Supply-Chain Survey Reveals Key Industry Concerns

A lot of concerns weigh heavily on the minds of medtech company leaders seeking to move forward in today's global marketplace. And it's no wonder, when nearly everything a medtech company does—from sourcing to sales—requires input on an international level.

A survey to find out more about how healthcare companies are handling such supply-chain issues was recently conducted by UPS ( Atlanta, GA), a global provider of healthcare logistics and transportation services.

Targeting top supply-chain decision makers in the pharmaceutical, medical and surgical device, and biotech industries, the 2008 “UPS Pain in the Healthcare (Supply) Chain Survey” reveals that regulatory compliance and industry competition top the list of healthcare company concerns.

The survey also found that global market access is emerging as the area companies need the most help addressing. Global market access is a major focus area for healthcare companies seeking to take advantage of lower-cost sourcing opportunities and penetrate fast-growing, emerging consumer markets.

“Capitalizing on new global market opportunities amidst an increasingly competitive industry landscape requires changes in supply-chain and business strategies,” said Bill Hook, UPS vice president for healthcare logistics. “It's crucial that companies have the supply-chain flexibility to respond to changing market conditions in order to capture new market share and navigate the many complexities associated with global market access.”

Evolving compliance legislation is also a concern for healthcare companies that operate in an increasingly global marketplace, in which companies must navigate various regulatory regimes across many territories. Regulatory concerns ranked as the number one business issue for larger companies in a correlated online survey targeting companies with annual revenues of more than $1 billion. Nearly 92% of these companies cited regulatory compliance as a top concern.

Cost Pressures

When asked about supply-chain-specific concerns, companies ranked managing and containing costs as their number one concern. Among the responding companies, 60% reported they were ‘very concerned' or ‘extremely concerned' about the potential impact of supply-chain costs on their business.

For 25% of respondents, managing supply-chain costs was selected as the issue they have been most successful at addressing. Among the companies with revenues greater than $1 billion, 74% of respondents estimated that costs related to product expirations, returns, and recalls cost them hundreds of thousands to millions of dollars every year.

“Managing supply-chain costs will only become more critical as healthcare supply chains continue to expand and evolve,” said Hook. “It's a balancing act for companies to take advantage of new opportunities amidst market pressures, an increasingly complex regulatory environment, and elongated supply chains.”

New Business Directions

The vast majority of survey respondents indicated that they plan to make changes to their supply-chain models in the near future. Among the immediate changes companies plan to make are expanding distribution channels, outsourcing more supply-chain functions, working with third-party logistics companies, and increasing supply-chain spending.

Among the respondents, 90% expect to make changes to their distribution channels in the next one to two years. About 40% of all industry experts—and more than half of those in the pharma industry (55%)—expect to change their distribution channels to work with third-party logistics providers. A majority of respondents (61%) plan to implement a direct-to-consumer strategy in the next one to two years, and 55% are planning to initiate a direct-to-wholesaler strategy. Interestingly, 37% expect to expand through both direct-to-consumer and direct-to-wholesaler channels.

When companies with annual revenues of $1 billion or more were asked the same question, 46% reported they are planning to change their distribution channel or their go-to-market strategy. Nearly half of these larger companies (46%) also plan to increase the amount they outsource in the next one to two years. The same percentage plan to work with third-party logistics providers in the near future.

Despite concerns about managing supply-chain costs, another trend is an increase in supply-chain spending. In the next 18 months, 60% of survey respondents expect supply-chain spending as a percentage of total sales to increase by 23%. Among the companies with revenues of $1 billion or more, 42% expect increases in their supply-chain spending over the same time period.

Methodology

The survey was a two-part study. The first phase included a blind, in-depth phone survey conducted by Harris Interactive among more than 300 primarily small-to-mid-market companies in the pharmaceutical, medical device, and biotech industries. The second phase—conducted online—targeted large healthcare companies from the same sectors with annual revenues of $1 billion or more. Qualified respondents were supply-chain decision makers.

A summary of findings from the 2008 “UPSPain in the Healthcare (Supply) Chain Survey” is available from the UPS Web site at http://pressroom.ups.com/pix/UPS_Pain_in_the_Chain_Survey_Summary.pdf.

© 2008 Canon Communications LLC

Return to MX: Issues Update.