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Pharmaceutical supply chains at risk of emerging cyber threats

Pharmaceutical supply chains are becoming increasingly complex as the path from production to consumption isn’t as linear as one may think.



As we enter a new decade in the digital age, data management has become a top priority for many high-value industries, especially pharmaceutical and healthcare companies. This sector strives to keep pace with the increased demand of COVID-19, as well as burgeoning technologies and the rapid globalization of supply chains. 

Innovations in technology have provided pharmaceutical and healthcare companies with efficient data processing, real-time information and an unprecedented level of supply chain visibility. However, the ever-changing nature of their supply chains can leave companies vulnerable to theft and emerging cyber risks. With the proper technologies, companies in these high-risk sectors can add layers of protection against cyber-security threats, counterfeiting, cargo theft and temperature excursions, among other costly risks.

Overhaul and Freightwaves have come together to analyze the risks and solutions surrounding pharmaceutical logistics as part of a white paper report, Command and Control for Pharmaceutical Logistics.     

Logistical issues such as temperature fluctuations and cargo theft have heightened the need for a unified command-and-control center that can overlay multiple data sources for one analytical tool. Companies that adopt this tool not only have access to a global view of their shipments but also possess a competitive marketplace advantage. 

Pharmaceutical supply chains are becoming increasingly complex, and a growing number of exchange points have complicated the path from production to consumption. New modes of transport also make the likelihood of error even greater as bad weather and traffic congestion can result in additional delays.

Delays not only cost time and money, but also leave entire shipments vulnerable to temperature fluctuations. According to the IQVIA Institute for Human Data Science, the biopharma industry loses $35 billion annually due to failures in temperature-controlled logistics. Pharmaceutical Commerce estimates that by 2022, 30 of the top 50 global pharmaceutical products will require cold chain handling, as in-transit control over temperature, humidity, vibration and light become priorities. 

Over-the-road (OTR) trucking is still one of the least secure forms of transportation globally, making the movement of high-value pharmaceuticals by truck a risky venture. It is estimated that the average pharmaceutical cargo theft is valued at $121,185. While in-transit cargo theft is a major concern, an extra set of padlocks is no match for invisible attacks in the form of malware and ransomware. 

A 2018 Proofpoint report stated that among Fortune 500 companies, cyber attackers targeted the pharmaceutical industry the most. What often catches the attention of cyber-criminals is the rich intellectual property associated with prescription medicines. 

Counterfeiting is also an ever-looming threat. In addition to the loss of sales and damaged reputations, companies find themselves allocating much of their funding towards combating fraudulent drugs, leaving less money available for groundbreaking research.

Moreover, counterfeiting can have deadly consequences. According to a 2017 report by PricewaterhouseCoopers (PwC), the counterfeit drug market is valued at $163 billion to $217 billion per year, making it the most lucrative sector of the global trade in illegally copied goods. The 2017 PwC report also revealed that 10% of all drugs in circulation are counterfeits. Beyond that, the American Society for Microbiology estimates that one million people die annually from ingesting fraudulent medications. 

The white paper suggests that pharmaceutical and healthcare companies create security-enhanced audit trails that trace products throughout the supply chain. Evidence-based documentation can quickly mitigate potential risks and be very useful for healthcare companies, insurance companies, law enforcement and regulatory agencies should an investigation occur.

Regulations have been put in place to provide corrective action against supply chain threats. The whitepaper defines Good Distribution Practice (GDP) as the set of regulatory guidelines governing the wholesale distribution of medicinal products to ensure that their quality and integrity are maintained throughout the supply chain from manufacturer to end-user.

Pharmaceutical companies rely on guidelines such as GDP to mitigate risk. Failure to comply with these guidelines at any point within the supply chain can damage the product’s quality and cause an irreparable loss of public trust in the company. In addition, supply chain errors and irregularities can lead to Corrective Action, Preventative Action (CAPA), which is an important aspect of the GDP regulatory guidelines. A 2019 Pharma Manufacturing article reported that the financial cost for CAPA cases can range between $10 million and $1 billion, depending on the case’s severity.

Manufacturers invest significantly in quality-assurance monitoring, but their efforts are ultimately futile without a logistics monitoring system in place. The whitepaper states that the only way pharmaceutical companies can ensure the quality and safety of their products is through supply chain visibility at each step of the process. 

Smart platforms like Overhaul have programmed artificial intelligence (AI) to take corrective action when a step in the supply chain does not meet standard operating procedures (SOPs). This AI technology could alert the party in control of the shipment or notify authorities when shipments have been tampered with or stolen. Its intelligent notification system works in real-time by connecting users to touchpoints in the supply chain and can alert law enforcement agencies when illegal in-transit activity is detected.

The use of real-time data streamlines communication between operations and drivers, while eliminating unnecessary paperwork. The whitepaper states that real-time data also protects the product’s integrity as high-value pharmaceuticals are transported through lower-security modes of transit like OTR. Notifications can be sent if truckload tampering is detected on stopped loads such as broken seals.

Real-time insight into inventory levels also provides accurate forecasting and managing through periods of peak demand. Companies have traditionally relied on historical data to model future demand and inventory management. According to the white paper, assuming that next year will be similar to last year is just as dangerous as shocks to the system like COVID-19 happening regularly.  

With the proper technologies, pharmaceutical and healthcare companies can easily attain real-time information to unlock total supply chain visibility. The COVID-19 pandemic has challenged medical supply chains to become faster and more secure. No company can fully insulate itself from the ever-evolving threats that emerge from an ever-changing market, but smart companies will utilize the right tools to protect itself from threats old and new.



Stormy weather hitting two US regions this weekend (with forecast video)



The last weekend of May will be a bit dicey for truckers in parts of the Northeast and Northwest as the weather turns quite stormy.

SONAR Critical Events and radar: Friday, May 29, 2020, 9 a.m. EDT; Severe thunderstorm risk area May 29, 2020

A strong cold front will move through the eastern United States later today, triggering thunderstorms from the Great Lakes to the Northeast. Some storms could become severe late this afternoon and evening from West Virginia and northern Virginia all the way to upstate portions of New York and Vermont.

These severe storms could produce scattered areas of large hail and intense wind gusts, as well as localized flash flooding and isolated tornadoes.

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The National Weather Service (NWS) considers a storm severe if it produce any of the following based on radar data or an observation from the field:

• Winds of at least 58 mph
• Hail at least 1 inch in diameter
• A tornado

Severe weather could hit places such as Charlottesville, Virgina; Morgantown, West Virginia; Baltimore, Mayland; Washington, D.C.; most of Pennsylvania; most of upstate New York, including Albany, Buffalo and Rochester; and Montpelier, Vermont.

Severe weather may delay drivers heading to the key freight markets of Harrisburg and Allentown, Pennsylvania to pick up loads.

SONAR Ticker: OTMS Tree Map

The latest FreightWaves data, updated this morning, shows these two markets are in the top 10 for outbound volume. In other words, there is a large amount of freight available that has been offered by shippers.

Harrisburg and Allentown rank fourth and eighth, respectively, in terms of their Outbound Tender Market Share (OTMS). Combined, they account for almost 5.5% of the nation’s outbound freight. Drivers heading to these areas should expect mostly minor/short-term delays due to the potential for severe thunderstorms and roadblocks.

Other weekend weather

Crosswinds in southern California will become hazardous Friday and Saturday. Gusts will reach 45 to 50 mph along sections of Interstate 5 and State Route 99 from Fresno to Bakersfield. Drivers deadheading or carrying light loads should be extra careful.

SONAR Critical Events: Friday, May 29, 2020, 9 a.m. EDT; Severe thunderstorm risk area Saturday, May 30,2020

Heavy rain will soak parts of the I-5 corridor from northern California to Seattle from late Friday night through Saturday. Severe thunderstorms will hit areas of Oregon and Washington, mostly east of I-5, affecting areas along I-82, I-84 and I-90. Light to moderate rainfall will continue Sunday, with areas of freezing rain and snowfall possible in the Cascades as cold air enters the mid-levels of the storm system.

Have a great day! Please stay healthy and be careful out there!


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Commentary: Making a tough best guess market forecast



The views expressed here are solely those of the author and do not necessarily represent the views of FreightWaves or its affiliates.  

Forecasting is hard enough to do when you have accurate and timely data. It’s almost impossible when your data is not up-to-date. 

There is an old adage: Forecasting is like driving blindfolded while your partner looks rearward and telegraphs the next turn based on what you recently passed. That is tough to do on a curved road. It is mpossible on a road never taken.

Railroad freight is a derived demand economic function because cargo moves when there is a market demand.   

(Photo: Jim Allen/FreightWaves)

Who sets the demand? It’s typically the receivers that set the demand table. Yes, the critical mass to projecting a forward business volume is the buyers. 

A map highlighting the delivery geography is the prime intelligence source for almost all freight forecasting.

In practice, one must examine both the origin and destination together with the alternate transit paths. There is complexity. Sometimes there is a middleman that changes the scope and the path and the timing of cargo movements.

A fuel change and a market slowdown or a price drop in certain commodities can also change the path and the chosen freight carrier mode.

Thinking about railway freight specifically, let’s briefly consider the essential planning factors that will influence the outlook for the remaining weeks in the second quarter of 2020. 

The setup for rail freight is that it moves bulk cargo and industrial cargo.  That covers the core rail carload sector. Carload traffic volume is more profitable on a per railcar revenue basis and much larger as a percentage of cargo relative to intermodal traffic (trailers and containers on trains). 

If we just focus on intermodal rail, we miss the heart of the still extremely profitable carload freight business model that drives the seven big Class 1 railroad companies.

Here is a simple profile of where the railroads most hope to preserve or to grow their 2020 business volume.  These commodity sectors are important because they are where the money is for a strong financial result.

What’s the official railroad company traffic volume and return to volume growth outlooks?

Collectively, they are very silent. None are effectively telegraphing the next turns ahead.  In investor relations terms it means eliminating their “forward guidance.”

Here is a sample of the non-forecasting language:

CSX withdrew its guidance for the rest of the year. Why? It is “too wide to predict at this time” according to the company’s president and chief executive officer.

Kansas City Southern has withdrawn its previous full-year earnings forecast. It is also reducing its 2020 capital expenditures by about 10% from the original target of ~$500 million. That might drop later by a full 20% depending upon evolving conditions.

Norfolk Southern Corp. withdrew its previous outlook for flat full-year revenue. It has not yet signaled how much its second quarter 2020 volumes will decline. Instead, it has signaled a so-called “doubling down” on lowering its structural costs as a means of driving profits. That suggests a financial outlook rather than a marketing message.

In railroad freight messages, the choice of metrics and the wording of the messages about their companies’ futures often emphasizes the financial scorecard. Customers and volume growth are not emphasized in the wording.

IPhoto: Jim Allen/FreightWaves)

The anticipated pivot towards traffic volume growth and capture of trucking market share is hard to discern.

If the industry internally isn’t clear, that leaves us with speculation. My sources tend to be railroad customers and what they are broadly saying and doing about the next few months of the business. 

We must interpret from the customer side without a direct contact to the changing railroad metrics.

True, we can examine broad system-wide reported traffic data for multiple commodity types. That data is published weekly.

But it is difficult to see the data in terms of changing market to market origin and destination corridor flows. The geography of rail freight transport is somewhat blind.

We can see trucking traffic by geography in near real-time, but not the rail carload volumes. The only way to do that is to use inferential modeling and secondary reporting access data such as from port records.

The problem is that there is a data capture lag time.

Remember our road trip partner in the car? This is like asking for the next turn ahead when she or he hasn’t seen the road behind yet.

Here are examples of what the outside market is seeing. It remains troubling; there is not much buoyancy.

How will intermodal rail play in the second quarter? Here are a few informed views.

With five weeks to go until the end of June, what’s the rail freight call?

In broad terms, here are separate volume numbers for intermodal and carload. It assumes a tepid U.S. economic recovery out over about six weeks.

Intermodal likely continues to show much slower returning traffic growth than expectations for the trucking sector. The primary reason is that intermodal does not carry much e-commerce merchandise. In addition, the possible return of the retail economy will be primarily truckload based because of speed and reliability.

Domestic intermodal is still 10 to 15% below that of June 2019, while international intermodal is still down 18% or more below June 2019.

Here is an independent view of the intermodal outlook as shared by FTR’s Eric Starks and colleagues. We might not yet be in the so-called restart of the railroad-served economic recovery phase yet. This data view as of May 13th

FTR uses AAR and other data partners in its tracking

How bad is this visually? Check out the FTR plotted trend of current early May data versus the five-year plotted intermodal volume. Intermodal volume might still fall further year-over-year in this four-week average plot out to just beyond week 26. We will have a sharper view in about four weeks.

Carload freight is likely to see much larger variances in traffic volume decreases than intermodal.

Canadian traffic will see a somewhat different pattern, perhaps a bit better in volume than that across the U.S. rail network.

Mexican railroad traffic will, like that of the U.S., see a negative impact largely related to the fortunes of how many new cars the automakers build and ship to their dealers. This is part of the market demand hypothesis being found at the delivery end rather than the origin.

Humbly, this is my offered level of confidence as to the total second quarter volumes:


The end of the third quarter outlook is less certain. There are some optimists that should not be ignored.

Roy Blanchard closely follows the Class 1 railroad and shoreline carload business sector. He likes the UBS Global Research contrary focus. 

Their three-part counter is simple. Investor sentiment has rarely been this depressed. While a bearish sentiment is over 50% in some surveys, there may be a sign of a rebound underway. For example, the CRB Commodity Index has “stabilized.” Maybe.

Lumber prices have retraced almost 50% of their COVID-induced decline. Does this reflect the gradual re-opening of the U.S. economy or rather a sort of desperate pricing for cash flow by sellers?

(Photo: Jim Allen/FreightWaves)

If stimulus payments by the federal government work as some suggest, then we might indeed see a rebound in cyclical sectors like energy, materials and industrials.

What’s your expectation?

Meanwhile, who within the railroad carrier sector will survive and who might stumble?

For the Class 1 railroads, there is an optimism that they will demonstrate resiliency in financial terms. Positive net cash flow from a somewhat less efficient productivity but still perhaps in the high 60s to at worst very low 70s “operating ratio level” will mark a second quarter success for investors.

It appears that North American railway freight will remain the most profitable of the freight modes entering the summer. 

This economist’s confidence level is about 95% or better for financial health.

Some short lines that specialize in selected commodities as their core regional business may stumble in both volume and in their reported second quarter accounting. Clearly this pandemic is a market test. 

Here is the broader rail-centric outlook for a year from now (the second quarter of 2021).

Intermodal volume across the USA – likely down as much as 23%. The eastern short-haul rail lines may possibly be down even more – in the range of 26%.

FTR second quarter intermodal outlook as absolute drop and percentage drop since end of 2019

The single market commodity that is a huge waiting opportunity is grain. In contrast, crude oil, fracking sand and coal are challenges as their markets continue to morph.

Chemicals and petrochemicals like plastics are still a good bet for rail traffic gains over the next decade. Auto traffic will grow again if the travel industry and the disposable income of the American consumer can recover at a reasonable pace.  

If Congress and the Trump administration can reach a political resolution that results in safety-related modernization of roads and bridges, that should spur primary metals- and aggregates-related growth for the railroads. But this remains a big “if” scenario. 

As for the continuing shift in market share from railroads to trucking, that’s not really a pandemic issue. It is a business issue.

It’s going to be decided largely in the halls of each of the separate Class 1 railroads. If the large railroads decide to share their productivity gains from the recent precision scheduled railroading business change – as they did four decades ago from productivity gains of the Staggers Act, then competitive pricing should shift railroad demand-side customers (the receivers) back to using more rail services. 

(Photo: Jim Allen/FreightWaves)

When we see that cost savings sharing occurs, my level of confidence as the volume and share pivot will be in the high 90s.  That is my market view.

What’s yours?

Despite all of these expert opinions, you the reader have to make a judgment. The best strategy is a reasonable high to low range – and then pray for a market migration “to the mean.”

Best forecast bet? That we are blessed by a combination of herd immunity and a successful vaccine.


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More air cargo finds its sea legs during COVID-19



Escalating airfreight transportation rates and capacity shortages out of China in recent months due to the coronavirus pandemic have led many shippers to try hybrid services that combine sea and air modes.

So-called “sea-air” services offered by some global freight forwarders and non-vessel-operating common carriers (NVOCCs) have been around for decades, but they tend to come and go depending on airfreight market conditions.

Mortan Bach, global chief commercial officer, Shipco Trasport (Courtesy photo)

The pandemic has spawned increased interest in moving freight from Asia by fast boat to Los Angeles where it is put on a plane to Europe. The new option has become more popular than the traditional routing through the Middle East, which involved an ocean leg to the United Arab Emirates’ Jebel Ali seaport, stripping the container and delivering the cargo to an airliner at the Dubai airport for transport to the destination city, according to logistics professionals.

“Sea-air is a reaction to lack of capacity and high rates,” said Morten Bach, global chief commercial officer for Shipco, a non-vessel carrier in Hoboken, New Jersey. “When air rates go up, sea-air becomes a viable alternative for cargo that cannot pay high airfreight rates, nor accept all-ocean transit times.”

Experts caution that not all freight is suited for the sea-air mix because of tight delivery windows and more touch points that increase the risk of delays, such as extra customs inspections.

L.A. sea-air service throughput

The COVID-19 pandemic has turned Los Angeles into a center for sea-air logistics services.

Ocean consolidator ECU Worldwide earlier this year established a sea-air service from China to Europe via Los Angeles, called XLERATE. Less-than-containerload (LCL) shipments booked by forwarders are moved via ocean carrier from six Chinese ports to Los Angeles,  for devanning and placement onto airplanes bound for Europe.

Tim Tudor, CEO, ECU Worldwide (Courtesy photo)

“We are targeting airfreight users and really not trying to convert our standard LCL clients to XLERATE per se. The commercial benefits are allowing our freight forwarding customers to give their “clients a third or middle service option both in price and transit between pure air cargo out of China and the standard ocean LCL service,” Tim Tudor, ECU Worldwide’s Miami-based CEO said.

Transit times are between 14 to 23 days, depending on the Chinese origin port and the destination European airport, while the cost is about one-fourth that of pure airfreight.

After devanning containers and reloading the cargo onto airline pallets at its facility in Los Angeles, Shipco turns the freight over to all-cargo operator Cargolux for air transport to Europe.

Both ocean wholesalers credit the success of their L.A. sea-air service to trans-Pacific, U.S.-flag ocean carriers Matson Navigation (NYSE: MATX) and APL, a subsidiary of French line CMA CGM, which operate scheduled container service from China and North Asia to the Port of Los Angeles. 

While other trans-Pacific liner carriers have announced numerous blank sailings during the COVID-19 pandemic, Matson has even added chartered vessels to increase its capacity to two sailings per week, according to Tudor. For Asia origins that are not served by Matson, ECU Worldwide uses APL’s “Gate Out” service.

“We are most certainly focused on knowing when these blank sailings will occur and adjust our schedule accordingly,” Tudor said.

Central and South America

Both ECU Worldwide and Shipco said they also have expanded their sea-air services via Los Angeles to include destinations across Central and South America. They perform this by trucking the cargo to Miami International Airport for outbound flights to those regions.

Shipco operates team trucks seven days a week to Miami.

“It is an advantage for us that we are a truck broker in the U.S. and can control the trucking leg into Miami ourselves via our in-house domestic department to ensure we can deliver on the competitive transit times,” Bach said.

Hospital Gear

The ocean consolidators are also providing sea-air services for large container shipments of personal protective equipment for hospitals, which initially relied on express air to cover immediate supply shortages.

“We have moved several sea-air shipments well over 80 cubic meters from Shanghai  to . . .  Munich and Madrid recently,” said Spencer Strader, ECU Worldwide’s director of U.S. imports. “We have been moving weekly shipments in the 40- to 50-cubic meter range of PPE from Shanghai and Shenzhen to Buenos Aires, Argentina, and Bogota, Colombia, via Miami.”

Personal protective equipment, or PPE, is worn to minimize exposure to hazards such as viruses.

Minneapolis-based forwarder C.H. Robinson Worldwide (NASDAQ: CHRW) has also helped Asian shippers turn to sea-air transport for their U.S.-bound shipments.

Matt Castle, vice president of global forwarding products and services, C.H. Robinson Worlwide (Courtesy photo)

“We’re working closely with them to understand their current inventory levels and determine if expedited ocean services to the U.S. and domestic air to various U.S. states will work with their timeline,” said Matt Castle, C.H. Robinson’s vice president of global forwarding products and services. “With the right planning, global shippers can accommodate the longer lead time and take advantage of the cost savings.”

Extraordinary measures

DSV Panalpina (OTCMKTS: DSDVY), based in Germany, has experienced greater interest in its sea-air service to Europe via Singapore and Dubai.

“At the beginning of the year – before Chinese New Year – we experienced an increase in demand for this service from markets such as Bangladesh, Myanmar and Cambodia due to a surge in textile volumes,” DSV Panalpina spokesman Christian Krogslund told American Shipper.

“As the COVID-19 pandemic unfolded late in the first quarter, demand shifted towards mainly PPE,” he said. “In order to keep supply chains flowing with vital PPE for the fight against COVID-19, we have used transshipment points such as South Korea, Taiwan and even Vietnam to meet the huge demand for capacity out of China.”

Kim Ekstroem, global chief operating officer, Shipco Transport (Courtesy photo)

Shipco COO Kim Ekstroem said experienced logistics providers can establish new sea-air routes on demand.

When airfreight capacity to China suddenly tightened at the start of the pandemic, Shipco established a sea-air solution through Inchon, South Korea. Cargo arrived via aircraft at Inchon and was reloaded into ocean containers for transport to Shanghai.

“We got down to a transit time of roughly seven days,” Ekstroem said. However, he added, the service only lasted until the outbreak subsided in China.

Sustaining sea-air services post-COVID-19

ECU Worldwide said it plans to expand XLERATE for Europe with truck service to nine more inland U.S. locations in the next several weeks.

“Our XLERATE service, however, must first have access to premium port-to-port and express terminal gate-out services in Los Angeles for us to put it under the XLERATE rate,” Strader said.

Since sea-air services thrive on supply chain emergencies, C.H. Robinson’s Castle said the number of shipper requests will likely decrease once the COVID-19 virus subsides.

But Shipco’s Ekstroem believes sea-air services will stick around once the COVID-19 pandemic subsides.

“I think the need for cargo capacity will increase faster than our appetite for traveling, and without us traveling, there will be limited belly capacity and airfreight rates will stay high,” he said.


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