Healthcare supply chain shippers continue to adapt to industry challenges, says UPS survey

The drivers for healthcare supply chain executives to make strategic supply chain investments and decisions are more than just a few, given the many moving parts of the healthcare supply chain.

This was made clear in the sixth annual UPS “Pain in the (Supply) Chain” healthcare survey, which was conducted for UPS by TNS, a provider of global market research services, and was based on data and feedback from more than 440 senior-level healthcare supply chain decision makers in North America, Asia-Pacific, and Western Europe.

The survey found that regardless of geography increasing regulations and changes in healthcare legislation or procedures were the top two concerns among respondents.  And over the next five years, 84 percent of respondents said they plan to invest in new technologies, 78 percent plan to enter new markets, and 70 percent plan to implement new distribution channels to providers, retailers, and end-patients, and 59 percent plan to count more on 3PL partners.

As for the top supply chain-specific concerns, the respondents cited regulatory compliance (63 percent); product security (53 percent); managing supply chain costs (51 percent); product damage or spoilage (43 percent); access to new global markets or new customer bases (37 percent); and changing distribution and go-to market channels (25 percent).

This marked the first time product security eclipsed cost management to land in the number two slot. UPS noted that while concern levels are still high, it is less pessimistic than they were in 2012 while concern levels remain significant.

UPS Director of Global Strategy for Healthcare Logistics Robin Hooker told LM that one of the biggest takeaways from the survey was a rising concern in product security even though cost management will always be top of mind for healthcare supply chain executives.

“To me, the biggest thing over all executives are facing is amid keeping the standards of regulatory compliance how do you effectively access new markets and at the same time maintain product security and product protection and do it in a cost effective manner,” he said. “That is the piece that the supply chain still continues to struggle with, and we are seeing some clients gain headway in this area.”

Healthcare product security, explained Hooker, has more to do with internal control of a product that is moving through the supply chain as well as counterfeiting.

This had led regulatory bodies looking for more ways and means to identify the authenticity of pharmaceutical products as they move through the supply chain and even after they arrive at their destination.

Moving into new global markets was highlighted by nearly 80 percent of respondents even with the myriad challenges that come with that such as country-specific regulations.

“When we looked at the interest in entering global markets, the top challenge being faced is regulatory,” said Hooker.  “Addressing a new market involves having an understanding of what the regulatory environment is in that country and the other piece is looking at what the needs are for infrastructure within a country like what a manufacturing firm needs to access or a country’s infrastructure itself.  Those most successful strategy in entering global markets said that logistics and distribution partnerships were at the top.”

Even though logistics and distribution are viewed as a top strategy for entering new markets, the survey found that shipping costs (61 percent) and labor costs (51 percent) are the top cost management challenges.

These may not be entirely surprising, but the 47 percent identifying rapid growth increasing supply chain complexity which has become costly to manage, and new market expansion driving supply chain costs (43 percent), and serialization track and trace rounding out the top five at 38 percent are all of concern, according to the survey.

Conversely, the top five successful cost management strategies were the aforementioned logistics and distribution partnerships (56 percent), IT investments (53 percent), supply chain optimization analysis (50 percent), vested logistics and distribution partnerships (45 percent), and outsourced transportation management (42 percent).

“The healthcare supply chain is unique especially when you compare it to an industry like high-tech or retail, where supply chains have been optimized for quite some time,” said Hooker. “The difference here is the product goes into our bodies, and we expect as a consumer that the product you are going to take did not experience something unusual in the supply chain that made it ineffective or dangerous. Because of that the healthcare supply chain has a lot of extra care and handling or sensitivity to maintain the product but there is room to make things more efficient. The key moving forward is that pharma and medical device companies will start to partner with their supply chain partners and use more shared distribution space as that checks off the box for regulatory compliance and keeps the manufacturer very agile. The other side is that it will help them enter new markets, because the distribution partner is moving in the direction the manufacturers want in terms of new market entry, and there should be a concerted effort that allows market access and infrastructure to be built up that no single entity has to bear the entire responsibility as it is more of a shared partnership plan for entering new markets. “