Health Care Reveals its Supply Chain Pain

Sept. 23, 2014
Significant factors contributing to uncertainty in the healthcare supply chain are more stringent regulations and increased product protection challenges

According to the 7th annual United Parcel Service’s (UPS) "Pain in the (Supply) Chain" survey, the most significant factors contributing to uncertainty in the healthcare supply chain are more stringent regulations and increased product protection challenges. For the third consecutive year, regulatory compliance is the top supply chain pain point, says UPS, cited by 60 percent of respondents. Further, 78 percent cite regulatory compliance and increasing regulations as a top trend driving business and supply chain changes. Product protection also is increasingly challenging in a highly global marketplace, with 46 percent citing product security as a top challenge and 40 percent citing product damage and spoilage as a top concern.

Despite operating in a risk-inherent environment, only 26 percent of healthcare executives cite contingency planning as a top supply chain concern, note UPS researchers. Meanwhile, 34 percent of those surveyed in Asia and 22 percent in Latin America say that more than one-quarter of their companies' supply chains were impacted by unplanned events in the past three to five years. Specific challenges to addressing business continuity include events being too unlikely or infrequent (61 percent), back-up infrastructure being too expensive to deploy (46 percent) and little to no prioritization being given to this area (42 percent) versus other more urgent matters.

Again this year, investing in new technologies is a top strategy to increase efficiencies and competitiveness for the next five years. Globally, over the next three to five years, 80 percent of respondents say they will invest in new technologies. "Companies that embrace new technologies and transformative supply chain strategies to mitigate risks will be more likely to capitalize on new growth opportunities in the healthcare marketplace of tomorrow," says John Menna, UPS vice president, global healthcare strategy.


Despite progress in addressing industry challenges, opportunities remain, say UPS analysts. One of these areas is in leveraging new distribution channels and models to meet changing customer demands as e-commerce, urbanization and home healthcare grow. Over the past two years, 70 percent or more of those surveyed both years have indicated that they plan to increase their usage of new distribution channels, yet over this same time period their channel mix remains nearly identical. This demonstrates that while the intention to take advantage of untapped opportunities is apparent, actual change is slow. Among the reasons for the slow shift, 68 percent say they are still building their direct channel strategies.

The rise of home healthcare is taking off with growth surges expected over the next decade. Globally, 21 percent of survey respondents cite the shift to home healthcare as a key trend driving business and supply chain changes. Respondents report that 30 percent of products will support the home healthcare channel in the next seven to 10 years.

Global market expansion is another area in which healthcare companies are heavily investing that continues to hold new opportunities, finds the UPS survey. Over the past 18 months, 65 percent have tapped into new global markets to expand their customer base in order to drive new revenue growth. Looking ahead, 78 percent will expand to new global markets over the next three to five years. These responses closely mirror 2011 survey data, when 81 percent of executives reported they plan to expand to new global markets over the next few years.

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