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Healthcare Restructuring, Done Right

Eliminate the pain points in healthcare acquisitions with these survival tips.

Peter Bromley | UPS

Second in a two-part series. Click here for part one.

In this post, we will outline some pragmatic, actionable strategies we’ve gleaned in our experience working in this sector.

Tactical Solutions for a Smooth Integration

Click here to download whitepaper. Over the years, we’ve observed several easily adoptable practices that greatly enhance the chance of a smooth transition for acquisitions and mergers.

The first is to create an integration team tasked with coordinating the transition across all key areas of the business.

Here, a weekly integration meeting with reviews tied to the integration task lists is key. These reviews provide a reliable structure for tracking progress and performance, confirming ownership of various tasks and reviewing documentation procedures.

Given the complexity of the supply chains in the healthcare sectors, these rituals can play a vital role. For companies in the business of manufacturing, transporting and warehousing hazardous and perishable biologics or reagents, they’re paramount.

The second practice we recommend is regular mapping sessions. These provide a simple, effective way of sharing information and best practices, and maintaining communication required to anticipate potential pain points.

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The obvious benefits of partnering with a 3PL are time and efficiency.

Ultimately, and as we noted at the outset, these all fall within the realm of good communication – and they make a measurable difference. Corporations with best-in-class freight and logistics competencies grow 7 to 26 percent above the industry average. [1] How people share information and collaborate is reflected in the value chain – and the bottom line.

Building agility into a new supply chain

One of the unintended benefits of upheaval from a merger or acquisition is the opportunity it provides to build agility into your new supply chain.

Screen Shot 2016-05-19 at 3.44.51 PMFor healthcare companies in particular, a responsive supply chain enhances competitiveness – whether by allowing a company to quickly adapt to regulatory changes or to capitalize on new opportunities like the direct-to-patient market.

It may sound self-serving, but the best way for many companies to build agility into their supply chain is by partnering with an established third-party logistics provider (3PL). The rewards can be considerable.

The obvious benefits of partnering with a 3PL are time and efficiency. A global logistics provider can deliver immediate technological and logistics solutions, which would take most companies six to 12 months to implement.

Logistics companies like UPS can now deliver gold-standard, monitored cold-chain packaging and shipping. For companies in the midst of a major integration, 3PLs can deliver substantial gains in agility and reliability without the related capital expenditure.

For in vitro diagnostics companies in particular, this can make a lot of sense. Devices are becoming more complicated and are often subject to regulation that varies from territory to territory.

Reagents and biologics can be hazardous, requiring additional infrastructure and procedures. And biologics typically have much higher SKUs – putting greater burdens on a company whose core competencies lie in research, development and manufacturing – not supply chain optimization.

As a recent McKinsey & Company study noted, “Products, markets, regulators and patients are making new demands on pharmaceutical and medical device supply chains, from the factory floor to the bedside, and these demands are rising at an accelerating rate.” [2] A global 3PL with the right capabilities can often help close this gap.

The second – and unintended – benefit of embracing a 3PL is that it forces the company to fully document and assess their own supply chain – often for the first time. In the words of Lord Kelvin, ‘You cannot improve what you do not measure.”

Capitalizing on emerging trends

Screen Shot 2016-05-19 at 3.45.06 PMThe ability to embrace change is the difference between surviving and thriving – and nowhere more so than biopharma and IVD.

When we talk about emerging trends, there are two categories to consider. The first are advances in supply chain technology and optimization. The second are health sector trends that place new demands on supply chains. Both merit a closer look when companies undertake a wholesale review of their supply chain.

With respect to advances in supply chain technology, a new generation of GPS and temperature-monitoring systems now makes it possible to provide end-to-end cold-chain capabilities.

These systems greatly reduce the risk of temperature excursions. Further, they have the capacity for security monitoring – a growing concern when working in many regions.

As significantly, these technologies are making it possible for the shipper to intervene during transit – allowing companies to re-route packages and provide transit data to customers. This becomes particularly relevant as direct-to-patient services continue to flourish.

Another trend in supply chain optimization that could benefit IVD companies in particular is a shift towards more centralized supply chains. By relying on postponement and custom labeling at centralized hubs, healthcare companies are better positioned to respond to product changes, and to offer direct-to-market shipping while retaining smaller inventories and paying less in warehousing costs.

Secondly, with respect to emerging trends in the healthcare sector, we’re seeing a move towards cross-pollination of industry expertise in the logistics sector. More and more, logistics experts from fast-moving consumer goods, tech and the automotive industry are migrating into other sectors such as healthcare.

It’s a trend we’ve been quick to capitalize on at UPS. The influx of non-industry expertise has brought with it a new level of critical analysis and the introduction of efficiencies already commonplace in other industries. It’s a migration that many companies in the healthcare sectors can benefit from as well – particularly those already in the midst of a structural reorganization brought about by a merger or acquisition.

Restructuring as a catalyst for change

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A merger, acquisition or divestiture can be an opportunity to cast a fresh eye on a company’s supply chain.

Whether it’s a merger, acquisition or divestiture, a major corporate restructuring is a disruptive and perilous undertaking. For evidence, look no further than this bleak Harvard Business Review statistic: About 70 to 90 percent of mergers are unsuccessful. That said, it needn’t be a roll of the dice.

We’ve discussed several practical processes and protocols that can greatly influence the outcome of a transition. They can ease and accelerate the integration process, eliminate pain points and enable better knowledge retention.

More broadly, they can lead to greater agility in the supply chain and significantly bolster competitiveness and the bottom line.

Done right, a restructuring can be a catalyst for positive change.

In the rapidly evolving healthcare sector, an M&A or divestiture can compel companies to critically assess and overhaul legacy systems, embrace new technologies and efficiencies and adopt practices and partners that are better suited to their next incarnation.

The pace of change is fierce. From automated instruments and point-of-care diagnostic solutions to the growing demand in emerging markets like China and India, there’s more pressure to produce faster, more precise and more affordable products for a breadth of diseases and conditions.

A merger, acquisition or divestiture can be an opportunity to cast a fresh eye on a company’s supply chain while producing transformative change that bolsters the value chain and long-term success. goldbrown2

[1] UPS Presentation: Supply chain optimisation and network design. UPS Mark Jackson 2014

[2] White Paper: Building New Strengths in the Healthcare Supply Chain. McKinsey & Company 2013

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Peter Bromley is Director of Healthcare Logistics, UPS Europe

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