Redefining The Total Cost of Ownership Formula

The pharmaceutical industry is experiencing a transformative period, balancing two major priorities: the digitalization of supply chains and a strong commitment to decarbonization. At the same time, the industry must navigate the ever-present challenges of managing patient delivery costs while ensuring the integrity of pharmaceutical products. 

To meet the demands of the future and thrive, the pharma supply chain needs to embrace innovation and adaptability.  

Key to balancing conflicting pressures in the supply chain is the Total Cost of Ownership (TCO) framework. This formula is used to evaluate the full cost of a product throughout its life cycle, encompassing both direct and indirect costs with associated risks.  

However, rising temperatures and increasing pressure from shareholders, regulatory authorities, and other stakeholders demand a more holistic and comprehensive approach. The modern supply chain is complex and so the TCO framework must evolve and integrate CO₂ emissions (CO₂e) to address the changing demands of the industry. 

The New TCO Formula: Cost + Risk + CO2e

At LogiPharma 2024 in Lyon, our CTO and co-founder, Nico Ros, unveiled the new formula that integrates cost, risk, and CO₂e, underscoring SkyCell’s dedication to sustainability and comprehensive risk management. 

This innovative framework redefines how pharmaceutical supply chains operate by focusing on reducing expenses, mitigating risks, and lowering environmental impact together. It sets a new industry benchmark, ensuring that critical decisions align with both efficiency and responsibility. 

More importantly, the formula fosters collaboration across the organization, enabling teams at all levels to make informed, strategic decisions about supplier selection, packaging choice, etc. It empowers stakeholders to weigh critical factors holistically based on their contributions to cost efficiency, risk reduction, and sustainability. 

At its core, it drives action. When everyone in the pharma supply chain embraces this mindset, objectives are no longer pursued in isolation but collectively, delivering long-term results. 

With the growing financial implications of CO₂e, including carbon credits, taxes, and removal costs, accounting for these three factors is essential to future-proof supply chains. For instance, a major pharmaceutical company emitting 10 million tons of CO₂ annually would face a staggering $1 billion in yearly removal costs, assuming a removal cost of $100 per ton. 

How to Reduce Cost, Risk, and CO2e simultaneously?

Balancing cost, risk, and CO₂e isn’t enough for a resilient, future-ready supply chain—we must work to reduce all three. But how? 

The answer lies in both hardware and software. 

Hardware Innovation 

When designing hardware, product development should focus on two key areas: 

1. Designing reliable, reusable hardware that avoids landfill waste. 

1. Reducing CO₂e during use by minimizing both weight and volume. 

At SkyCell, we’ve embraced the latest scientific research into sustainability and built our solutions around reuse. Our containers are designed cradle-to-cradle, allowing materials from older containers to be repurposed for new ones. 

Performance and reliability are always crucial in the pharma supply chain. Temperature-controlled packaging exists to safeguard pharmaceuticals, and even slight improvements can yield significant benefits. For instance, studies reveal that a 1% reduction in temperature excursions across the supply chain can save $100 million annually by cutting costs related to excess inventory, additional shipping, and product disposal.  

At SkyCell, we exceed industry standards, achieving an industry-leading temperature excursion rate of less than 0.05%, verified through annual independent assessments. 

Last but not least, our 1500X hybrid container saves up to 50% of CO₂e per use, as calculated by MIT and myclimate¹. On a lane from Dublin to China, the 1500X performance can lead to savings of 6t of CO₂e per pallet compared to an active container, leading to avoided removal costs of 600$ per pallet².   

Software Solutions 

SkyMind, our software platform, complements our hardware with live monitoring and advanced data analytics, delivering end-to-end visibility and enabling proactive risk management. Our lane planning service helps choose the optimal lanes to reduce cost, risk, and CO₂e. 

With historical and operational data from our extensive IoT-connected fleet, SkyMind uses predictive analytics and intelligent alerts to empower pharmaceutical companies to make better decisions and take control of their supply chains.  

Take the Next Step Toward Net Zero

At SkyCell, our mission is to lead the pharmaceutical supply chain toward a future of zero medicine loss and zero CO₂ emissions. By integrating cost, risk, and CO₂ into the TCO formula, we are setting a new standard for efficiency and sustainability while rising to meet the challenges of tomorrow.  

Want to learn more? Our experts in cost efficiency, logistics, risk management, customs, and sustainability are on hand to discuss your needs.  

Contact Our Experts

1: MIT University’s Centre for Transportation and Logistics, Lehmann (2023), and myclimate (2022).

2: Calculated SkyMind DECARBONIZE, based on MIT. Transporting 15m³ and 2500 kg of pharma product from DUB – PVG on a B-777-200, with RFI of 3, and removal costs of 100$/ton. RKN compared to 1500X.