Large pharmas turning to 3PL to cut costs

16-Jun-2009 - Last updated on 17-Jun-2009 at 10:20 GMT

Related tags Supply chain Supply chain management

Large pharma companies will increase the level of supply chain activities they outsource in the next few years but smaller businesses are predicted to keep them in-house, according to a report.

The survey, which was conducted by Harris Interactive on behalf of UPS, found that 43 per cent of companies with revenues of more than $1bn a year are planning on increasingly outsourcing supply chain activities.

Bill Hook, UPS vice president for global strategy, healthcare logistics, said: "We are seeing a real shift in the marketplace in terms of large healthcare companies increasingly embracing outsourcing of supply chain functions ranging from the distribution of drugs and medical devices to customer service and support functions.”

Hook went on to explain how companies are outsourcing to third party logistics (3PL) providers in an attempt to increase efficiency in response to financial pressures. If successful this frees up money for use in R&D, marketing and acquisitions.

This contrasts with the results from the small to medium sized businesses that were surveyed, which showed that of those that currently use in-house supply chain teams three per cent are planning on outsourcing in the next two years.

Focus on regulations

Many respondents regarded regulatory changes as the most pressing business concern, with larger companies being particularly worried about the impact on their operations.

Hook commented: "There are many market factors driving regulatory concerns, including a heightened focus around security and product safety, increasing global border controls and more products requiring special handling coming into the market."

The report recommends that companies take this uncertainty into account when designing their supply chains to ensure they can adapt to changes.

Struggling to manage costs

Managing costs was the most important supply chain specific issue for the majority of respondents but companies are struggling to do so, with fewer than 50 per cent of both small and large companies reporting successes.

In last year’s survey managing costs also topped respondents list of concerns and the worsening of the economy is likely to have increased pressure in this area.