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INDUSTRY PULSE: Convergence of factors may drive up transportation rates for pharmaceutical shippers

TORONTO, Ont. Pharmaceutical shippers did better than most in 2005 in avoiding hefty transportation rate hikes bu...

TORONTO, Ont. Pharmaceutical shippers did better than most in 2005 in avoiding hefty transportation rate hikes but a convergence of factors may make that feat difficult to repeat in coming years, Transportation Media editorial director Lou Smyrlis told the Cold Chain Management and Temperature Control Summit this week.

Slightly more than half of pharmaceutical shippers using truck transport reported rate increases of 4.1% or higher, according to the recently completed annual Transportation Buying Trends Survey. In comparison, two-thirds of total survey respondents reported increases to their truck rates of 4.1% or higher.

The survey, conducted by Transportation Media Research in partnership with the Canadian Industrial Transportation Association and CITT, polled more than 700 shippers from a broad spectrum of industries on a variety of issues ranging from rate increases and surcharge penetration to shipment volume expectations and capacity concerns.

Although 55% of pharmaceutical shippers spend more than half their transportation budget on trucking services, they also rely heavily on courier and air transport.

Similarly, fewer pharmaceutical shippers using the courier mode reported paying increases of 4.1% or higher 38% of them did so compared to 47% for the survey respondents overall.

And the same went for air transport with 56% of pharmaceutical shippers reporting increases of 4.1% or higher compared to 65% for the survey overall.

The Transportation Buying Trends Survey also found that pharmaceutical shippers were expecting the lower rate of increases to continue into 2006. But Smyrlis said their ability to do a better job of holding the line on rate increases will be challenged by two developments in coming years.

First, while the North American economy overall looks to slow down in 2006, pharmaceutical shippers expect to continue experiencing shipment volume peaks. Seventy percent of pharmaceutical shippers expected to increase their shipment volumes in 2006, compared to just 61% of shippers expecting to do likewise for the survey overall. And 64% of pharmaceutical shippers anticipated double-digit increases to their shipment volumes in 2006 compared to 57% for survey overall. Such continually high volumes may place pressure on capacity, which could drive up rates.

Pharmaceutical shippers’ greater reliance on courier transport will also likely have an impact.

“The courier market continues to consolidate,” Smyrlis said. “The seven major players in the courier industry have greater than 80% of revenue share.”

He added that shipment destination will also play a role. The seven major players have an almost 90% share of the US/International market.

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