Cost control is a major impetus behind the trend among larger pharma firms to employ direct shipment as a distribution channel strategy, says John Menna, marketing director of healthcare logistics, UPS.
UPS’s 2009 Pain in the Healthcare Supply Chain survey found that more than 50% of firms with revenue of more than $1 billion are planning direct shipment to customers as a strategy, compared with 39% percent in the previous year’s study.
“Companies are finding they need to have multiple distribution strategies to meet the demands of their clients and to get closer to the end-patient to better service their needs. Product often must get to the customer faster, such as when care shifts into a patient’s home setting,” says Menna.
Menna says that through direct shipping to doctors, hospitals, pharmacies, and homes, firms can reduce their overall distribution costs.
More manufacturers are positioning their urgent high-cost goods at UPS’s “end of runway” healthcare distribution facility in Louisville, KY, for faster distribution to end users.
“We are being asked to provide more shipments directly to homes and provide more overnight and early morning deliveries. In Louisville, UPS can accept product orders as late as 1 AM, where they are then picked, packed, and shipped. We can deliver them as early as the next morning anywhere in the United States. This provides tighter control on inventory and reduces the amount of inventory.
“With the wholesaler model, inventory is positioned closer to the end consumer and replicated across the country. Although the wholesaler takes on the ownership and inventory carrying costs, the costs ultimately find their way into the cost of goods sold, which impacts the revenue the manufacturer will get from the wholesaler,” he says.
Along with the growth of direct-to-consumer distribution, the UPS survey found that direct-to-wholesaler transactions are also being planned to an increasing extent. Thirty percent of large firms are planning wholesale distribution, versus only 6% last year.
“What we are finding is that manufacturers are trying to expand their overall geographic reach. As they plan to enter new markets in the United States and overseas, one of the strategies is to use a wholesaler,” Menna says.
Though the transportation carrier and 3PL is not an importer of record with whom importation liability lies, the firm provides services that help clients conform to the new guidance.
UPS’s Temperature True and Proactive Response services provide controlled environments and shipment visibility, leveraged by UPS’s network of ground and air assets. The carrier recently opened dedicated healthcare-compliant facilities in markets including Puerto Rico and the Netherlands to meet customers’ growing needs for global reach.
UPS resources that help importers meet FDA’s new guidance include detailed, full-visibility tracking of information that is available electronically. “When a firm is picking up goods from another country, we have up to 24 milestones or tracking events we maintain and show as evidence to the importer. We can capture the information down to the serialized number at the case and item level.
“For customers using our Proactive Response service, those milestones can aid in the triggering of special operating plans by shipment. For example, should there be a delay and a milestone is not reached, plans to recover, divert to a nearby facility, re-ice, or refrigerate go into effect for that shipment,” Menna says.
Importers have to meet requirements for product before it arrives in the United States and also once it arrives. “We have cGMP-compliant validated facilities, caged storage, vault storage, [and] temperature-controlled services, with quality standards in place for reporting and providing evidence of compliance for the importer.”
With its Paperless Invoice program, UPS addresses one of the top concerns revealed in the supply-chain pain survey: Increasing regulations and their associated costs.
UPS manages customs documentation electronically after exporters key in their invoice data, which allows customs offices to begin processing the shipment while it is in transit. “We have worked with customs offices around the world to eliminate the commercial paper invoice, in favor of an electronic one. Internal shipments can thus be streamlined, which helps ensure that product quality is maintained, and reduces the risks of tampering and fraud.”