Logistics Check-Up

By Robin Hooker, UPS | October 9, 2013

Annual survey reveals transformative supply chain strategies

As the global economy begins to recover and healthcare companies look at increased investments in areas such as global expansion, the healthcare supply chain faces new challenges. Healthcare companies are operating under increasingly complex regulations and facing unique logistics challenges for more complex products. More than ever before, it is critical for healthcare companies to leverage their supply chains to drive core business goals and meet high-level objectives.

Each year, on behalf of UPS, TNS conducts the UPS Pain in the (Supply) Chain survey, which uncovers top business and supply chain challenges of healthcare logistics decision makers across the globe, as well as future investment plans and strategies. The 2013 survey took an even deeper dive into the top success strategies that healthcare executives have implemented to address common challenge areas, such as the constantly evolving healthcare regulatory landscape, product protection concerns and cost management struggles. Findings provide insight into the healthcare supply chain of the future that will be necessary for pharma companies to adopt in order to achieve new business growth goals and gain an advantage in new markets around the world. 

Seeing the Full Picture: Global Economic and Regulatory Conditions
In order to understand the implications of the UPS Pain in the (Supply) Chain survey, it is important to first take a step back and consider the global environment that healthcare companies are operating in today. In the U.S., the economic recovery remains fragile; Europe and Latin America face continuing economic headwinds as well. Worldwide, companies are still feeling the impacts of the global economic downturn, which has impacted their business, operations and planning. In all, 50% of healthcare decision makers surveyed are still feeling the impact of the economic downturn. In the U.S. specifically, 60% of those surveyed feel the impact today, one of the highest worldwide.

As products grow more unique and companies expand to new markets, regulations and legislation become increasingly more important and also more complicated. In today’s environment, where regulations can vary from country to country and legislation is shifting constantly, it can be difficult for healthcare companies to appropriately plan, prepare for and address compliance. Not only a barrier to global expansion, increasing regulations were also cited by 48% as a “top business issue.”

Despite concerns over regulation and the challenging global economic environment, companies are still looking to the future by assessing their current supply chain issues, making plans to address (and succeeding in addressing) some areas of concern and preparing investments to be ready for the healthcare industry of tomorrow.

Evaluating the Symptoms: Top Supply Chain Concerns
Similar to previous years, regulatory compliance, product security and cost management are all major areas of concern for logistics decision makers, according to the recent survey. But for the first year since the survey’s inception, product security surpassed cost management as a supply chain concern, with 53% citing product security as a top concern. This reflects the increasing concern over counterfeiting and disruptive factors in the supply chain. Product protection in general is a challenge for healthcare logistics decision makers, with another 43% expressing concern about product damage and spoilage. Let’s take a closer look at each of these top “pains” in the healthcare supply chain:
  • Regulatory compliance: In 2013, 63% of those surveyed cited regulatory compliance as a top supply chain concern. Increasing regulations were also cited as a top business concern and barrier to global expansion. Despite regulatory hurdles, executives are still planning to expand globally; top markets include China (27%), the U.S. (21%), Brazil (18%) and India (13%). Whether planning for global expansion or just trying to understand regulations in a single market, enhancing regulatory expertise via in-house services or a third-party logistics provider can significantly alleviate the headache of navigating continually evolving and often complex  regulations and allow companies to focus on their core business.
  • Product protection: Product protection, which refers to both product security and product damage and spoilage, continues to be a top issue for executives, particularly as needs and products grow more complex. Challenges to protecting products in the supply chain center around counterfeiter sophistication (48%), poor supply chain visibility and too many supply chain hand-offs (40%). This is a particularly high concern in developing markets, such as Asia and Latin America. In Asia, worries over product damage and spoilage are almost twice that of counterparts in North America and Western Europe, with 67% reporting it as a top concern. Similarly, 76% of logistics decision makers there are concerned about product security, possibly due to the geographically-dispersed nature of the region. Some global healthcare logistics providers offer best-in-class solutions for protecting high-value and/or temperature-sensitive shipments and ensuring critical visibility and intervention capabilities for these products across the supply chain.
  • Cost management: For the first year since the survey began, product security surpassed cost management as a top concern, possibly indicating successful strategies found in managing supply chain costs. Cost management remains a concern, however. Of those surveyed worldwide, 51% expressed concern about managing logistics costs. As companies grapple with short product creation timelines and the need to protect more high-value products while expanding into new markets, cost pressures are even greater than before. Working with a third-party logistics provider, whether to perform a supply chain optimization analysis or re-design a supply chain strategy to meet evolving business goals, can help identify opportunities for greater efficiencies and cost management.

Alleviating the Pain: Success in Addressing “Pains in the Chain”
This year, the UPS Pain in the (Supply) Chain survey took a deeper dive into successful strategies healthcare logistics executives have employed to address top pain points. While these concerns are still very important issues for healthcare companies, 64% of those surveyed saw some success in addressing regulatory compliance during the last 12 months, while 59% saw success in addressing product security and 44% successfully addressed managing supply chain costs. Below are some of the top strategies companies implemented that worked to alleviate their “pains.”
  • Addressing regulatory compliance: Of those who have seen success in addressing regulations, 49% did so by investing in IT, such as barcode and serialization technologies. Complementing those technology investments, 42% increased regulatory staff and 41% hired regulatory consultants to stay on top of changing and new regulations worldwide. In Europe, while regulatory compliance is still a top concern, executives there have seen significant success in addressing the issue, possibly due to the long history of regulation in the region, indicating that healthcare executives in Europe could share best practices with their peers around the world. Still Europe faces new GDP rules this year and healthcare companies with operations there can benefit from working with a third-party logistics provider with expertise in this area. 
  • Protecting products: A variety of successful strategies also emerged when asked about product security. Of those who saw success in alleviating this concern, 61% invested in shipment insurance, 56% invested in IT like barcoding and serialization and 47% enhanced their in-transit monitoring and intervention capabilities. When planning for the next five years, executives in Asia, where concerns over product protection are highest, are preparing to use similar strategies to address product protection.
For example, 71% plan to invest in e-pedigree or serialization technology, 68% plan to invest in security-specific technology and 61% are looking to temperature-sensitive technology investments.
  • Managing costs: While there are still challenges to cost management for healthcare companies around the world, a number have seen success in addressing this concern. When asked about what strategies executives have used, 56% said they utilized logistics and distribution partnerships to alleviate the issue, while 53% made investments in IT such as barcoding, serialization and e-pedigree, and 50% performed a supply chain optimization analysis. Some third-party logistics providers can conduct a supply chain analysis for pharma companies to help them identify opportunities for managing costs across the supply chain. Focusing on the supply chain to manage costs not only has positive logistics costs implications, but also can serve to lower overall business costs.
Prescribing Transformative Strategies: Planning for Future Investments
Looking ahead, healthcare companies around the world are planning to invest in new technologies, expand their operations to new markets and implement new distribution models to enhance business efficiencies and increase competitiveness over the coming years. In this year’s results, we saw common themes of enhancing expertise and increasing technology investment when reviewing successful strategies healthcare executives have implemented. And the same is true for the coming years. Over the next five years, a staggering 84% of companies plan to invest in new technologies, while 78% are going to tap new global markets to expand their customer base, 70% plan to use new distribution channels and models such as going direct to retailers, providers and patients and 59% will work with/increase reliance on a logistics providers.

Planned technology investments include investment in order management and web ordering systems as the top two priorities. But healthcare logistics executives plan to invest more heavily in temperature-sensitive, serialization and security-specific technologies over the next few years, possibly signaling their preparation for increasingly complex products, supply chains and regulatory environments.

As survey findings show, healthcare logistics decision makers are preparing for change at a rapid place and on a global scale. The supply chain will play a critical role in enabling change and ensuring that companies are set up to deliver on broader business objectives. All pharmaceutical companies should ask themselves — is your supply chain set up to deliver?

Robin Hooker is director, Global Strategy Healthcare Logistics, UPS. For more information about this article, please contact pr@ups.com.

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