A DHL cargo plane.
Jay LaPrete/ReutersWith pharmaceutical companies racing to get COVID-19 vaccines approved and manufactured, the world's shipping and logistics companies are gearing up for a massive global operation to distribute doses and help end the pandemic.
The scale of the operation, combined with unique storage requirements for some leading vaccine candidates, means that this will be a logistical operation unlike any seen before.
Business Insider spoke with two executives at DHL who are leading the shipping giant's preparations for the vaccine airlift. They explained how the company is getting ready to help move as much vaccine as possible as soon as it's ready.
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The end of the COVID-19 pandemic is finally in sight.
Three pharmaceutical companies have announced that their COVID-19 vaccine candidates have proven to be effective during late-stage clinical trials. All three companies — Pfizer, Moderna, and AstraZenica jointly with Oxford University — are expected to apply for emergency FDA clearance in the coming weeks, which would mean that they could begin distributing and administering the vaccine.
But delivering enough vaccine doses to achieve herd immunity — or even just to inoculate those most at-risk — will demand a feat of logistics unlike anything ever seen before.
"It is absolutely the largest health care logistics problem the world's ever seen," Larry St Onge, president of DHL's healthcare and life sciences operation, told Business Insider. "You can't underestimate it, but I do also believe that with the capabilities of the world, the science, the understanding, we will get through this."
Moving 10 billion doses
The core of the challenge, said David Goldberg, CEO of DHL's Global Forwarding freight service in the US, is that everyone is clamoring for these vaccines, all at the time time. "We haven't seen anything that globally before."
The primary challenge is the sheer number of vaccine doses that will ultimately be needed, St Onge said.
"You're talking about 10 billion doses," he said, noting that some of the vaccines under development require two doses per person.
The fact that it will take drug companies some time to manufacture that many doses, however, means that carriers are unlikely to be overwhelmed.
"I think it's pretty clear that there won't be a billion doses of vaccine on day one," Goldberg said. "And those will be distributed in different lots over different times."
A complicating factor is that there has been a sharp reduction in international passenger flights as travel demand has collapsed during the pandemic. Since many passenger flights carry freight in their cargo holds, alongside luggage, there's a lot less global cargo capacity out there.
"Most of the pharmaceutical shipments that move between Europe and the US, Europe and South America, Europe and even the Middle East and Africa, were moving in the bellies of [passenger] aircraft," St Onge said. "Many people may not realize it."
And air freight is key here: Slower sea shipping or long-distance trucking could allow doses to expire before they're delivered.
A bigger challenge, St Onge said, are the temperatures at which the leading vaccines must be stored during transport.
Pfizer's vaccine must be stored at -70 degrees Celsius, or -94 degrees Fahrenheit, and Moderna's must be kept at -20 Celsius, or -4 Fahrenheit (though it can remain stable at refrigerator temperatures for up to 30 days). AstraZenica and Oxford's vaccine, which has more open questions regarding efficacy, has the advantage of being storable at between 2 and 8 degrees Celsius, the norm for most other vaccines.
"There are essentially four or five different bipharmeceutical platforms that are being used to develop vaccines," St Onge said. He noted that data that normally emerges from clinical trials, which helps establish the right storage conditions, can't be obtained because of the accelerated pace of developing the vaccines. That means that manufacturers and shippers will have to err on the side of caution, sticking with the most stringent temperatures possible.
To maintain those temperatures during transit, shippers like DHL will have to rely on what St Onge described as "passive solutions," using specifically engineered packaging lined with replacable dry ice, rather than active refrigeration, which is too heavy and energy-hungry to work on an airplane.
This creates its own challenges, though. Dry ice is essentially frozen carbon dioxide, which sublimes into its gaseous form as it warms. Too much of that gas can be dangerous to pilots.
"So there are limits to the amount of dry ice you can have on an aircraft," St Onge said. "If we start talking about having to move a lot of vaccine in this deep frozen state, the availability of lift, with the dry ice limitations on aircraft, and those challenges start to rear itself."
"The second part then becomes, once the product arrives to markets" — meaning air cargo distribution hubs, as well as to customers such as governments, health centers, or other points of distribution — "how does it get broken down to be distributed? Because it's got a limited shelf life when it starts to be exposed to different temperatures."
That requires a two-prong approach from DHL, St Onge said: working with vaccine manufacturers to develop the most efficient possible packaging and transport method, while also working with governments and NGOs to figure out how and where to deliver the vaccine in order to avoid the risk of spoilage.
Shipments big and small
As it works to form plans in the face of so many remaining unknowns, DHL is preparing for two general shipping archetypes. Under the first, manufacturers will ship smaller quantities of the vaccine directly to care providers, such as hospitals, nursing homes, and clinics.
Under the second scenario, DHL is planning to move mass quantities — "multiple pallets" at once, according to St Onge — to larger distribution centers in some countries. From there, pallets would be broken down and doses would be sent the final mile to care centers.
In a final scenario, destination countries will build up inventory of the vaccine over time before distributing it, but St Onge suggested that planning for that scenario was a secondary concern, as it's unlikely to play out until distribution and inoculation is well under way.
Each scenario is something that DHL has managed before — just never on such a large scale, nor with such extreme storage requirements.
"We do warehouse vaccines and distribute them all over the world today," St Onge said. "What's really going to stress the infrastructure is the mix of frozen to regular, conventional vaccine temperature requirements."
"There are varying capacities, capabilities in the worldwide market even at the 2-8 [degrees Celsius] storage requirement, so it's still a challenge and has to be carefully planned," he added. "I see some concerns and challenges, but generally that's surmountable."
The way that DHL has mitigated such challenges in the past, and the same approach it plans to take for the COVID-19 vaccine, is deliberate, meticulous planning for every single stage and transition during the shipping process.
The company develops a "very, very detailed lane-level SOP [standard operating procedure]" for workers at hubs and distribution centers to replace dry ice in specialized packaging, moving and rotating containers into active refrigeration as needed, and prioritizing shipments where appropriate.
"It means knowing how to create the SOP, so you know exactly where all the touch points are, how you need to track it, what the process is," St Onge said. "We have a team that monitors these shipments 24/7/365, we're constantly on top of this. We built a cloud-based platform to allow us to control the details around that SOP, literally down to the lane level. And it's not uncommon that you may have 20 different SOPs for a particular product just in two airport pairs."
Although some logistics firms, including DHL, have invested in additional infrastructure to transport vaccines in recent years, and even more during the pandemic, St Onge stressed that the seamless infrastructure such delicate and vital shipments require is something that's taken decades to build.
"It's not something I could envision anybody being able to put up in a few months. We've been doing this for 20-plus years, building this infrastructure and capability," he said.
"I'm not meaning to suggest that this is something indigenous to DHL alone, I certainly respect my competitors. I know that they're capable of doing these things too," he added. "But I think it's that kind of capability that's going to be so important to being able to manage this."
As the carrier prepares for the first vaccine shipments, it's racing to make sure its entire infrastructure is prepared, analyzing any gaps or shortfalls in its system. That includes building refrigeration units, and working with vendors to source dry ice.
Although it is not currently known how much dry ice will ultimately be needed — St Onge said that other vaccine candidates which arrive in 2021 can likely be stored at the normal refrigeration temperature — the company thinks it should have enough to manage the surge in shipping demand.
"We have long existing relationships with dry ice suppliers around the US," Goldberg added. "We've been hearing talks about shortages of dry ice, but we haven't experienced that, and we also believe we have the ability to continue to ramp up if we need more," he said.
Joe Kudla is the founder and CEO of activewear brand Vuori.
Mark Tesi / VuoriVuori, the activewear brand based in Encinitas, California, has seen its revenue nearly triple in 2020, despite the COVID-19 pandemic.
CEO and founder Joe Kudla said sales of its women's performance jogger have been up more than 1,000% so far this year.
Kudla attributes its success to the comfort and quality of its clothing, as well as to its commitment to community and sustainability.
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"Our performance joggers are the most comfortable pants you will ever own," reads a description on Vuori's website, an activewear brand based in Encinitas, California.
It's a bold claim, but based on the retailer's 2020 sales results so far, it seems many consumers would agree.
In a recent interview with Business Insider, CEO Joe Kudla said that sales of the brand's women's performance jogger pants were up more than 1,000% this year. Vuori is also seeing similar growth for its men's Ponto performance pants.
Kudla's company came into 2020 hoping to double its revenue. And as the year comes to a close, Vuori is closer to tripling it, he said.
Kudla describes Vuori, which he founded in 2015, as having an "effortless, casual California aesthetic." Its products hide features like zip pockets and seams so that they can be worn for different purposes and don't "identify you as somebody who just left the gym," he said.
In addition to sweatpants, Vuori sells casual and workout shorts, tops, hoodies, and jackets.
"The color palettes and the prints are sophisticated and easy to throw on, no matter what you're doing," he said. "The product is technical, but it performs without looking technical."
Vuori's performance joggers have been extremely popular this year.
Apparel has been one of the hardest-hit categories in consumer spending so far this year.
Read more: 3 business areas Levi's is prioritizing to help it grow sales after the pandemic created a reckoning for jeans
While the US Commerce Department reported this week that retail spending increased slightly in October, sales of apparel continued to decline. Apparel sales fell 4.2% in October and have decreased by 30% overall in 2020. Last month's 0.3% overall growth rate in retail was the smallest reported in six months by the agency.
But for retailers focusing on comfortable clothing, there is plenty of reason for hope.
The NPD Group is forecasting that cozy categories — including sweatshirts, sweatpants, active bottoms, sleepwear, and socks — will account for 31% of total apparel spend this holiday season.
Vuori has been one in a crop of apparel retailers that has overperformed as consumers have opted for comfort while staying home amid the pandemic.
In September, Lululemon reported that its net revenue grew by 2% in the second quarter, despite stores being closed for much of the period. Its online sales grew by 157%. Athleta similarly reported net sales growth in the second quarter despite declines for the rest of Gap Inc.'s portfolio. Its online sales were up 74%.
E-commerce first, but 'meeting the customer where they're at'
Vuori came into the pandemic well-positioned, having raised $45 million in funding from Norwest Venture Partners in August 2019.
Kudla said that e-commerce "is hands down the most important channel for any business today." But, Vuori is getting its products into consumers' hands in several different ways, including through its own brick-and-mortar stores and wholesale partnerships.
The company had opened five stores before the spring's pandemic-related shutdowns. Four of those stores are in Southern California, while the last can be found in San Francisco.
Kudla said the pandemic caused Vuori to hit the brakes on a couple of store openings it had planned for this year. Those two stores — one at Santana Row in San Jose and one in Studio City in Los Angeles — are now slated to open in 2021.
Kudla said the company is still "bullish" on brick-and-mortar retail and wants to eventually grow its store base outward from west to east. Vuori additionally has strong wholesale relationships with REI, Nordstrom, and Equinox and stocks its products at about 700 independent specialty retailers around the country.
"We want to meet our customer where they're shopping. And while we don't want to sell our products to every wholesale partner out there, if we can find alignment in terms of how the product is showcased on the floor and the way that the story is being told, the way the products are being merchandised, we really love the wholesale channel," Kudla said.
"Nordstrom and REI can be a place of discovery for a lot of individuals," he added. "We believe that having that complement to our direct efforts is an advantage over a pure-play DTC brand."
When it comes to its e-commerce efforts, Vuori has placed a heavy emphasis on its work with influencers.
"From the very beginning, our number one strategy was to get our product in the hands of community influencers, and that strategy is still one of our number one initiatives today," Kudla said.
Vuori recently announced it has signed on surfer and environmental activist Rob Machado as its first "Investment in Happiness Ambassador," helping to promote the brand's commitment to sustainability. Vuori is a Climate Neutral Certified brand and has committed to have 80% of its textiles be comprised of sustainable materials by 2022 (Right now, it's trending at just above 50%). It's also committing to reducing the use of plastic in its supply chain by 80% in the same time frame.
Kudla said he believes that Vuori's "community leadership and standing for causes and supporting organizations that are aligned with our values" have been a factor in its growth this year. The company did not disclose specific sales figures.
Staying connected with customers while not being able to hold community events in-person has been a challenge, though.
Vuori started holding live workout classes on its Instagram account and also started an interview series during the pandemic, featuring guests like Machado, Brooklyn Nets head coach Steven Nash, and singer Jason Mraz.
"I think it's important that brands are just thinking on their toes and thinking about meeting the customer where they're at, providing authentic experiences that are relevant to how they're living their lives," Kudla said.
"As we know, everybody's lives got thrown upside down this year. So we had to pivot and adapt quickly."
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