What defines the life sciences and healthcare supply chain today? Which issues are going to shape logistics over the coming years? To find out, we polled attendees at our recent DHL Global Life Sciences & Healthcare Conference in Miami – we asked which hot topics they are prioritizing in their operations. Here in reverse order are their top ten:
- Improve market access
Companies are eager to expand into new markets and get products to market faster. Drivers include expanded patient access to high-quality healthcare and pockets of new wealth stimulating demand for cutting-edge treatments in the private sector. In the years leading up to 2022, drug-spending growth in the so-called ‘pharmerging’ markets (such as the BRIC countries) is expected at 6-9%.
- Supply chain resilience
Two years ago during our 2017 global conference, this topic was only in 17th place. Today, companies are increasingly challenged to build more flexible and responsive supply chains. Complexity has grown in the supply chain with more contract manufacturing and outsourcing, supplier reductions, and intensified regulations. What is needed is a more flexible, tightly controlled global supply chain capable of reacting very quickly to risk.
- Deployment of new technologies
These include robotics and augmented reality in the supply chain and, interestingly, this has fallen from 4th place in our 2018 poll. It could be that companies are actively exploring and piloting these technologies yet take a mid-term view on realizing investment returns; other issues with nearer-term implications are taking priority.
- Regulatory compliance
GDP and GMP remain firmly on the radar for supply chain managers and will likely remain a priority for the foreseeable future, given the highly regulated nature of the industry. Rules continue to change every day around the world, and the environment is getting more sophisticated and challenging with issues such as serialization, new directives for medical devices, and more.
- Sustainability & a green supply chain
This topic was never previously prioritized by our life sciences and healthcare customers so there has clearly been a strong shift in sentiment, perhaps related to tougher regulation and enforcement, such as the new rules on Hazardous Waste Pharmaceuticals introduced this year by the EPA and to growing environmental momentum globally. Cold chain transportation in life sciences and healthcare could prove to be a particularly critical battleground here – it has a 20% higher carbon emission impact than regular road transport.
- Direct-to-pharmacy, ward & lab
Supply chain professionals in the industry are probably thinking of Amazon’s acquisition of PillPack in 2018 and how this threatens to reshape the pharmaceutical supply chain. Many are looking at more direct distribution models, and this poses interesting challenges for inventory management and positioning, network design, and changing customer expectations. Research says $40 dollars of every $100 spent on drugs in the US are being channeled through intermediaries and supply chains with multiple players; this suggests inefficiencies in a supply chain ripe for disruption. Manufacturers now have greater access to patient and user data – something they did not have previously – and new tech startups are going further with direct-to-home models.
- Network optimization & distribution center consolidation
This is driven largely by M&A activity and the prioritization of supply chain optimization to retain service and quality standards during a merger and to realize synergies. In addition, the industry is highly transformational, with lots of divestitures, new partnerships, a high level of innovation bringing new therapies to market, new distribution models, and a trend towards outsourcing of key supply chain activities.
- Cost efficiency & service level optimization
Governments are trying to lower healthcare costs – which can account for 10% of GDP – at a time when those costs are growing at a faster rate than GDP. This is placing immense pressure on companies to operate more efficiently. The supply chain is an obvious place to start. To give you one example – the leading companies in medical devices have from 116-185 days of inventory on hand. Compare this to 6-9 days in the tech sector and you will immediately see the potential to realize savings through an optimized supply chain.
2. Digitalization of supply chains & data analytics
Our customers clearly see great potential in big data and machine learning for data-driven end-to-end optimization. They want to achieve better analysis of risks, costs, and other variables in the supply chain, to model more efficient flows of inventory and produce better forecasts and predictions. Improved end-to-end visibility and data analysis can help address the long-standing trend of overstocking inventory to ensure fulfillment. Companies now have the ability to break down silos throughout their supply chain – improving data exchange and analysis across multiple partners and suppliers to increase the agility of their distribution networks. They can reduce the amount of cash tied up in excess inventory and, ultimately, ensure the right pharmaceuticals are in the right place at the right time.
1. Temperature control & cold chain
A major priority for more than 75% of conference attendees, this has also been the number one issue for the last three years, confirming just how critical logistics is to the life sciences and healthcare industry. The integrity of the product is everything and maintaining, controlling, and monitoring the temperature of products through to their point of delivery – wherever that may be – is where the supply chain adds the most value for many of our customers today and also where it faces the greatest challenges and complexity. It also gives you a sense of where the market is heading. Temperature-controlled products are growing twice as fast as other products in the pharma market. 75% of biopharma and up to 15% of all vaccines, samples, and diagnostic tools require cold chain transportation. With the rise in biopharma, the emergence of therapies that require cryogenic conditions, and the continued global growth of clinical trials, particularly in emerging markets, the need to invest in cold chain and temperature-control solutions is sure to continue.
I hope you have enjoyed this countdown of key priorities. For me, issues five to two are all interlinked – it is about streamlining and optimizing the complex, highly regulated supply chain we see today from manufacturing to pharmacy, hospital or even homes in a way that strikes the right balance between cost and service levels. We must keep in mind that data – or end-to-end digitalization – is the new enabler of all that.
It would be great to hear your thoughts on these trends and any others you consider important that I have not mentioned in this article.