Security still front and centre among supply chain concerns

For the second year running, product security has ranked just behind regulatory compliance among the top concerns for supply chain executives in the life sciences sector.

This year's Pain in the (Supply) Chain survey by UPS found that product security issues such as counterfeiting, diversion and theft were cited as a top challenge by 46 per cent of survey respondents. For the third consecutive year, regulatory compliance is the top supply chain pain point, cited by 60 per cent of respondents

Among those who cited product security as the top consideration, 50 per cent said the presence of parallel trade was the main challenge, closely followed by counterfeit sophistication growing faster than countermeasures at 48 per cent.

Poor supply chain visibility - particularly too many supply-chain handoffs - came third at 40 per cent, according to Dan Gagnon, UPS' healthcare marketing director for the Europe region,  who told SecuringIndustry.com that more than a third of respondents cited inadequate law enforcement as a factor.

There are a lot of great technologies that can be used to protect products in the supply chain, but survey respondents questioned the ability of local or regional authorities to mobilise law enforcement once a shipment has been identified as stolen, he added.

Security strategies

It was quite illuminating that the most common strategy deployed to tackle product counterfeiting, diversion and theft was simply an investment in shipment insurance - clearly a passive strategy but cited by 78 per cent of respondents - while greater investment in technologies such as bar coding and serialisation technology came second at 73 per cent.

Two-thirds of respondents said they had invested in enhanced in-transit monitoring - to proactively monitor and intervene if shipments went astray - with cooperation with law enforcement (60 per cent), visible authentication or security labels such as holograms (48 per cent) and covert/forensic security features (33 per cent) rounding out the main list.  13 per cent of respondents had no strategy in place at all.

Gagnon noted that the picture above may not be wholly accurate in terms of adoption of technologies, for example, as some of those decisions may be taken by people in the organisation other than the supply chain professionals polled in this survey.

"Product security has always been a big concern in global logistics but in a recession theft and other crime starts to pick up," he said. "Criminals will develop new ways to steal and otherwise get their hands on products, and to overcome measures put in place to counter that activity - it's a constant battle."

UPS believes that a multi-tiered approach to supply chain security is the best strategy, including investing in people and training, making sure your organisation is connected to the right enforcement agencies, developing a broad network to share information and expertise in tackling security threats and having the right infrastructure at facilities. Overlaying that is an investment in technology to help facilitate those other elements, said Gagnon.

On the latter issue, the large number of initiatives ongoing around the world in areas such as medicines traceability and serialisation is leaving companies confused regarding the best way to proceed.

"There is still a lot of rationalisation happening, with companies trying to establish what they need to do - in their part of the supply chain - to meet those evolving commitments," said Gagnon.

"To some degree - and depending on the international country or region involved - there are companies which are still unsure which way to go, and are waiting for further clarifications from industry or regulatory bodies."

That also ties in with the most cited challenge in the survey - regulatory compliance - which when dissected  also revealed the depth of confusion among supply chain executives.

Three quarters of respondents who highlighted this issue said that the legislative outlook was "murky, unstable or changing too quickly", which was closely followed by a belief that "lack of clarity and consistency in the interpretation and timing of regulation is causing delays".

Regulatory uncertainty was particularly cited by European respondents, which is an unsurprising finding given the sweeping changes in the last few years.

Chief among these is the Falsified Medicines Directive - and the Delegated Acts on issues such as safety features which are in the pipeline - but the publication by the European Commission (EC) of new Good Distribution Practice (GDP) guidelines last year, which have introduced quality risk management systems to set out responsibilities, processes and risk management principles, along with the stricter process on record-keeping and communication, are also exercising the minds of supply chain personnel.

With regards to GDP for example individual countries are coming out with a slightly different take on what is required, creating a "grey area" for companies trying to maintain compliance, said Gagnon.

One consequence of this - and a change from the previous year's survey - is that the first reaction of manufacturers when faced with regulatory uncertainty is to boost regulatory staffing levels and expertise, rather than relying on the current headcount. Staffing increases are also being driven by a push into emerging markets, he said.

Looking beyond the product security elements of the survey, UPS also identified a number of other interesting trends, including:

• 78 per cent cited logistics and distribution partnerships as a top strategy to manage supply chain costs;
• 65 per cent use logistics and distribution partnerships to successfully access global markets;
• 61 per cent use collaboration, including vested logistics and distribution partnerships, to successfully embrace new distribution and go-to-market channels, while 23 per cent use mergers and acquisitions to do so;
• 59 per cent are working with a third-party logistics (3PL) provider as a top strategy to increase efficiencies and improve competitiveness; and
• Over the next three to five years, 80 per cent of respondents say they will invest in new technologies to increase efficiencies and competitiveness;
• 70 per cent or more of those surveyed both years have indicated that they plan to increase their usage of new distribution channels;
• Globally, 21 per cent of survey respondents cite the shift to home healthcare as a key trend driving business and supply chain changes with 30 per cent of products will support the home healthcare channel in the next seven to 10 years; and
• Looking ahead, 78 per cent will expand to emerging markets over the next three to five years.