Nearshoring: The future of the pharmaceutical and healthcare sector

Eastern European nations like the Czech Republic can be good options for nearshoring.

Move over offshoring – pharmaceutical and healthcare companies are looking to reap the benefits of outsourcing closer to home, writes Toby Hay.

At FedEx, we’ve observed this rising trend of nearshoring among the healthcare and pharmaceutical sector with more than 70 per cent of our healthcare customers turning to nearby countries. Whether it’s the Czech Republic or Poland, nearshoring helps cut costs while maintaining greater levels of control and visibility in comparison to offshoring.

The healthcare and pharmaceutical industry is devoting significant resources to research and development (R&D) and the global market for medicines is forecast to grow to £770 billion this year. To build on this, companies across the sector are evolving their business models and are now looking at nearshoring as an efficient method to continue upward growth.

By outsourcing business processes like information technology and manufacturing, with additional benefits of clear communication and cultural alignment, nearshoring offers a host of opportunities for the sector to help achieve growth. While offshoring – long-distance outsourcing – was the trending model a few years ago, advances in technology are removing the need for hiring large teams of workers in relatively remote areas.

In addition, generics are dominating China and India, meaning big pharma companies are reluctant to be based in the same regions as their competitors. These countries also have difficult market conditions and challenges with government regulations.

Reducing risk and increasing control

Depending on the country, nearshoring provides lower wages, cheaper travel expenses and economic transportation with fewer restrictions. This allows money to be reallocated to R&D and the drug pipeline – the primary factor of growth and the lifeblood of pharma companies.

Another benefit is geographic proximity. Being based closer to home provides pharmaceutical and healthcare companies with increased control and clearer channels of communication throughout the supply chain, making it easier to manage overseas operations. With clarity and insight into high-value shipments – an important element in complex global environments – businesses want greater visibility, flexibility and reach.

To support companies in addressing this need, FedEx has developed SenseAware – a solution providing real-time access to a shipment’s vital statistics while in transit. This allows customers to share information continually across supply chain partners.

These factors, as well as similar time zones, can contribute to a more agile supply chain, increasing a business’s responsiveness to changing consumer and corporate environments and its ability to adapt to continued innovation in the sector.

With R&D integral to the development of healthcare and pharmaceutical businesses, security of intellectual property is paramount. Nearshoring can help smooth out the supply chain and helps to remove the number of organisations involved, ensuring the process to patent your product and getting it to market is faster and more controlled, giving peace of mind that the latest developments are better protected.

Opportunities in Eastern Europe

Eastern European countries are likely to benefit the most from western European countries nearshoring, with Bulgaria, Poland and Lithuania ranking among the top ten destinations.

Offering a wealth of opportunities for outsourcing, including tax incentives, attractive cost structures and stable economies, these countries offer quality of service, high performance and reliability. Eastern Europe is particularly desirable in the life sciences sector as time differences to the UK are limited, the culture is similar to Western Europe, travel can be fast and inexpensive and land logistics are relatively uncomplicated and reliable.

In addition, Eastern Europe is attractive when developing respected and reliable clinical trials data, due to it being home to naïve populations – populations that haven’t been exposed to large numbers of drugs trials. Looking closer to the United Kingdom, the Czech Republic offers an attractive offering for clinical trials data with the added benefits that within the European Union (EU), transportation of goods are in free circulation and not liable for duty.

Some Eastern European countries, such as Poland, also benefit from being members of the EU. These countries have to adhere to the strict quality and compliance regulations set out by the governing body which drive sector innovations – something that is often a concern for pharmaceutical businesses working with countries further afield like India and China. The complexity of the sector’s supply chain means access across the EU allows businesses to trade easily between member states, simplifying complex documentation and reducing cost.

The path ahead

Nearshoring addresses the supply chain from start to finish. For healthcare and pharmaceutical businesses, investment in R&D is essential to stay ahead of the sector and nearshoring provides clear opportunities to help cut costs for reallocation into R&D. Reaping benefits closer to home can help you grow your business in an efficient way leading the way in innovative business processes.

Toby Hay is worldwide sales manager at FedEx Healthcare Solutions.

Photo © mendhak (CC BY-SA 2.0). Cropped.