UPS' 2nd Annual '(Pain) in the Supply Chain' Survey Finds Regulatory Compliance as Top Concern

July 8, 2009
Pharmaceutical Commerce, Pharmaceutical Commerce - May 2009,

Compliance jumps over last year’s top issue, competitive pressure, among healthcare supply-chain decisionmakers

Supply chain cost and regulation occupy top share of mind among decisionmakers at biopharma and med device companies, according to a survey conducted by Harris Interactive on behalf of UPS. The survey, now in its second year, is meant to identify supply chain issues beyond simple transportation and delivery, and coincidentally identify market opportunities for the broadening range of services that UPS is offering to biopharma.

When asked what the top concern was from a business perspective, respondents cited increasing regulation, particularly among large (>$1 billion) companies. Among smaller firms, regulation was tied with increasing competition. When asked about specific supply chain concerns, both large and small companies cited managing supply chain costs (large companies are light blue in Fig. 1; small companies dark blue). Moreover, 44% of larger companies, and 45% of smaller companies, expected to be spending more on supply chain costs in the next 18 months.

The survey also took the temperature of how well supply chain decisionmakers felt they were managing costs, and the results are worrisome: 54% of smaller companies, and 59% of larger ones, were not “successful” in managing these costs. “This is very interesting because from a year ago to today, fuel costs have declined and shipping overcapacity has cut shipping rates,” says John Menna, director of healthcare logistics at UPS (Atlanta). “You would think that supply chain managers could take some credit for better pricing, but their concern remains quite high.” He concludes that “the drive to develop a more efficient supply chain is not going to go away.”

It’s also worth noting that nearly half (48%) of large-company respondents cited product tampering and counterfeiting as a concern, which belies the relatively quieter scene in drug pedigree, tracking and tracing as a result of the postponement of pedigree rules in California last year.

Changing channel strategies

More than half (52 to 56%) of large-company respondents are seeking ways to go more directly to patients, physicians hospitals and retailers with product deliveries, while smaller companies have lower intentions (18-27%) of doing so. Last year, large and small companies had an equal desire (42%) to use third-party logistics providers. This year, the two have diverged: 48% of large companies but only 19% of small companies plan to do so.

As an outsourcing provider itself, UPS is naturally focused on how much outsourcing its clients are planning to do. Figs. 2 and 3 show that 42% of large companies, but only 13% of smaller ones, plan to do more outsourcing. Fig. 4 shows (for large companies only) the functions currently outsourced. The 0% figure for outsourced regulatory compliance is interesting: given that this is a top concern for respondents, why aren’t they planning to acquire more assistance in this area? One possible answer is that compliance for supply chain management specifically is considered too important to outsource. But next year’s survey might show an evolution in this area. PC