that uses ice brick shipping packs that can be used in cold chain systems. This technology is considered to be the next generation option in cold chain logistics. Such water-based refrigeration is designed for providing safe and non-toxic alternatives to dry ice because it is not required to adhere to provisions as provided by the United Nations in the context of transporting temperature-sensitive products. The usability of such cold shipping packs allows trans-shipment of temperature-sensitive products for different applications ranging from complicated cold chain activities to shipping common products through long distances. More and more countries across the world have started relying on cold storage technology, which has facilitated convenient shipping of billions of dollars worth of perishable products. It is thus beneficial for companies to make investments in this logistically crucial technology (Lovell, 2004).

According to Taylor and Holloway (2007), the global market for bioengineered, pharmaceuticals has grown exponentially and such a scenario is now putting intense strain on the linkages that comprise a supply chain in the context of temperature-controlled products, which has taken in its grip third-party logistics providers, packaging companies, wholesalers and pharmaceutical companies. Although the cold chain logistics is considerably advanced in developed countries such as the US, the problem is quite acute in countries such as China, which does not have a typical global delivery system of cold chain logistics for pharmaceutical products. The situation becomes grave because global transport of pharmaceutical products could involve passage through two or three airports, some ground handlers, different airlines, different trucking companies, one or two freight forwarding companies, and customs brokers. When pharmaceutical products are being transferred from one country to another they come under the provisions of regulations of both countries in addition to being influenced by differences in climate zones that are known to compound the complexities.

Thus, China needs to respond to such problems by reducing the number of intermediaries and providing end to end distribution and transport of temperature-sensitive drugs. Although the pharmaceutical industry in China has begun to respond with several solutions, there is a need to reduce the number of transit transfers for products to reach their final destination. Positive developments in this regard relate to the establishment of facilities by global courier companies, such as FedEx, DHL, and UPS that have begun to source a large number of compressor-driven technologically advanced containers. Cold chain logistics provide for temperature-controlled shipping containers that can control temperatures between 4° and 25° C. It is predicted that the life sciences segments in the pharmaceutical industry in China will continue to grow at compounded annual rates of 12 percent for the next few years, which will entail that the temperature-controlled portions of the distribution segments will also grow significantly in the coming times.

Researchers have forecasted that about 40% of life sciences products in China will be impacted by temperature control, while the remaining 60 percent will be non-controlled pharmaceutical products. In this context, temperature-controlled products are defined as those that are required to be kept under controlled temperatures between 15° to 25° C. The basic concept of controlling temperatures of pharmaceutical products during transport is a basic necessity in the sector and will continue to grow. As more and more pharmaceutical products are imported into China, and with more and more multinational companies establishing their production facilities in the country, it is estimated that there will be a significant increase in the amount of work-related with customs tariffs and other forms of taxation. In developed countries such as the US, several guidelines inform distributors about the specific methods in which pharmaceutical drugs have to be transported, but China has just begun to realize the need of enforcing more stringent conditions for the transport of such products.

There has been a considerable shift in the product profile of pharmaceutical products and many of such products are bioengineered medicines that have molecular properties that make them more vulnerable to variation in humidity and temperature. There is great demand and need in China for bioengineered products such as hormones, enzymes, coagulant materials, cytokine extracts, and insulin. Such protein-based products are very useful in treating ailments such as hepatitis, cancer, diabetes, hemophilia, and several other diseases that have so far not been treated effectively because of inadequate distribution of drugs in far-flung areas of the country (WHO, 2008).

Other trends that had impacted cold chain logistics systems in China include the emergence of new markets and the regulatory reforms and security issues that have created new sets of challenges because the supply chains in the country have begun to stretch towards new manufacturing facilities that have been set up by multinational companies. Any product that is being transported through cold chain systems has a specific timeline in which it has to reach its final destination because of which any event that may happen along the way could impact and put pressure on all concerned parties. Any kind of delay can make distribution companies fall out of line with compliance measures which could further delay the product delivery and under such circumstances, the adverse consequences could be imagined in the context of the losses incurred because of failure of cooling mediums and the containers.

Changes in the regulatory environment in China in the context of cold chain logistics have begun to put considerable pressure on the pharmaceutical industry. Although historically, temperatures in the cold chain environment previously ranged between 2° and 8°C, the pharmaceutical industry is now experiencing an evolution in this regard because the temperature range now varies between 15° to 20° C. This range is believed to be a typical room temperature but is considered essential due to changing climatic conditions across the globe, more specifically in China. In keeping with practices followed by other developed countries, China has also expanded its definition of temperature control products and has passed a regulation that mandates the storage and transportation of drugs under strict temperature control, and under the regulated labels (Yang, 2010).

The Chinese government is now very specific in asserting that if a product needs to be kept at a specific temperature, the manufacturing company is directly responsible to arrange for the transport of such medicines under strict temperature controls. If drugs have to be shipped from one point to another the manufacturer is to ensure that the products are adequately labeled so that they can be identified with the kind of temperature controls that they have to be kept in. If a company does not comply with such requirements the product will not reach its destination in time because it will require checks and analysis and may be declared unfit for human consumption. A lot of spoilage occurs with the combined accumulation range reaching specific time levels that are considered unacceptable by the quality control departments of pharmaceutical companies (Zhan et al 2003).

The integrity of the supply chain in the context of products that are susceptible to getting damaged in high temperatures implies that additional conditions have to comply in the context of adequate packaging, monitoring, and temperature controls. As living standards in China improve, cold chain logistics of storage technologies of pharmaceuticals and drugs have been well-received by consumers through community stores and supermarkets in terms of frozen food and pharmaceuticals that are distributed in keeping with cold chain technologies that have been comprehensively used and quickly developed in the whole of China. Cold chain logistics has now become a major thrust area in China, especially in food and pharmaceutical products. In comparison with other developed nations of the world that have significantly developed in terms of cold chain logistics, China is characterized by considerable shortcomings in terms of its cold storage industry and transport facilities, refrigerating capacities, logistics, and technological equipment. Undoubtedly there is immense potential for cold chain logistics in the country and in recent years there have been significant efforts to apply technology to cold chain logistics and drug safety management.

Specialization in cold chain logistics has led many companies to become dependent upon foreign shipping services but there are concrete and visible signs of niche logistical services being established for temperature-sensitive pharmaceutical products. For multinational companies to succeed in cold chain logistics whereby the distribution of products can be made in far-flung areas of China, they need to become well conversant with the local rules, traditions, and environmental circumstances in addition to estimating the time taken for distributing their products within China. The medical technology sector has now become a major part of China’s fast-expanding biomedical science industry, which is evident from the fact that in 2007, the sector accounted for over $7 billion and an increasing pattern of employment generation. Many multinational companies are being attracted to setting up med-tech companies and manufacturing facilities.

As more and more experienced biopharmaceutical transport companies establish themselves in China, cold chain logistics services of biotechnology and pharmaceutical products have begun to be widely available in most parts of China although there is a significant gap in the context of perfection being achieved in such systems. As the world continues to experience the economic crisis and the developed world is experiencing bleak business environments, China is amongst the few nations that provide a warm ray of hope for many companies. Moreover, there is a marked growth in business amongst smaller clients that have contributed to transforming the marketing mix for pharmaceutical companies. Such a changing pattern has enabled efficient sourcing options for distributors that can now have flexibility in having a consistently functioning in the house marketing team.

Such marketing efforts have also enhanced the need to transport larger quantities of pharmaceutical products to different parts of the country, which has increased the potential for these companies to have a broader trading mindset in aiming towards higher profitability. The need to transport larger numbers of consignments of pharmaceutical products has widened the scope of cold chain logistics in the country. However, the present structure continues to be characterized by a lack of IT hardware and inadequate provisions for efficient customer service in the sector.

Strategic approaches have to be used in leveraging a large number of capacity in the services that also include local and national direct distribution systems so that distribution channels are simplified. Cold chain logistics have to cover descriptions in the context of different therapies and categories including specialty distribution and import logistics. There is also a need to have specifically built state of the art cold chain facilities along with efficient management of the same. Cold chain logistics require local direct distribution and regional clusters in addressing the diverse needs of principles and different product categories along with a team of dedicated managers that can develop customized options for different varieties of portfolio and volume requirements of multinational companies and suppliers that provide niche products.

Distributors are considered to be market partners of principal companies because they invest time in ascertaining and understanding the products and the principal companies’ positioning strategy. Advantages associated with strategies like this pertain to efficiency in inventory control and shorter time for collecting receivable accounts in addition to the reduced risk of returns. Therefore it is profitable for pharmaceutical companies to shift their marketing functions to smaller cities in also including rural markets and community hospitals. By adopting regional quality management systems that operate across all regions of the country the firm can make significant achievements in the current context of maintaining strong business continuity planning, product integrity, and quality control. Authorities and multinational companies are making efforts to steadily enforce a de-layering model that has so far been used only in the context of pharmaceuticals. Import processes for vaccines have to be managed more efficiently and better warehousing facilities along with cold chain expertise introduced in different cities and regions.

Conclusions and Recommendations

Most developed countries have introduced several regulations and standards in addition to issuing guidelines that have been consistently published during the last few years. In keeping with practices followed in developed countries in the context of cold chain logistics in China, supply chain partners are required to collaborate in ensuring patient safety and product qualities. Such objectives would have forced the streamlining of the cold chain systems and pharmaceutical companies have begun to push for anti-counterfeiting electronic systems that link most pharmaceutical companies. Most of the counterfeit drugs are also considered as being temperature control products. Although presently there is no indication of counterfeit drugs entering the Chinese market as the country develops into a global market culture, it has to face such possibilities because there is a strong relationship between temperature-sensitive drugs and counterfeit drugs. Adulteration of drugs is also possible because of external issues such as pressures, humidity levels, vibration, shocks, and temperature variation.

Globalization has indeed led the world to become a much smaller place in terms of distance but the perspective of physical separation is still relevant in the context of freight that has to be safely transported between different regions in the world. If the physical distance is large there is a greater likelihood of the freight being spoilt within the complex transport mechanism that is involved in the transportation of products such as medicines and health care products. A great deal of time and coordinative efforts are required to efficiently transport pharmaceutical products to save them from getting damaged and unfit for human use. Cold chain logistics relates to transporting temperature susceptible products in a supply chain system by making use of refrigerated packing processes and logistics planning so that the integrity of such consignments is protected.

Presently only about 15 percent of pharmaceutical and food products are transported through cold chain systems and the distribution systems have now begun to adopt measures whereby the shelf life of food products, vegetables, and pharmaceuticals is ensured. The main problems faced by US exporters in the context of reaching their pharmaceutical products to the majority of people in China pertains to their inability to transport their products to interior regions in China because of a shortage of cold chain logistics. This shortcoming certainly proves to be a big trade barrier for not only multinational companies but also for local companies that are attempting to enhance their productivity and increase their market presence. Concurrently, such circumstances have proved to create a lot of opportunities for logistics companies that are attempting to sell their cold chain systems in the country. Given that the cold chain industry in China is still in the infancy stage, there is no clear way to determine when sufficiency will be achieved in cold chain logistics.

In having unique eating habits and weather conditions China needs to establish standards that are acceptable by the US and the European Union (Guthridge and Miller, 2006). For multinational companies to succeed in cold chain logistics whereby the distribution of products can be made in far-flung areas of China, they need to become well conversant with the local rules, traditions, and environmental circumstances in addition to estimating the time taken for distributing their products within China. Consequently, the logistics industry in the country has experienced considerable growth in terms of segmentation and specialization of the cold chain logistics systems (HDMA Factbook, 2006-2007).

From the perspective of prospects of economic growth, cold chain logistics allow several developing nations to partake in the international market for perishable pharmaceutical products. In the context of geographical perceptions, cold chain logistics leads to several advantages at the global, regional, and local levels. At the global level, it allows for specialization of pharmaceutical functions in enabling the transportation of temperature-sensitive products to different regions, which allows the distribution of biological and pharmaceutical products and other essential vaccines to a larger number of people. At the regional level distributors can give support to the specialization functions that have been known to create positive economies of scale. At the local level, cold chain logistics provide timely distribution to the end customers (Carter, 2009).

Although the international commodity transportation systems are quite modern extensions, transportation of goods and refrigeration has been known to exist from the end of the 18th century. The British fishing industry during that time used natural ice in preserving stocks of fish. Such procedures were also used for transporting food items from rural to urban areas. Cold storage was quite important during the late 19th century when large shipments of frozen beef products from South America were sent to England while frozen beef and pork were transported from Australia. The transportation of pharmaceutical products under strict temperature controls is a recent development as compared to the shipping of frozen food. After the 1950s, logistics companies and third-party administrators emerged and instituted new procedures for safely transporting products across the globe (Harber, 2007).

Food and drug regulators in China impose accountability and restriction in the context of stabilizing the cold chain systems. Stability issues in the context of cold chain led many companies to become dependent upon specialized cooling systems instead of completely transforming their supply chain systems. The same system is presently prevalent in China whereby an increasing number of foreign companies are establishing facilities to offer cold chain logistics to the increasing number of pharmaceutical companies and frozen food industries (China Pharmaceutical Newsletter, 2010).

The cold chain industry became well-established in the US several years ago but the importance of the cold chain in preserving expensive vaccines and pharmaceutical products has been recently recognized in China because its logistical providers have begun to appear on the scene. Demand in this context is gradually increasing and so is the requirement for efficient management systems for cold chain logistics (Samant et al 2007). The importance of cold chain logistics in China continues to become stronger especially in the pharmaceutical industry because of the need to test and produce drugs that are considered controlled and uncompromised in the context of transfer through shipments.

A large percentage of pharmaceutical products that are transported through cold chain systems in China are still considered to be experimental or in the development phase (Hazelton et al, 2002). As for research carried out by the Healthcare Distribution Management Association in America in the context of over $200 billion worth of pharmaceutical distributed products, almost 10 percent of the drugs are sensitive to temperature. This implies that immense dependence is placed on food chain logistics and investments in establishing such facilities. The importance of cold chain logistics becomes more pertinent upon realizing that if products are exposed to varying temperature levels during shipment they could become ineffective and damaging to the health of patients.

Temperature control is an important element of cold chain logistics and has assumed a great deal of importance in global trade. As more and more nations begin to concentrate on the export economies there is an increasing need to keep products fresh for larger periods. The present consumer market is rife with examples of grocery stores providing a host of commodities that are manufactured in different parts of the world. A grocery store in an urban market will indeed in all probability provide customers with apples from New Zealand, mangoes from India dates from the Middle East, and cheese from Switzerland, including a host of several other items that would otherwise, have not been available in the absence of efficient cold chain systems. In 2005 about 1500 billion dollars worth of food products and frozen meat products were transported through cold chain systems across the world. Although China has so far not reached such levels time is not far when the country will need advanced mechanisms and technological solutions to improve the quality of its cold chain logistics systems.

The coming decade is set to experience the power of the middle classes and very soon China will become the world’s third-biggest consumer market. In being a typical example of an emerging economy that is rapidly experiencing an increase in incomes and enhanced knowledge about health care issues, the consumer health care market is being driven upwards at a rapid pace. This would require the added transportation of health care products and medicines in every corner of the country and given China’s diverse climatic conditions the need for cold chain logistics becomes more pertinent. Many sectors in China have also started to experience the advantages associated with changing attitudes in terms of seeking products and treatments to check lifestyle and old age-related complexities. For instance, there is a marked pattern whereby cardiovascular issues are increasing and digestive remedies are being sought by a larger number of people. People in China are now ready to take medicines for ailments that were once considered taboo in society. The major push factors in this regard are hemorrhoid medications and vaginal yeast ailments. Moreover, the government has been actively engaged in promoting emergency contraceptive measures through high profile initiatives.

Until recent times most of the small and local distributors in China could not introduce logistical expertise and automation in the distribution sector. Moreover, the lack of such competence levels implied that pharmaceutical manufacturers that sought to distribute their products across the country needed to consolidate several distributors in helping them transport products to retailers in different corners of the country. A major challenge currently pertains to inadequacy relating to comprehensive product tracking systems that need to be established amongst different distributors. Because of such shortcomings, it is difficult to ascertain product traceability and when such problems increase, pharmaceutical products have to be recalled which proves to be very damaging to the profitability of the company. The complications related to the supply chain in the pharmaceutical sector have also created susceptibility in the context of counterfeit products entering the markets, which has created significant threats for the survival of the pharmaceutical industry in China. Given the inadequacies in the cold chain systems, pharmaceutical companies have to make use of multiple distributors which enhances the risk of interrupting efficient cold chain performance and negatively impacts the quality of products (Santoro and Liu, 2006).

At the same time, regulatory change has resulted in consolidating the distribution sectors although international pressures have made attempts in influencing Chinese authorities to reconsider their decisions in this regard. In the context of regulation, China’s adherence to the World Trade Organization has resulted in some improvement. The Chinese government has initiated compliance measures to make standards of good supply practices in an attempt to become free of industries that are engaging in unethical practices. There is a strong need in China for industries to reach the situation of critical mass so that they survive depleting profit margins and can consolidate themselves. Many pharmaceutical distribution companies that had begun operating with losses have decided to alter their business models and instead become agents for pharmaceutical products and healthcare products. Effectively, such measures and the increasing controls imposed by the government have reduced the number of drug distributing companies by more than half.

Multinational companies have also started interacting with the distribution systems in China’s pharmaceutical industries. In complying with WTO agreements the Chinese government has gradually opened up its economy to foreign drug companies. The government has also opened the limits in the context of proportions of capital investments by foreign investors. Such measures have motivated foreign companies to make big investments in cold chain logistics. There are no visible signs whereby the numbers of logistics companies are increasing at a steady pace and most of the big cities in the country are now well endowed with several cold chain logistics companies. However, multinational companies continue to dominate in some sectors of the pharmaceutical industry. Although the cold chain logistics industry is nascent, the Chinese government is making hectic efforts to encourage local industries and entrepreneurs to develop such facilities through funding that is provided by the government (Shippers Today, 2010).

The pharmaceutical distribution market in China is presently worth over $44 billion and is consistently faced with major challenges. China has massive potential because of its huge rural population and the present availability is not sufficient in terms of logistics and infrastructure, which makes it difficult to ensure the delivery of medicines to patients in time through safe and cost-effective measures. Although the government in China is taking proactive measures in meeting the challenges, the present structure of the distribution networks that comprise primarily of thousands of local and small distributors has created lots of difficulties for the government to keep track of manufacturers and products and to ensure timely delivery to end-users. But a combined effort is being made by involving government initiatives, foreign involvement, and market mechanisms to assist the sector is gradually improving the distribution systems in the sector.

The distribution chain in the pharmaceutical sector in China is three-tiered. The majority of multinational pharmaceutical companies have adopted distribution arrangements by using the services of national and regional wholesale companies that sell their drugs to health care centers, government hospitals, and other pharmacies that further make available such products to patients. Almost 80 percent of pharmaceutical products produced by multinational companies are presumed to be distributed by making use of hospital services and the remaining 20 percent requirements are made available through pharmacies. The previous patterns indicate that wholesale networks were under government control through distribution systems that relied on local and regional levels. But as the country started to transform towards a market economy during the 1980s, pharmaceutical drugs became increasingly popular and the distribution systems were decentralized. There was an exponential increase in the numbers of distributors that led to the creation of a complicated environment amongst local distributors that competed for maximum shares in the market.

Most of the smaller distributors in the pharmaceutical sector do not have adequate means of having access to automation and logistical efficiency, which is characteristic in developed countries. Moreover, this inadequacy has implied that pharmaceutical companies that had come for distributing the products across the nation have to make use of several distributors for their products to reach retailers. A major challenge is the lack of an all-inclusive tracking system amongst different distributors. The complications in the supply chain in the pharmaceutical sector in China have made it extremely susceptible to the presence of duplicate products.

Cold chain logistics has now become a major thrust area in China, especially in food and pharmaceutical products. Undoubtedly there is immense potential for cold chain logistics in the country and in recent years there have been significant efforts to apply the technology of cold chain logistics and drug safety management. The pharmaceutical cold chain logistics focuses upon developing the core capabilities and lessening costs of logistics in terms of the rush that has begun in developing third party logistics in the cold chain markets.

The cold chain logistics systems provide convenience in terms of facilities for maintaining the required storage environment for perishable products while they are being transported from the manufacturers’ premises to the end-user. The cold chain has to necessarily commence from the manufacturer’s production facility and be covered up to the retail level. A cold chain that is well organized diminishes the chances of deterioration and maintains the quality of the product in guaranteeing cost-effective deliveries to consumers in keeping with provisions of good customer service. The main characteristic of a cold chain is that if there is a missing link in between the entire process, the whole system will fail. A cold chain’s logistics system usually comprises pre-cooling facilities, cold storage, refrigerated transport vehicles, required packaging, warehousing, and information management systems that can take care of tracing and tracking consignments.

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