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1 Healthcare Logistics OUTSOURCING Survey 2013 A recent survey by Healthcare Packaging Magazine and UPS provides insight into how healthcare logistics is managed, what is driving change, and what challenges lie ahead.
2 Exclusive survey benchmarks how companies are handling healthcare logistics strategy As logistics becomes a more important part of doing business in the global healthcare market, there is still a lack of hard information on how individual healthcare companies are handling this vital operation. Are they leveraging their internal logistics expertise to manage the function? Or are they outsourcing this operation to third-party companies? We found that a variety of regulatory and internal drivers influence the choices healthcare companies make in logistics management, from cost savings and cargo security to shipment volumes and access to new technologies. Healthcare companies differ in how and if they use third-party logistics partners, as well as how often they re-certify them. Respondents also gave us a glimpse into how they manage their corporate logistics strategies: centrally managed, decentralized to the plant level, or outsourced. The survey was sent via to Healthcare Packaging s audience in August 2013, and resulted in 277 qualified responses Here s what we learned from this exclusive survey. 1 Outsourced vs. internally managed logistics While slightly over forty percent of healthcare companies we surveyed manage their supply-chain investment internally, a majority outsource at least some percentage of their business. 100% Internally managed 100% Outsourced 75% Outsourced 25% Outsourced 42% 24% 8% 12% 14% 50% Outsourced Healthcare Logistics Outsourcing Survey 2013 Page 2
3 2 Number of Third Party Logistics (3PL) service providers used A solid majority of respondents rely on more than one 3PL provider to handle their logistics. 52% Two to six 10% 16% More than 6 One 22% None 3 Future plans on outsourcing logistics Will increase outsourcing 46% About the same as always 66% Will reduce outsourcing 27% While over half respondents don t foresee tinkering with their current level of outsourcing, of those remaining, the trend is clearly toward increasing versus reducing outsourcing. Healthcare Logistics Outsourcing Survey 2013 Page 3
4 Top drivers of logistics outsourcing 4 Cost savings 73% Service quality 55% Regulatory compliance 43% Shipment volumes 39% Cargo security 25% Access to new technologies 18% Access to emerging markets 17% Plain old cost savings is clearly driving the outsourcing of logistics management in the healthcare field. Other important factors include the quality of service vendors provide, relevant shipment volumes and cargo security. 5 Timetable for requalifying logistics vendors Once healthcare respondents select a vendor, they keep a close watch on them: More than 60 percent re-qualify these vendors at least yearly, if not every three to six months. The rest re-qualify every two to three years. 57% 25% At least once a year Once every two years More than once a year 8% 10% Once every three years Healthcare Logistics Outsourcing Survey 2013 Page 4
5 6 Biggest regulatory challenge anticipated 48% Countryspecific Good Distribution Practices 6% Other 7% Clinical trial logistics in emerging markets Serialization 23% 16% Controlled room temperature requirements Managing the logistics regulations in far-flung parts of the world is the chief regulatory headache anticipated by healthcare respondents, followed by the advent of serialization procedures. Controlled room temperature (CRT) requirements and clinical trial logistics in emerging markets do not seem to pose as much of an immediate concern. When it comes to the method for managing logistics, more than a third of respondents favor a top-down centralized approach. A much smaller percentage handle logistics at the plant or distribution-center level, and another third combine the two in some fashion. 7 Decentralized, individual site management Centralized vs de-centralized logistics 14% 32% Hybrid of Centralized and Outsourced 36% Centralized, staffed by in-house logistics experts 18% Outsource to third-party logistics providers Healthcare Logistics Outsourcing Survey 2013 Page 5
6 8 Biggest concerns in supply chain integrity Damage 45% 38% 17% Time excursions 40% 44% 16% Temperature excursions 39% 35% 26% Trapping freight 38% 45% 17% Counterfeiting 29% 31% 40% Theft 25% 30% 45% 15% Diversion/Gray market 39% 46% Level of Concern: High Medium Lower Freight damage, as well as time and temperature excursions along the way, are of the highest concern among respondents. Diversion, theft, and counterfeiting are not quite as bothersome. Healthcare Logistics Outsourcing Survey 2013 Page 6
7 9 Departments involved in logistics decisions Quality 66% Distribution or transportation/logistics 57% Packaging engineering 43% Product development 40% Production planning or materials management 37% Regulatory 36% Procurement 24% Marketing 14% The expertise of many departments at pharmaceutical companies is utilized for temperature-sensitive logistics; not only the expected quality, distribution, and packaging departments but also engineering, product development and production planning. This variety indicates that logistics is becoming a consideration earlier in the development of a drug product, dosage form, and package. While a majority of respondents monitor from their own facilities to the distributor, only a handful monitor to the point of use. And a surprising number of respondents do not perform any temperature monitoring at all. 10 Where supply chain temperature monitoring is applied From manufacturer to primary distributor 52% Distributor to retailer/hospital 15% Last mile (to point of use) 7% None 25% Healthcare Logistics Outsourcing Survey 2013 Page 7
8 11 Temperature-monitoring technologies regularly used Electronic data logging monitor (EDLM) 35% Programmable electronic temperature indicators 32% Chemical cumulative event (Time-temperature indicators) 14% Chemical single event (Chemical threshhold indicators) 11% None 33% Data loggers and PETIs are most in use to perform in-transit temperature monitoring among our respondents. Chemical solutions lag behind. 12 Primary factor in using temperature monitoring technology A number of factors, with seasonal and locational factors uppermost, determine the use of temperature monitoring. Season 44% Location 39% Product value 39% Route 32% Mode 23% Healthcare Logistics Outsourcing Survey 2013 Page 8
9 13 Standards used for qualifying and testing packages Internal test standard 47% ASTM 4169 test standard 27% ISO test standard 20% ISTA test standards 7-E/7D & 3A 19% PDA Technical Report 39 13% Accept packaging vendor s own tests at face value 28% Other 6% Respondents were most likely to use an internal standard for package testing, followed by ASTM, ISO, and ISTA protocols. A surprising number use their vendor s tests at face value. 14 Company type Pharmaceutical manufacturer 24% Biologics/ biopharmaceutical 7% Nutraceutical manufacturer 3% Medical device manufacturer 15% Other manufacturer 10% Pharmaceutical or packaging supplier 25% Wholesaler/ distributor 10% System integrator/ consultant 5% Healthcare Logistics Outsourcing Survey 2013 Page 9
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