Pharma SCs tied up on all fronts

PHARMA SC       COST MANAGEMENT      SC RISK

Global - Managing costs is the first and most pressing concern for pharma supply chains, but most also have their hands tied by increasing regulations which will impact supply chain operations, found a new UPS survey.

Healthcare decision makers are also grappling with increasing regulations and are now realising they've had limited success in actually managing the cost of their supply chains, the study, "Healthcare Pain in the (Supply) Chain" said.

In its second year running, the survey identified that as in the first, the number one supply chain concern in the pharmaceutical and healthcare sector was to manage costs. Specifically, 55% of survey respondents at smaller companies said they were "highly concerned" with managing costs and fewer than half of those, or 46% reported success in addressing this area. A whopping 81% of large pharma companies were highly concerned about managing supply chain costs and only 41% reported success in doing so.

Product damage, loss and spoilage and meeting customers' changing demands for service ranked second among supply chain concerns after managing costs, the study said.

Following cost management is regulatory concerns, with respondents understanding that increasing regulations are having a substantial impact on supply chain strategies. Some 56% of companies with over US$1 billion revenues said they were "highly concerned" about increasing regulation, and 30% of small to mid-sized companies ranking this as their top business concern.

"There are many market factors driving regulatory concerns, including a heightened focus around security and product safety, increasing global border controls and more products requiring special handling coming into the market," said Bill Hook, UPS vice president for global strategy, Healthcare Logistics. "Regulatory pressures will only continue to grow with new industry legislation, making this a critical focus for companies as they design their supply chains to meet evolving needs."

The study also found that pharma companies are gearing toward shifting its supply chain strategies to meet changing customer needs. These include 56% of companies with revenues above US$1 billion altering their distribution models to go direct to hospitals, pharmacies or retailers, 30% will go direct to wholesalers and 48% will work with a 3PL.

Large companies are also taking a second look at outsourcing, a strategy that differs from their smaller competitors. (43% vs 3%)

"We are seeing a real shift in the marketplace in terms of large healthcare companies increasingly embracing outsourcing of supply chain functions ranging from the distribution of drugs and medical devices to customer service and support functions," said Hook.  "With increased pressures to innovate while cutting costs, many companies are turning to outsourcing as a way to gain efficiencies across the supply chain to better focus on core areas like R&D, marketing and acquisitions."

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