More Links—or Kinks?—in the Supply Chain

U.S. pharmaceutical and medical device manufacturers seeking to penetrate new markets struggle with finding an ideal supply chain. A recent survey conducted for UPS, “Pain in the (Supply) Chain,” found that respondents ranked managing and containing supply chain costs as their number one concern. Sixty percent of companies reported they were “very concerned” or “extremely concerned” about the potential impact of supply-chain costs. Complying with global regulations is another worry. In addition, nearly three-fourths of the responding companies with $1 billion-plus in revenue estimated that costs related to product expirations, returns, and recalls cost them hundreds of thousands to millions of dollars every year.

“Capitalizing on new global market opportunities amidst an increasingly competitive industry landscape requires changes in supply chain and business strategies,” said Bill Hook, UPS’s 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.”

Concerns about costs, however, is not stopping companies from spending money on the supply chain. The survey found that in the next 18 months, 60% of the respondents expect supply-chain spending as a percentage of total sales to increase by 23%. Forty-two percent of the responding companies with revenues of $1 billion and higher anticipate spending more over the same time period.

“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.”

Most respondents plan to make changes to their supply-chain models. Immediate modifications include expanding distribution channels, outsourcing more supply-chain functions, working with third-party logistics companies, and increasing supply-chain spending.

Shipping channels are also changing. More than 60% of respondents intend to utilize a direct-to-consumer strategy in the next one to two years; 55% are looking toward a direct-to-wholesaler strategy. And 37% plan to expand both.

The survey was conducted for UPS by Harris Interactive. A two-phase study surveyed pharmaceutical, medical device, and biotech industries of all sizes.


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