With more than half of the world’s population living in Asia and the Pacific, it is difficult to overstate the region’s importance to the healthcare industry.
According to the United Nations Economic and Social Commission for Asia and the Pacific, the Asia-Pacific population grew 0.9% to 4.45 billion in 2016. This growth brings with it an increasing demand for healthcare services and products, which in turn requires the support of the logistics industry.
In the eyes of FedEx, the demand for healthcare is being driven by ageing populations, a rising middle class and technological advancements.
“As economies expand, living conditions improve and life expectancy increases, so too does the demand for healthcare, especially elder care,” says Malcolm Sullivan, vice president of marketing solutions and customer experience design in Asia Pacific at FedEx Express. “In Asia Pacific, the elderly population aged 65 or above is expected to increase to 11% by 2018. In East Asia and the Pacific, the older population will grow by about 22% every five years between 2015 and 2034.”
Imports of high-value goods such as healthcare products and advanced medical equipment are made possible by the higher incomes of a growing middle class.
“Asia Pacific alone is expected to account for two-thirds or 3.3 billion people of the global middle class by 2030, up from just under one-third in 2009,” Sullivan says. “The World Bank forecasts that the expenditure of the middle-class population in the Asia-Pacific region will increase by almost six-fold (571%) to US$32.9 billion in 2030 as compared to 2009.”
In terms of technology, new developments are constantly unlocking opportunities in all aspects of the healthcare world. As an example, Sullivan says that Asia Pacific ranks as the fastest-growing market for wearable medical devices, with a compound annual growth rate of 23.8% in the five years from 2015-2020.
“The net effect of these changes is that the regional healthcare industry is becoming more sophisticated, and the healthcare supply chain that supports it now has to fulfil new and different requirements,” he says. “It’s no longer just about shipping products from A to B. Increasingly specialized needs characterize today’s healthcare shipments, with no ‘one size fits all’ solution. For instance, the pharmaceutical or clinical trials subsector has more temperature-controlled and specialized packaging requirements; medical devices are characterized by complex, integrated logistics; while consumables usually require freight forwarding.”
Regardless of subsector though, FedEx sees regulatory requirements and supply chain optimization as two major challenges that apply across the board.
“Change is the new normal, and that is no exception to healthcare regulation,” Sullivan says. “As the global healthcare market opens up, the need for transparency increases, leading to an increasingly stringent and demanding regulatory environment.”
Optimizing the supply chain helps reduce costs, which Sullivan says is key to sustaining growth in healthcare, where supply chain expenses represent nearly 25% of pharma costs and more than 40% of medical device costs.
“Even minor efficiency gains from shortened manufacturing lead times and slashed inventory levels could free up billions of dollars,” he says. “Healthcare supply chains lag behind other industries, such as fast-moving consumer goods, in terms of performance with longer manufacturing lead times, higher product obsolescence and larger inventories. Adopting supply chain advances well established in other industries can potentially help the healthcare sector improve costs by US$105 billion and margins by US$130 billion.”
Having an agile supply chain means that a company is more responsive to demand shifts. For example, Sullivan says that the lead time for a typical pharmaceutical manufacturer for replenishment from plants to distribution centres can be up to 75 days, while companies in other industries such as fast-moving consumer goods take less than half of that time, allowing much faster market supply and avoiding critical stockouts.
Optimized supply chains are especially important in emerging markets, where delivering affordable healthcare to millions more people can provide companies with a boost in revenues.
“Pharmaceuticals in emerging markets are expected to account for US$190 billion or 76% of sales growth between 2015 and 2020,” says Sullivan. “Much of the growth is likely to be driven by the BRIC-MT countries – Brazil, Russia, India, China, Mexico and Turkey.”
According to a research study commissioned by FedEx, sales to emerging countries are growing at 12% to 18% per year, as opposed to 7% in developed countries. China’s pharmaceutical market is the world’s second-largest and is valued at over US$100 billion.
The rapidly growing Asia-Pacific economies have resulted in infrastructural deficiencies across much of the region, but Sullivan says there have been encouraging signs that many countries are stepping up to resolve these constraints.
“For example, of the 340 new airport projects that were started globally in 2015, 178 are in Asia Pacific,” he says. “China provides another case in point. During the last three years of the country’s 12th Five-Year Plan, China invested more than US$31 billion in aviation-related infrastructure, including 16 new airports.”
FedEx itself is expanding its cold chain facility at Shanghai’s Pudong International Airport in anticipation of the increased volumes of healthcare and pharmaceutical traffic in the country as well as around the region. The facility is scheduled to be completed later this year and will have designated onsite customs clearance.
But bringing about changes and improvements to the supply chain that would benefit the healthcare industry as a whole isn’t something that FedEx can achieve on its own.
“This would require the support of the national governments,” says Sullivan. “So our approach, as a healthcare logistics solutions provider, is to focus on what we can manipulate, such as offering our customers the right portfolio of solutions, the operational strength and our global network.”
By Jeffrey Lee
Asia Cargo News | Hong Kong
