Key players in an upcoming campaign to immunize the public against COVID-19 were all assembled: Pfizer, a leading candidate to produce the first vaccine; McKesson, the government’s choice to head up vaccine distribution; and FedEx, a sure bet to be on the front lines of moving vaccine to the far corners of the U.S. and the world.

Officials of Pfizer and McKesson, operators of massive pharmaceutical distribution centers in Memphis, lavished praise on FedEx for its ability to help them safely deliver life-saving shipments wherever they need to go.

It sounds like a conversation that could have taken place in the runup to the anticipated start of mass production and distribution of vaccines for COVID-19, which has killed more a million people globally and locked down vast sectors of the economy.

But this was 4 1/2 years ago, and the occasion was the opening of FedEx’s $25 million Cold Chain Center at the FedEx Express hub at Memphis International Airport.

It was among the first handful of facilities to open in what’s now a network of 90 FedEx cold chain facilities in the Americas, Europe, Asia and Australia.

The Memphis center was built to hold shipments such as medicine, perishable foods and flowers in climate-controlled conditions, from room temperature down to minus-13 degrees Fahrenheit, which would cover common temperature ranges for most vaccines.

It wasn’t originally equipped with ultra-cold storage, as low as -94 to -112 degrees Fahrenheit, the requirement for some vaccines under development. FedEx is now fixing that by buying super-freezers.

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In addition to customers Pfizer, McKesson and other big pharma players, Richard W. Smith was there at the grand opening. Now president of The Americas for FedEx Express, Smith had been involved in the center’s development as a managing director of life sciences and specialty services from 2009 to 2014.

Smith worked on shipping of H1N1 (swine flu) vaccines in 2009-2010 and said the cold chain network was upgraded partially in response to lessons learned from swine flu.

“Partially because of (H1N1), we started building out and adding to our cold chain infrastructure,” Smith said in an interview Sept. 28.

“Fortunately, that H1N1 swine flu never rose to the level of global pandemic like COVID-19, but I think it was a wakeup call that we needed to invest more in the capabilities for cold storage, specialty solutions, cold chain, monitoring and intervention capabilities,” Smith said.

Advantage FedEx?

FedEx’s cold chain network, backed by a fleet of refrigerated trucks and experience carrying half a million dry ice shipments a month, gives it a leg up in competition to transport vaccines once production begins, some experts believe.

However, many specifics of the vaccine launch remain unclear, because of widely differing properties and safe storage requirements of various vaccines under development.

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“What is known is distribution will call for transport via a globally integrated supply chain network, utilizing both ground and air transportation,” investment firm Cowen Inc. said in a Sept. 22 overview of the shipping industry.

FedEx, UPS and German company DHL are the biggest companies fitting that description.

The results of expedited vaccine development will determine details ranging from the type of packaging required to how many aircraft and trucks will be needed to move it.

“We believe FedEx will play an essential role in the upcoming COVID-19 vaccine distribution effort,” Cowen said.

Cowen researchers estimated vaccine shipments could mean billions of dollars in revenues for shipping companies.

FedEx should be able to add surcharges and renegotiate contracts to reflect the increased demand.

“However, we see risk in the company potentially not being able to react fast enough on pricing to reflect vaccine-driven changing market conditions,” Cowen said.

It also said Wall Street has underestimated the magnitude of vaccine distribution and the timeline for a successful vaccination program.

“Reaching COVID-19 vaccine approval is only half the battle,” Cowen said.

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“The logistics of deploying a vaccine to citizens of the world with vastly different levels of economic and supply chain capabilities is a nightmare scenario that could take all of 2021 and 2022 to fully play out, a vastly underappreciated reality, in our view,” researchers said.

Trip Miller, managing partner at Gullane Capital Partners in Memphis, a FedEx share owner, said at least nine big pharmaceutical companies had bought air freight capacity with FedEx for November through January.

‘A big, big role’

If FedEx is essential to the vaccine distribution effort, it naturally follows that Memphis is, too, said Ernie Nichols, an associate professor of marketing and supply chain management at the University of Memphis.

Memphis is home to FedEx Express’s largest, most extensively connected air freight hub, along with major pharmaceutical distribution centers.

“It’s the right parties and they certainly move massive volumes, so Memphis will play a big, big role,” Nichols said.

Smith said, “I think we’re so well positioned for this. We’re going to play an incredible and pivotal role in this. I would say we’re better positioned for this than anybody in our industry.”

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FedEx also stands ready to help the U.S. government and military on vaccine distribution.

The U.S. military is expected to be heavily involved in early stages of vaccine distribution, contracting with cargo airlines such as Atlas Air and Air Transport Services Group, Cowen believes.

FedEx coordinated with the Defense Department in the pandemic’s early stages to bring COVID-19 test materials and personal protective equipment into the U.S. through hubs in Memphis and elsewhere.

“We plan to work very closely with Health and Human Services, as well as the Department of Defense, on their distribution plans of these critical shipments,” Smith said. “We’ve been on a number of working calls with them for how we engage. We’re ready to support them with anything they need here in Memphis or any of our other hub locations and major gateways.” 

Precious cargo

FedEx officials have touted their technology that tracks and monitors the contents of shipments in real time as a crucial advantage in the coming vaccine movement.

A significant upgrade of the 11-year-old monitoring system was unveiled in September and will be available for highest priority shipments in November. The upgrade features a low-cost Bluetooth Low Energy chip, rather than a bulkier mobile device, to transmit data to WiFi networks.

FedEx’s SenseAware ID “has multiple patents and may be difficult for others to replicate in a short period of time,” Cowen noted.

FedEx gears up for vaccine shipments with new tracking technology

A research and development presentation by Pfizer showed vaccines moving in insulated containers equipped with monitoring devices similar to SenseAware ID and dry ice to maintain proper temperatures, Cowen said.

Temperature control is important because of the risk of spoilage if vaccines are held outside of prescribed ranges. A 2005 World Health Organization study said as much as half of the world’s vaccines spoiled before they could be administered.

SenseAware ID tracks a shipment’s precise location, temperature, humidity, light and shock and can tell if a box has been opened in transit. A priority alert system allows the company to intervene if the shipment isn’t within acceptable ranges.

Smith said the ability to intervene may be more crucial than having cold chain facilities to store an errant shipment.

“We put the SenseAware ID and the priority alert product code on these shipments and we have the ability to track them, identify them, give them special handling in our network and priority boarding on our aircraft,” Smith said.

Speed, reliability key

Experts looking strictly at FedEx’s cold chain infrastructure are missing a key point, Smith said.

“We have cold chain infrastructure in terms of refrigerated and freezer space, and we’re investing in more of these ultra-cold freezers and other things that we may need to store this product at points throughout our network, should we encounter a delay,” Smith said.

“But all that cold storage infrastructure in my view is really just kind of the table stakes, if you will, because that’s contingency storage that you need in the event something goes wrong,” Smith said.

“At the risk of sounding cocky, we’re pretty good at getting things in the Express network delivered absolutely, positively on time, so we haven’t maxed out that facility (the Memphis Cold Chain Center) in terms of how much we have to store there,” Smith said.

The cold chain center takes up about 20,000 square feet of an 83,000-square-foot building on Democrat Road that also contains offices and heavyweight freight docks.

Rival UPS also has been stocking up on freezers and said in August it was building freezer farms near air hubs in Kentucky and the Netherlands capable of holding 48,000 multi-dose vials of vaccine at ultra-freezing temperatures.

Nichols said he had more faith in “the middle of the supply chain,” meaning the shipping companies, than either of its ends.

“I think the systems can be up to the task, but it’s still just the volume of what’s required. If everybody’s expecting to get their vaccine at Christmas, there’s going to be some very disappointed people out there, assuming that it’s even ready by Christmas,” Nichols said.

Challenges in the field

Cowen and other researchers discussed the challenges of moving temperature-sensitive shipments into more remote or undeveloped areas of the world that have less cold chain and transportation infrastructure.

Media reports and a white paper by DHL and McKinsey have noted the high level of coordination needed to deliver vaccines on time and without spoilage for mass inoculation efforts.

“I think in the developed world, it will be a challenge, but at least most of the infrastructure that’s needed is there, and we know what’s necessary,” Nichols said. “In some of these other places, it will be a major challenge.”

Smith said, “The big challenges are at the edge. They’re out in the field at the injection sites where they’re going to be administering the vaccines.”

Moving target

Experts believe the first vaccines to launch will be those that require the coldest temperatures and present the biggest logistical challenges, including the product of a partnership of Pfizer and BioNTech.

Subsequent vaccines are expected to be easier to store, distribute and administer, more comparable to typical flu vaccines.

Smith said the range of requirements makes it challenging to know how much cargo space will be required and how the shipments will be packaged and handled.

The government has named McKesson the centralized distributor for the vaccines, except for the ones like Pfizer’s that have to be kept ultra-frozen.

“It’s a moving target now, because we don’t know which vaccine is going to get approval first and hit the market, which means we don’t know the particular characteristics of that vaccine, or its packaging characteristics,” Smith said.

“When we look at our network capacity, we don’t just need to know how many boxes, we need to know the dimensions of the box. The type of packaging it’s in will drive those dimensions, so that determines how much capacity we need out in the market, truck capacity, aircraft capacity. So there are a lot of unknowns,” Smith said.

Double whammy

Late October to early November, just before the U.S. presidential election Nov. 3, has been the most optimistic prediction of when the first vaccines will be available.

A fall launch could increase strain on shipping companies as they plan for a record holiday peak season on top of elevated volume because of a COVID-related rise in e-commerce that began in March.

“One industry-wide headwind that could pop up should a vaccine be approved, given emergency use authorization, and begin distribution by the end of the year, is reduced efficiency and network stress caused by transporting the vaccine during the holiday peak,” Cowen said.

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Space in cargo aircraft is already at a premium because COVID-19 has dramatically reduced passenger flights, to about 40% of pre-COVID levels. Passenger aircraft normally provide as much as half of global air freight capacity, but Cowen doesn’t see international air freight capacity recovering to 2019 levels for another five to seven years.

Increased demand resulting from vaccine distribution “may delay non-medical packages, leading to pent-up demand, both of which would support elevated freight rates,” Cowen said.

Hitendra Chaturvedi, a supply chain management professor at Arizona State University, does not expect vaccine shipments to conflict with e-commerce “as distribution network, distribution companies and storage requirements are very different.”

“Pharma distribution has enough capacity to carry the vaccine. Moreover, vaccine supply will be limited, as already forecasted, so (the) distribution channel will not be flooded immediately and they will be able to handle it. The lead time from order receiving to approval by CDC to shipping will allow (the) distribution channel to adjust without too much stress,” Chaturvedi said.

Mammoth undertaking

Estimates of the sheer volume of shipping capacity needed for vaccine distribution are staggering.

The International Air Transport Association pegged the volume at the equivalent of 8,000 Boeing 747s.

DHL and McKinsey estimated it could require 15,000 flights, 200,000 movements by pallet and shippers, 15 million deliveries in cooling boxes and 10 billion doses. Some of the vaccines require two doses a few weeks apart.

“You start looking at the numbers, just shy of 330 million in this country and 8 billion worldwide, that’s kind of a monumental ring to it,” Nichols said.

FedEx, operator of the world’s largest all cargo airline, had 399 trunk or jet aircraft at the end of August.

Ramping up at Memphis hub

The vast scale of vaccine distribution and predictions of a record holiday season are reasons FedEx has moved aggressively to hire about 2,000 more workers for the Memphis hub, double the number hired going into the 2019 peak.

FedEx is raising pay for the peak, to at least $15 an hour for all hub employees and as much as $18 an hour for about 500 of the most physically demanding jobs. Last year, the hub’s starting wage was about $13 an hour.

The positions are for a mix of permanent full-time and part-time employees, recognizing there will be more shipments moving through the hub going forward.

FedEx increasing pay, adding shuttles to meet hub demand

FedEx also is working with churches to run shuttle buses within Memphis to transport workers from economically challenged neighborhoods to the hub. It’s an expansion of a transportation program that has previously ferried workers to and from the hub from Cleveland, Mississippi.

“We believe it’s going to be an incredibly strong peak, and if you add these vaccine distributions into the mix and it does indeed start during peak, it’s a lot of traffic,” Smith said.

“It’s a big part of why we ramped up hiring,” Smith said.

A third shift?

Smith raised the possibility the hub could add, in effect, a third shift: a period of each day, between the day sort and the night sort, dedicated to vaccine shipments.

“We’re even looking at, as we get more information, adding dedicated operations like we did for the COVID-19 testing programs, the remote testing sites,” Smith said.

FedEx added flights and truck transportation to move test specimens to labs on weekends in certain markets during the height of the pandemic.

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“We’re actually looking at launching aircraft, maybe double turning aircraft in between the day sort and night sort, so we could actually launch dedicated flights for vaccine distribution in between the day sort and the night sort. Which means we can use our sortation capacity in our hub at a time when it’s not normally utilized,” Smith said.

First dibs unlikely

The presence of FedEx and major pharmaceutical distributors will certainly give Memphis a lift economically during vaccine distribution, bit will it give Memphians first dibs on vaccines?

Probably not.

Experts believe governments will dictate where the first vaccines go, initially targeting the most essential workers, such as health care workers and first responders.

“The question I was afraid you were going to ask, and I don’t have an answer: Will this put Memphis consumers in better position? That’s not a guarantee,” Nichols said.