Healthcare Supply Chain Fundamentals

What we learned from the UPS annual Pain in the [Supply] Chain survey.

Companies in the healthcare sector are working in an environment where risks arise from a number of sources, such as new regulations, a surge in temperature-sensitive products and the frequency of disruptions.

As the population ages, becomes wealthier and expands into diverse geographical sets, there are benefits for the healthcare sector. This means that the supply chain will need to be adapted in order to accommodate the new channels of distribution, innovation and product specialization.

The annual UPS “Pain in the Chain” survey has brought to light three points to be considered for the coming year.

The first is that even though the supply chain is prone to disruption in the healthcare sector, it has not been prioritized by industry.

Problems can be found in lower-probability, higher-impact disruptions. In these circumstances, it is increasingly important to ensure business continuity. The FDA has recently embarked on a campaign to minimize disruptions in the medical equipment supply chain during periods of adverse weather.

The UPS survey suggest that companies who have good contingency planning have employed the following strategies:

  • Conducted planned scenario and recovery demonstrations (59%)
  • Negotiated with logistics providers over distribution infrastructure alternatives (59%)
  • Put money into their secondary and multiple distribution infrastructure (50%)
  • Consulted with third party logistics providers to develop contingency planning (44%)

You would expect business continuity would top of the list of priorities in healthcare, however, only 26% of logistics experts from the sector cite it as their main priority. Fewer than 40% claim success in planning for contingencies. This is something the industry will need to address.

The second notable point from the UPS survey is that remaining compliant with regulations is becoming more difficult, as is best managed through partnership and collaboration.

While companies are seeking to expand globally, they must overcome regulatory challenges. For the third year running, regulatory compliance tops the list of supply chain issues—according to 60% of executives surveyed. Regulatory change is at the heart of changes in supply chain implementation.

Regulations vary widely across regions, countries and products. The healthcare industry is risk-inherent due to a number of factors besides uncertainty arising from regulations, including the uncertain economic recovery as well as other industry pressures.

Those executives who experience success in complying with regulatory changes cite the following as the best strategies:

  • Hiring regulatory consultants (57%)
  • Utilizing native distribution companies (54%)
  • Engaging with multinational distribution companies (38%)

The third and final point is that investment in technology, expansion in global markets and using new distribution channels are the most pertinent strategies for the future.

The survey’s findings suggest that investment in a variety of technologies, expanding customer bases globally and increased usage of diverse distribution channels and models are areas where an increase in strategic focus is needed. These can be capital-intensive areas and need to be well understood and managed carefully. In the future, collaborative models will provide the best opportunity for success in managing the health care supply chain.