Insights From the UPS "Pain In the (Supply) Chain' Survey
Published: December 3rd, 2013
Healthcare executives view compliance with regulations as top concern.
As companies forge into new markets, IT investment and cost management strategies are leading priorities, the UPS Pain in the (Supply) Chain survey finds.
Healthcare executives for the third year in a row cite regulatory compliance as their leading supply chain concern, trumping supply chain issues of cost and product security, according to the sixth annual UPS “Pain in the (Supply) Chain” survey.
And for the first time product security surpasses cost management as the second highest supply chain concern, with companies citing the challenge of more sophisticated counterfeiters and protecting lengthened supply chains.
This year’s survey, conducted by TNS, sought insights from about 441 senior-level decision makers in supply chain and logistics in the US, Canada, Western Europe, Asia, and Latin America.
The survey finds evidence of an approaching shift in the healthcare supply chain. As companies seek business growth in new markets, and need to protect increasingly complex and high-value product, they are planning for transformative change, the survey reports.
Over the next five years, 84 percent of global healthcare executives will invest in new technologies, 78 percent will enter new markets, and 70 percent will implement new distribution channels such as shipping directly to hospitals and patient’s homes.
Among executives globally, 63 percent name regulation compliance as the top supply chain issue, followed by product security (53%). In North America, increasing regulation, cited by 54 percent, is the top business “pain point”, followed by changes in healthcare legislation (53 percent). The two issues rank one and two in Western Europe as well.
Regulatory challenges include murky legislative outlooks, new market complexities, and the cost of managing multiple countries’ requirements.
As a study that evolves from year-to-year, regulatory concerns as a supply chain item didn’t enter the survey until 2010, says Scott Szwast, marketing director, healthcare segment, UPS.
“In the past several years, we have seen an increase in warning letters and injunctions both domestically and abroad. Companies are facing more regulation on more complex products, and with international expansion, they are required to be in compliance with new regulatory authorities,” Szwast says.
“With the migration to telemedicine and telehealth, patient data that may be stored in a device needs to be protected. Devices are becoming more sophisticated which opens up new areas of compliance companies previously did not have to deal with,” says Szwast.
Patients are increasingly cared for in new distribution settings for which different regulations may apply. “There is not a single set of global rules for product disposal. In some countries it varies even across different regions and territories,” he adds.
As the second most pressing issue among all global regions, product protection is of particular concern in the Asia Pacific region where 76 percent of executives named product security as a top issue. In North America, the second most pressing concern after regulation is managing supply chain costs.
Trends such as home care are spurring interest in new distribution channels, although wholesaler distribution remains an important supply chain approach for reaching into new markets.
“Supply chains are mostly predicated on full pallet loads to very high points of dispensation such as at drug stores and hospitals. But other complementary channels are increasingly being created to accompany the traditional distribution model—such as direct to clinic, pharmacy, and to patient,” Szwast says.
Companies were asked about their strategies to improve competitiveness. Investment in new technology ranks number one with 74 percent investing today, and 84 percent planning to over the next five years.
In technology investments , serialization mandates, as well as the need to establish safe distribution of controlled or temperature sensitive product, are key drivers . The largest increase in technology investment is foreseen in bar coding, e-pedigree, and serialization technology. Today 42 percent are investing in this area; 59 percent will be in the next five years.
In strategies to improve competitiveness, tapping into new markets is the second priority, pursued today by 67 percent, with 78 percent planning new market initiatives over five years.
This year for the first time the survey captured empirical data on the hows and whys behind answers; executives were asked about the tactics they used and the results.
“We have always focused on the business concerns, supply chain challenges, and the strategies addressing those challenges. This year we looked for specific tactics-- what worked and to what do they attribute their success,” Szwast says.
What are the successful strategies used for addressing regulatory compliance? The top two are IT investment in bar coding, serialization, and e-pedigree, cited by 49 percent, and increased regulatory staffing levels and expertise (42 percent).
The top two challenges in product security are growing counterfeit sophistication and poor supply chain visibility with too many supply chain handoffs. The most successful strategies are shipment insurance (61 percent) and IT investment in bar code, serialization, e-pedigree and chain-of-custody solutions (56 percent).
In cost management, shipping costs and labor costs are the biggest hurdles. The most successful cost management strategies, cited by 56 percent, are logistics and distribution partnerships, followed by IT investment (53 percent).
“The survey results show that companies need a strategy in place to keep costs down and part of that is working with a third party logistics partner. We understand the overall picture of supply chain costs and can help identify redundancies, and opportunities to scale back investments,” says Robin Hooker, director, global strategy, UPS Healthcare Logistics.
“Fifty percent of executives who have been successful in managing costs have performed a supply chain optimization analyses. We can help here,” Hooker says.
As firms expand into new markets working with new suppliers and partners, send product through new distribution channels , and plan their IT investments, refining the supply chain becomes a critical exercise.
“Across all industries, 75 percent of any business’s operating results align back to how the supply chain is configured. Companies looking to outperform their competitors are investing in technology, conducting supply chain optimization, and partnering with companies that have best-in-class logistics, infrastructure, assets, and expertise,” Szwast says.