Healthcare logistics industry

Major challenges face the healthcare logistics industry today, but most are adapting well

healthcare logistics

Healthcare logistics has always been a complicated field, but that landscape seems to be shifting faster than ever, making strategic decisions on supply chain matters more critical than ever. TNS conducts its “Pain in the (Supply) Chain” healthcare survey annually for UPS, based on data they have gathered from 440 senior healthcare logistics decision makers across Western Europe, The Americas and the Asia-Pacific region. Their answers have a lot to tell us about what challenges face the market today, and what we might expect in the next few years.

Legislation and oversight worries in healthcare logistics

TNS’s study shows that increased regulation is a growing concern for the healthcare logistics industry worldwide. Bette than 4 out of every 5 respondents reported plans to step up investment in distribution technologies, and more than three quarters expect to seek out and implement new distribution channels among retailers, providers and patients. Nearly 2/3 expressed plans to reach out to 3PLs in order to achieve these goals.

When asked what their most pressing healthcare logistics related challenges were, 63% answered ‘regulatory compliance’. More than half cited product security, with rising supply chain costs making a close third. Just under half cited concerns about product damage or spoilage, and just over 1/3 of healthcare logistics professionals responded with worries over gaining access to new customer bases and markets.

Most of these results were unsurprising, yet this is the first year that security concerns ranked higher than cost management, or managed to rank second only to compliance issues. The analysis shows that concern over costs is still high, but that most healthcare logistics professionals are becoming less pessimistic over time.

The fact that security concerns are rising may also give some insight into how the next few years will unfold. After all, cost concerns will always be cited as a challenge, so anything else on the radar at that level is quite important.

Some analysts feel that the top three concerns should be looked at more holistically. The real question is ‘how can a company maintain compliance levels while maintaining product security and accessing new markets, all the while maintaining a profit margin?’ Expressed that way, the fact that there is increased optimism at all seems a good sign indeed.

In fact, security and regulatory concerns are closely tied together already. Product security questions are usually either about maintaining strict control of products at all stages in the supply chain, or about the threat of counterfeiting. The regulations that must be complied with concern themselves with the same things. Regulatory bodies are looking for more reliable (and yes, more efficient) ways to ensure the authenticity of pharma products both in production and after delivery. Taken together like this, security and compliance issues become the largest single issue by far.

Healthcare logistics in developing markets

Another point of synergy is between compliance and access to new markets. 4 out of 5 respondents were concerned with the difficulties they faced in complying with the regulations that these new markets presented. A healthcare logistics company has to understand the regulatory environment of a new market in a great deal of detail before it can attempt to penetrate the market economically.

Still some concerns are market-specific. With few regulatory offshoots. What is the infrastructure situation? Most markets are new because they are still in development, and pharma products are some of the most fragile and vulnerable to poor handling. Many of the companies that have seen the most success getting into these markets have used strategic logistics partnerships with local 3PLs that understand the challenges and capabilities of local infrastructure networks intimately.

Another problem is that as markets develop, they begin to resemble developed markets more and more. Because of this, more than half of those polled expressed concern with labour and shipping costs, especially for the part of their operations that would be within the new markets.

How are healthcare logistics companies meeting these challenges?

The four strategies for cost management judged most successful were:

  • Seeking distribution and other logistics partnerships,
  • Increased investment in IT,
  • Analysis projects aimed at supply chain optimisation,
  • And outsourcing the transportation management function.

Overall, healthcare logistics supply chains are under optimised, compared to those in the high tech and retail fields. Because these goods are delicate, and they are destined for use in humans, the degree of trust required from end customers has so far precluded any optimisation strategies that carry the appearance of increased risk. Nonetheless, there are efficiencies which can be exploited. Medical device and pharmaceutical companies can seek out increased shared distribution space through partners. This also lends needed agility to the manufacturers. Another potential point of synergy, if the manufacturer and the healthcare logistics firm both seek access to the same new market, they can support each other’s efforts.




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