Pain In The Chain Survey: Time To Capitalize On Untapped Opportunities
By Ed Miseta, Chief Editor, Clinical Leader
UPS has released its 7th annual UPS Pain in the (Supply) Chain Survey of executives in the pharma, biopharma, and med device industries. While this latest version of the survey shows executives still have concerns over the economy, rising costs, and regulatory challenges, there are opportunities companies can capitalize on to help move the industry forward.
On the positive side, the growth of the global population and the middle class, along with a rise in the median age has created a growing demand for healthcare services. The report notes in order to capitalize on these new opportunities, companies will need to move quickly to make strategic changes to their supply chains. Unfortunately, supply chain change seems to come slowly, and in the current risk-inherent environment, may be impeding growth in the industry.
While some companies are reacting to emerging opportunities by transforming their supply chains, the report states the winners in tomorrow's healthcare marketplace will be those companies that make their supply chains more flexible and efficient, and begin making those changes as soon as possible. Those that don’t may be taking on the greatest risk of all.
Key Challenges Will Impact The State Of The Industry
The survey first asked respondents about the overall state of the industry and the challenges firms will face going forward. Current global economic conditions continue to weigh heavily on the minds of industry executives. In North America, 54% felt they are still feeling the impact of the recent economic downturn. The same held true for 54% in Latin America, 46% in Asia-Pacific, and 43% in Western Europe. This concern has surfaced in purchasing decisions, as supply chain decision makers report they continue to be affected by tightened spending and other reductions or cutbacks.
Other trends are also weighing heavily on the minds of healthcare executives. When asked which trends were most driving changes in their business and supply chain, 37% cited changing or increasing regulatory requirements, while 24% noted product development specialization and 12% pointed to reimbursement levels. Patient demographics, serialization, and the shift to home healthcare all registered less than a 10% response. Top concerns related specifically to the supply chain also include managing costs, product security, contingency planning, product damage or spoilage, and access to global markets.
To deal with the cost management concerns, three top strategies were identified by a majority of respondents. At the top of the list are logistics and distribution partnerships, followed by IT investment and outsourced transportation management. Although concern over cost management was 44% in 2014, down from 64% in 2011, the report notes this may simply be due to the realization by management that the cost containment challenge is likely here to stay.
Unaddressed Challenges Will Hamper Growth
It's one thing to understand the challenges that exist. It's another to take on those challenges and identify workable solutions. There is no question the regulatory challenges faced by life science firms are complex, and navigating them can be a high-stakes operation. Survey respondents noted the legislative outlook is murky, unstable, or changing (75%), a lack of clarity has resulted in delays (69%), and keeping up with new regulations is a key challenge (62%). Partnering with companies that bring regulatory expertise is one way many companies are coping. However, the report also states this strategy is underutilized, and could deliver significant benefits if embraced more broadly by the industry.
Longer supply chains are also creating stronger concerns amongst executives. Product security and damage/spoilage were cited as top concerns by 46% and 40% of executives. The growing complexity of pharmaceutical products has at least partially contributed to these concerns. Temperature-sensitive products and longer supply chains, coupled with more hand-offs, have made supply chain visibility more important.
The top challenges to product security are counterfeit sophistication growing faster than countermeasures, poor supply chain visibility coupled with too many hand-offs, and an inadequate response from law enforcement. Contingency planning and preparedness for supply chain disruptions may be one area where concern is underestimated. Only 26% of respondents cited supply chain disruption as a primary concern, despite the fact that unexpected events have had a measurable effect on healthcare supply chains, and fewer than 4 in 10 respondents could report success in the area of contingency planning.
While these challenges will remain for years, they need not hamper growth. A successful strategy to address them can keep companies ahead of the curve and help to secure the pharma supply chain.
The Solution: Collaboration And Partnerships
No pharma company has sufficient resources in-house to properly manage all of the challenges they currently face. The mantra in today's outsourcing environment is to do what you do best, which is to focus on your core competencies and allow partners to do the rest. Although the outsourcing of manufacturing and clinical trials continue to become more commonplace in pharma, the report notes healthcare companies have been slower to outsource supply chains than other industries.
That picture may now be changing. The trend toward collaboration can be seen in several areas. The survey found 57% of executives had hired regulatory consultants, compared to just 41% the prior year. Those establishing partnerships with local distribution firms and large multinational distribution firms to help manage regulatory compliance showed increases of 16% and 6% respectively. To get a better handle on supply chain cost management, more firms are establishing distribution partnerships and outsourcing transportation management.
Companies are also using logistics and distribution partnerships to better access global markets and new customer bases. Globalization, increasing cost pressures, and the need for expertise in regulatory compliance, product protection, and expansion into new markets will likely continue to drive these trends, as will the desire of companies to focus on their core competencies. Greater investments in new technologies such as order management systems, serialization and track-and-trace technologies, online ordering systems, cold chain technologies, and security for high-risk shipments will also be winning strategies for many life science companies.
Finally, the report points out there are opportunities for growth for those companies that take advantage of global expansion and new channel and distribution strategies. Building new infrastructure overseas, making better use of logistics and distribution partnerships, and building partnerships with local distributors abroad were cited as successful strategies for global expansion. The challenges that may inhibit global expansion are the complicated regulatory environment, inadequate infrastructure in emerging markets, and multiple markets emerging simultaneously, which can complicate strategies.
All told, the report seems to be good news for pharma companies. Many of the challenges identified in the survey will not go away anytime soon, but for those companies willing to embrace new technologies and partnering opportunities, the road ahead should be more easily navigated.
For more information on the UPS Pain in the (Supply) Chain survey and to download an executive summary, visit www.pressroom.ups.com.
Survey Methodology: The 2014 UPS Pain in the (Supply) Chain survey was a blind, in-depth phone survey conducted by TNS, on behalf of UPS, of more than 530 healthcare executives in the U.S. and Canada, Western Europe, Asia and Latin America. Qualified respondents were senior-level decision makers responsible for supply chain and logistics in the pharmaceutical, medical device and biotech industries. Surveys were conducted between January and March 2014.