Gartner for Supply Chain

COVID-19 Vaccine
Fact vs Fiction
Debunking five myths associated with
the global distribution of the vaccine
2020 was a tumultuous year for every aspect of society. The disruption
caused by the COVID-19 pandemic forced thousands of companies and
millions of workers from all industries to adapt to new ways of working
and interacting with customers.
In 2021, preparation for global mass distribution of the COVID-19 vaccine
has led to unfounded speculation about logistics capacity constraints.
Although the vaccine distribution is not without challenges, some of the
hurdles have been vastly exaggerated. To separate fact from fiction, Gartner
surveyed several of the largest third-party logistics (3PL) players around
the globe to determine potential capacity constraints and other challenges.
This research provides logistics leaders with clarity on five common myths
surrounding the vaccine distribution and how it might impact supply
chain operations.

Myth No. 1
There is not enough airfreight
capacity to distribute the vaccine
During normal operations, as much as 85% of global airfreight capacity
is carried through passenger aircraft. Although it is estimated that 75% of Over the past six
passenger flights have been canceled since the start of the pandemic, airlines months, freighter
have been busy ramping up freight capacity by bringing more freighters and utilization has
converting passenger aircraft to all-cargo configurations. Over the past six increased between
months, freighter utilization has increased between 25% and 50% even though 25% and 50%.
overall freighter utilization was still down.
Estimates of global demand for the vaccine are expected to generate some Only around 50%
65,000 tons of airfreight, which is the equivalent of less than 1% of 2019 of the vaccine will
global airfreight volume. While it is true that capacity is vastly reduced and require airfreight.
the market does not have at its disposal the equivalent of 2019 capacity, it
is important to note that this will not be a single-event phenomenon, and
distribution will continue throughout 2021 and well into 2022.
There is, and will be, sufficient airfreight capacity. In fact, only around 50% of
the vaccine will require airfreight. Moreover, as vaccine manufacturers ramp up
production and governments approve dispensing, it is expected that regional
manufacturing and distribution will be supported by the most expedient mode
of transport, which is not always by air.

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Myth No. 2
Airfreight rates will disproportionately
increase because of the vaccine
During the first global wave of lockdown, airfreight rates did increase
rapidly. However, they soon went into sharp decline as countries imposed The spike in
lockdowns, capacity dried up and demand fell away. Airfreight rates airfreight rates is
typically increase as global markets approach end-of-year peaks that not disproportionate
include traditionally busy shopping periods in North America and Europe to what was
such as Black Friday and Christmas. The end-of-year spike in airfreight rates experienced in
is not disproportionate to what was experienced in previous years during the previous years
same period. Having said that, outliers do exist, and on certain airfreight during the same
lanes, concerns have been expressed at the price demands being made period.
by service providers. For instance, according to a recent World Health
Organization report, some carriers are charging “outrageous” prices to
fly dry ice and other medical equipment to a handful of destinations.
In 2021, airfreight rates will continue to reflect annual variabilities as they
would in any typical year, even though the level is slightly elevated, as is
expected. As the vaccine starts to take effect, capacity will increase, which
will help stabilize some of the volatility shippers are seeing in airfreight
rates. As companies start to recover, demand in airfreight may increase
as companies replenish inventories; however, if not already part of their
airfreight strategies, companies should refrain from chartering aircraft
or committing to significant rate increases, fearing capacity shortages.

Myth No. 3
Last-mile delivery networks will be
congested because of the vaccine
Last-mile delivery capacity constraints and increasing costs are
consequences of changing consumer behaviors that have been The move by UPS
accelerated by the COVID-19 disruption. Fears of domestic capacity was more in line
constraints caused by an effort to ship hundreds of millions of doses with the surge from
of the COVID-19 vaccine increased in December 2020 when, in North the holiday peak
America, UPS placed restrictions on large shippers, such as LL Bean, season, coupled
Nike, Gap and others. However, the move by UPS was more in line with still-high
with the surge from the holiday peak season, coupled with still-high domestic shipping
domestic shipping rates, rather than as a result of distribution of rates.
the vaccine.

Continued to the next page

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Myth No. 3 Last-mile delivery networks
will be congested because of the vaccine
(continued)
It is highly unlikely that domestic parcel delivery networks will be
leveraged to distribute the vaccine. Some countries will leverage the
skills and expertise of their dedicated governmental resources; others
will leverage special delivery vehicles typically used in the distribution of
temperature-sensitive goods, causing only limited and isolated instances
of capacity constraints in last-mile delivery networks. In addition, it has
been speculated that rather than taking the vaccine to the patient, mass
mobilization of individuals to vaccine hubs will be the preferred method
of delivery.

Myth No. 4
There are not enough cold-storage facilities
to accommodate the vaccine distribution
Warehouse capacity constraints existed before COVID-19 and have been
accelerated rather than caused by the COVID-19 pandemic. Temperature- Warehouse capacity
controlled storage facilities have always been considered premium constraints existed
capabilities and have been limited in availability and expensive in operation. before COVID-19.
The world’s largest logistics companies, including DHL, UPS, Kuehne and
Nagel, have made provisions for increasing both permanent and temporary
cold-storage facilities around the world even as the global capacity of
temperature-controlled warehouses remains unclear. Because time is of
the essence in distributing the vaccine, these cold-storage facilities are
expected to perform goods-in-transit functions rather than being long-term
storage facilities.
Beyond COVID-19, the demand for warehousing space remains a challenge
as companies shift from “just-in-time” to “just-in-case” supply chain models.
According to Prologis, global warehouse rents increased by 2.5% and
global warehouse vacancies dropped to a mere 5% of overall capacity
in 2020. Companies remain unwilling to invest in additional temperature-
controlled infrastructure, as the distribution of the vaccine will be a temporary
phenomenon. Increased demand for sustainable warehousing is a much
bigger challenge that the industry is facing and it is not caused by or limited
to the distribution of the COVID-19 vaccine.

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Myth No. 5
Transit of goods will be delayed due
to security concerns surrounding the
vaccine distribution
Security surrounding the distribution of the vaccine is a genuine
concern that companies are seeking to address. Security provisions Governments
include physical aspects of distribution such as engagement of expedite the transit
security services to accompany deliveries, real-time tracking, location of the vaccine
devices and two-people deliveries to ensure that vehicles are kept through their
moving at all time between secure sites. In addition to physical territories.
security, growing risks associated with cybersecurity are an area of
increasing concern. On 2 December 2020, Interpol issued an “Orange
Notice” outlining potential criminal activity against COVID-19 cold
chain transporters and highlighting the risks associated with online
fraud linked to “advertising, selling and administering fake vaccines.”
Transiting through border controls is not expected to be a bottleneck
as governments expedite the transit of the vaccine through their
territories, including the application of special dispensations for
customs clearance. It is unclear how the matter of duties and taxes
will be dealt with; however, in many territories, the importation of
vaccines is zero-rated for duty and value-added tax (VAT). Some
delays could be experienced at border crossings as vaccines take
priority. However, given the ability of customs authorities to expedite
and fast-track clearances, it is unlikely to be anything other than isolated
and localized events, such as Brexit, that delay goods in transit.

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About Gartner
Gartner is the world’s leading research and advisory company and a member of the
S&P 500. We equip business leaders with indispensable insights, advice and tools to
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COVID-19 Vaccine Supply Chain: How Gartner

Can Help
We are moving toward a post-COVID-19 world in which a vaccine is widely available.
And just as the COVID-19 epidemic disrupted supply chains, so will COVID-19 vaccine
distribution. CSCOs must understand the short- and long-term implications of vaccine
distribution on markets, materials and supply chain staff, as well as identify and take
deliberate steps pre- and post-distribution. When you’re under pressure to make major
decisions extremely fast, turn to Gartner for insight, advice, data and tools. Our experts
and 2,500+ supply chain clients work together to analyze successful techniques for
building agility and resilience into supply chain strategies, budgets and operations. We
then deliver actionable recommendations and playbooks that CSCOs can apply to their
organizations, helping avoid risk and accelerating progress on key priorities amid high
levels of uncertainty. Visit gartner.com to learn how we enable supply chain leadership
on mission-critical initiatives related to planning, manufacturing, logistics, fulfillment,
procurement, digitalization and quality, including COVID-19 vaccine distribution.

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