UPS Survey Reveals Challenges For Asian Healthcare Companies

Asian healthcare companies face both challenges and opportunities in a highly complex and dynamic business environment, reveals a recent UPS survey of senior-level healthcare supply chain executives.

Notably, Asian companies are aggressively expanding beyond their shores compared to their US and Europe counterparts. While this signals a more bullish outlook for venturing into new global markets, it also brings to light heightened business and supply chain challenges for Asian companies.

This includes concerns over increased competition, intellectual property protection, product security and product damage and spoilage.

Now in its fourth year, the survey known as UPS Pain in the (Supply) Chain telephoned nearly 250 decision-makers of pharmaceutical, biotechnology, medical device companies, and for the first time included Asian and European companies. The survey showed comparisons among the regions, providing insights into their similarities, but also highlighted the differences in key concerns.

Healthcare companies remain heavily focused on global expansion, with the top five markets for growth cited as the US, China, India, Japan and Brazil. With three out of the top five growth markets in Asia, the region is poised to take the lead focus in expansion by the healthcare industry.

The survey showed that healthcare companies in Asia are more focused on global expansion than those in the US, with 75 percent in Asia having recently expanded into new global markets to increase their competitiveness versus 58 percent in the United States.

A contributing factor could point to the strong economic recovery the countries in the region are experiencing, including India, China and South Korea.

Asia is taking the lead in driving revenue for global healthcare companies.

In 2010, Asia Pacific contributed 24 percent of the global healthcare revenue and this is expected to reach 27 percent by 2012. By the end of 2015, Asia Pacific will account for 40 percent of global healthcare revenues.

“Asia is clearly a critical growth market in the healthcare industry, both from a manufacturing and a consuming perspective, and it has never been more important to have a reliable supply chain partner to take advantage of those growth opportunities,” said Craig Foster, senior vice president, supply chain and healthcare logistics, UPS Asia Pacific.

“UPS is well-positioned to help healthcare companies with its global network, regulatory expertise, and technology to ensure product safety and efficacy, as well as track record for fast and reliable delivery.”

Given significant growth in the region, Asia appeared to be more cautious about increasing competition. When asked about business concerns, only 30 percent of US company respondents had concerns about increasing competition versus 51 percent in Asia.

As global expansion plans take hold, a focus on intellectual property protection emerged as a top business concern, cited by 43 percent of respondents. Patent expirations also ranked high among pharmaceutical and biotech company concerns, cited by 43 percent of these respondents.

The survey further reveals that 50 percent of companies in Asia reported intellectual property concerns versus only 34 percent in Europe.

With extended supply chains due to globalization and the surge of more specialized, temperature sensitive products coming into the marketplace, concerns over regulatory compliance, product integrity and security and cost management all remain at the top of supply chain concerns again this year. Of all the regions, however, Asian executives seem to the most concerned by these supply chain issues.

Regulatory compliance was the top supply chain concern cited by 73 percent of all respondents. Specifically, Asian executives were the most concerned at 79 percent.

Product security was also cited as a top concern by 61 percent of the respondents. The survey points to Asia again as the region most concerned about product security as a supply chain issue, with 71 percent of respondents reporting this as a high concern compared to 53 percent in the US and 51 percent in Europe.

Managing supply chain costs ranked second with 64 percent of healthcare executives rating this as a top supply chain concern. This is a much bigger worry in the US and Asia with 72 percent and 70 percent respectively citing concern, compared with 49 percent in European companies reporting concern.

Comparing year-over-year trends, companies remain highly concerned about the issue of supply chain cost management but report limited success in addressing this issue. Only 42 percent of global executives surveyed in 2011 reported success in supply chain cost management.

In the US, however, companies appear to be getting better at cost management, with 53 percent of US executives reporting success in this area in 2011 versus 44 percent in 2010.

Product damage and spoilage also ranks as a high supply chain concern with 56 percent of the respondents raising it as an issue. Asia and US respondents consider product damage and spoilage a major issue with 70 percent and 67 percent, respectively, versus only 27 percent in Europe.

The No. 1 business concern for healthcare executives globally is change in healthcare legislation/reform, cited by 52 percent of respondents, followed by increasing regulations at 48 percent. Among US companies, concerns around reform have risen since 2010, with 60 percent reporting concern in 2011 versus 55 percent last year.

Changes in healthcare legislation/reform also was cited as the greatest perceived barrier to providing quality and affordable healthcare by 47 percent of respondents.

Amidst industry pressures and change, healthcare executives are focused on investing in their supply chains to increase their competitiveness. Technology investments ranked as the No. 1 strategy, with 86 percent of respondents reporting that they would invest in new technologies over the next three to five years.

Tapping into new global markets was the second top strategy for increasing competitiveness, with 81 percent of respondents reporting plans to expand in new areas in the next three to five years.