A new analysis by Frost & Sullivan suggests companies in the health care industry can gain a competitive advantage by placing a greater emphasis on their supply chains.
The report, commissioned by FedEx, said health care companies generally utilize research and development, technology and marketing to advance their businesses while neglecting a more comprehensive plan to serve their customers. Leading companies, by contrast, "have begun to move beyond their traditional focus to position themselves as solution providers."
Of the 39 executives polled by Frost & Sullivan during a FedEx health care conference last fall in Miami, 78 percent described an effective supply chain as extremely important to their ability to compete over the next decade.
The same margin deemed supply chains extremely important to sustaining customer loyalty, while larger majorities recognized their importance in meeting future profit and revenue goals.
“When you can’t show product differentiation you look at cost, efficiency and availability,” said Paul Higday of medical supply distributor Owens & Minor.
In addition, the Frost & Sullivan report said improving supply chains could help companies weather a slew of changes in the health care sector.
Pressure to decrease costs amid rising demand affects companies both in the U.S. and abroad; the U.S., in particular, experienced declining reimbursement rates in the aftermath of the Affordable Care Act.
According to the survey, 61 percent of executives said supply chains were extremely important in meeting price pressure. The report highlighted Michigan-based medical technology company Stryker, which established a central distribution center and overhauled its shipping schedule.
In addition, health care businesses face pressure from increasing regulatory demands and from recent consolidation among hospitals and other providers.
The report added that supply chains could help companies navigate differences between developed and developing nations. While the medical technology market grows at an average annual rate of 7 percent in the U.S., Japan and Western Europe, the report said that growth rates in China, India, Brazil, Mexico and Russia can range between 12 and 18 percent.