2010 UPS 'Pain in the (Supply) Chain' Survey

Pharmaceutical CommercePharmaceutical Commerce - May/June 2010

Executing on global-expansion plans and exploring distribution alternatives are top issues

UPS Healthcare Logistics (Atlanta), working with market-polling firm Harris Interactive, has completed its third annual healthcare supply chain survey, which is conducted as a blind, in-depth telephone survey with senior-level decisonmakers responsible for supply chain and logistics among pharma, biotech and med/surg manufacturers. Across the board from large multinationals to small emerging firms, there is an emphasis on expanding into non-US markets. Seventy percent are already doing business with at least one country outside the US; 51% manufacture and source outside the US; 24% conduct clinical trials abroad; and only 21% engage in none of these international activities. Two in five respondents report being “very” or “extremely” concerned about access to global markets—an increase of 22% over last year’s survey. The biggest hurdle is thought to be in-country regulations (54%) The next-highest worry is product security (33%)—both in terms of in-transit security issues and counterfeiting and diversion.

An interesting result appears on the question, “Please tell me if you expect your use to increase, decrease or stay the same for the next 18 months” for changing distribution channels. For each category—going direct to hospitals; direct to consumers; or going through wholesaler/distributors, a majority of respondents said they expected to increase their activity. “This could be a case where, in conjunction with expanding abroad, a company looks into local wholesaler arrangements, while at the same time is looking at direct distribution in the US,” notes John Menna, director of healthcare logistics.

The data do show that the biggest change in distribution practices is direct distribution, with 70% of respondents expecting to increase their use of that channel. In line with these data, 35% of respondents expect to do more outsourced distribution; the figure for that response was 13% in last year’s survey.

In 2009 and 2010, “managing supply chain costs” was the No. 1 issue, but after that, the results re-sort themselves. Regulatory compliance is a close second to cost concerns in 2010; that didn’t show up in the 2009 survey. The third-highest 2010 result is “product security.” Both compliance and security are on supply chain managers’ minds as the “100% inspection rule” comes into force with the Transportation Security Administration. About two-thirds of respondents expect to increase their supply chain spending in the next 18 months.

Keeping product secure

The concern with product security goes hand in hand with global expansion, as companies realize just how counterfeit-prone markets are in many parts of the world, says Menna. “We think this will translate into logistics providers offering complete or near-complete solutions for theft and counterfeiting. The reality is that there is no one logistics provider who can cover the entire globe; but the concern is being expressed that these issues have to be addressed.”

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