For a healthcare supply chain manager, sending products and services to the customer in a quick, cost-efficient manner sounds like "Business 101." But in this difficult economic (and heavily regulated) business climate, healthcare supply managers face increasing problems.

In the midst of this change in the healthcare industry, UPS (Atlanta) has launched a survey to identify growing pains in the healthcare supply chain. Titled "Pain in the (Supply) Chain," the results revealed that regulatory compliance and industry competition top the list of healthcare company concerns.

Bill Hook, UPS's VP for healthcare logistics, told Medical Device Daily that a common regulatory hurdle is cargo screening. "When shipping medical device cargo, it now has to go through the same type of screening as commercial aircraft packaging. This could mean X-ray screening, which might damage some sensitive items," he said.

A new TSA mandate will call for 100% screening of all foreign cargo by 2010, and Hook said that UPS is working to bring its own screening equipment up to speed to avoid any delays in global shipping.

The survey also found "global market access" emerging as the area companies need the most help addressing. Global market access is a major focus area for healthcare companies seeking to take advantage of lower-cost sourcing opportunities and penetrate fast-growing, emerging consumer markets.

"Capitalizing on new global market opportunities amidst an increasingly competitive industry landscape requires changes in supply chain and business strategies," Hook said. "It's crucial that companies have the supply chain flexibility to respond to changing market conditions in order to capture new market share and navigate the many complexities associated with global market access."

The survey was a two-part study. The first phase included a blind, in-depth phone survey conducted by Harris Interactive of more than 300 primarily small-to-mid-market companies in the pharmaceutical, medical device and biotech industries. The second phase, conducted online, targeted large healthcare companies from the same sectors with annual revenues of $1 billion and higher. Qualified respondents were supply chain decision makers.

Evolving compliance legislation also is a concern for healthcare companies in an increasingly global marketplace in which companies must navigate various regulatory compliance laws across new territories. Regulatory concerns ranked as the No. 1 business issue for larger companies in a correlated online survey targeting companies with $1 billion-plus revenues. Nearly 92% of these companies cited regulatory compliance as a top concern.

When asked about supply chain-specific concerns, companies ranked managing and containing supply chain costs as the No. 1 concern. Fully 60% of companies reported they were "very concerned" or "extremely concerned" about the potential impact of supply chain costs on their business.

Some 25% selected managing supply chain costs as the issue they have been most successful at addressing. Among the companies with $1 billion-plus revenues, 74% of respondents estimated that costs related to product expirations, returns and recalls cost them hundreds of thousands to millions of dollars every year.

The vast majority of survey respondents said they planned to make changes to their supply chain models in the near future. Among the immediate changes companies planned to make are: expanding their distribution channels; outsourcing more supply chain functions; working with third-party logistics companies, and increasing their supply chain spending.

Hook told MDD that he envisions a "distribution center without any walls" that could be achieved with more direct distribution facilities in more countries, and more "warehouse-to-door" direct service. Hook said UPS also has cargo-sensitive detailed handling instructions to avoid any unnecessary delay. A shipment would be flagged, and steps taken to ensure delivery.

Hook gave an example of a shipment of coronary stents that needed to be delivered for a specific operation at a specific time. "In this case, 99% on-time delivery won't cut it. You don't want to be that 1% waiting on your stent to arrive."

In all, 90% of respondents said they expect to make changes to their distribution channels in the next one to two years; two in five of all industry experts and more than half of the pharma industry (55%) expect to change their distribution channels to work with third-party logistics providers. A majority, 61% of respondents, plan to implement a direct-to-consumer channel strategy in the next one to two years and 55% are planning to initiate a direct-to-wholesaler strategy. Interestingly, 37% expect to expand to both direct-to-consumer and direct-to-wholesaler.

When asked the same question of companies with $1 billion-plus revenues, 46% reported they are planning to change their distribution channel/go-to-market strategy. Nearly half (46%) of these larger companies also plan to increase the amount they outsource in the next one to two years. The same percentage planned to work with third-party logistics providers in the near future.

More detail on the UPS survey can be found online at www.ups-scs.com/solutions/healthcare.html.

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