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What We Learned from the 2015 UPS Pain in the Chain Survey

Jan 07, 2016 River Logic Healthcare, Supply Chain Management

Screen_Shot_2016-01-03_at_5.09.29_PM-1.pngThe 2015 (8th) UPS Pain in the Chain Survey has now been released, and its findings are as helpful a barometer of healthcare industry supply chain issues as were its predecessors. The survey results are based on 421 interviews of healthcare logistics executives in 16 different nations, and it contains detailed analyses of the industry broken down into 5 main areas of concern.

The five areas that executives were asked about, a summary of their responses, and the significance of their answers to healthcare logistics going into 2016 are outlined below.

1. Product Security

In 2014, only 55% of those surveyed said they had seen significant improvements in product security. In 2015, that number jumped by 20 points to 75%, making it the most-improved category. The most commonly cited means of improvement were: IT solutions like bar-coding and serialization, better cooperation with law enforcement and visible authentication methods like holographs and security inks. The most challenging problems that remained were: physical anti-theft protection at all points of the supply chain, maintaining end-to-end supply chain visibility, and having too many "links" (hand-offs) in the supply chain to easily manage.

The rising cost of healthcare products and the prohibitively high cost of litigation has motivated suppliers to do everything in their power to guard against theft and tampering. With effective security systems now in place, healthcare companies are freed up to focus on improvements in other areas.

2. Regulatory Compliance

For 2015, 70% of respondents said their regulatory compliance had improved, a 13% increase from 57% in the 2014 survey. Healthcare manufacturers have made great strides in complying with an ever-increasing government regulatory burden. The main method of improvement was to work with logistics and distribution partners who are expert in the regulatory compliance requirements of the various destination countries to which end-products are imported.

Without the ability to comply with diverse regulations in major markets like the U.S., E.U., China, Russia, Brazil, and more, healthcare manufacturing companies will either meet with costly delays/rejections or be limited to a smaller market. Improvement in this area signals the rise of greater levels of global competition.

3. Product Damage & Spoilage

One area of significant challenge has been constantly guarding against product damage and spoilage all along the supply line. Improvement in this category was 51% in 2014 and 63% in 2015. Part of the reason for the lagging behind other categories is the complexity of in-transit monitoring systems, which tends toward under-utilization. The progress that was made came mostly from two sources: switching to a faster, more conscientious shipping company and use of temperature monitoring devices to prevent spoilage.

One way to reduce product damage even further without hurting shipping efficiency is to hire a logistics management company with access to local agents and detailed knowledge of which shippers and shipping methods work best in each country and in each situation.

4. Logistics, Warehousing, & Transportation Costs

This was a relatively weak area, with only 50% saying they had improved in 2015, though that is still a 12% increase from the 38% who said so in 2014. The most critical challenges involved were: struggling to keep logistical optimization up to speed with rapid business growth, the learning curve that comes with entering a new market, and unpredictable fluctuations in the prices of fuel and raw material. The most successful cost-management strategies were: use of logistics/distribution partners and reliance on supply chain optimization analysis. Problems included: use of a non-optimized transportation service and using a separate company to finish the last mile or so of local deliveries, which leads to loss of traceability.

Finding ways to accurately pre-plan every step of the supply chain, identifying the most efficient working partners, and keeping full visibility from shipment to delivery may require help from a supply chain optimization expert.

5. Contingency Planning

Contingency planning received very little investment, as healthcare companies find it hard to justify the cost due to the limited, unpredictable nature of supply chain disruptions. Many simply do not consider this area to be of much importance. This isn’t surprising, considering only 6% of supply chains have been affected by unplanned events over the last several years.

Even if less critical day-to-day than other areas that call for investment, unexpected disruptions can cost valuable time and resources whenever they do occur. At least a modest amount of research, planning, and investment for contingency planning is a wise business practice.

Closing Remarks

Healthcare logistics decision-makers have made significant improvements in 2015 across multiple areas of the supply chain. Product security and regulatory compliance saw vast improvements, while product damage/spoilage saw modest success. However, contingency planning remained largely unimproved, receiving hardly an investment. Leveraging logistics experts holds great promise for further progress in healthcare, giving a competitive advantage to manufacturers who utilize their services. We predict that healthcare efficiency and managed cost will see a boom over the next several years as the industry slowly begins to adopt tools and tactics adopted across other supply chain industries.

Jewish General Hospital


Written by River Logic

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