Uncharted territory – regulation in emerging markets

Logistics presents one of the biggest headaches when considering how to introduce a product to an emerging market. There are many factors that might affect whether your shipment arrives in a timely manner – poor transportation routes, or lengthy customs and border processes, for example.

The question is how to expand from managing logistics in a limited number of local geographies to managing them in emerging market geographies worldwide in an efficient way. The focus must be on developing an end-to-end integrated system capable of dealing with the regulatory compliance and related global supply chain management complexities in a joined-up, coherent way.

Nearly 5.8 billion people in the world have limited access to quality, affordable healthcare, says Andy Slupecki, general manager for order fulfilment at GE Healthcare: “The world’s developing nations understand that a key force for socioeconomic growth lies in the strength of a country’s healthcare system, and its ability to provide more equitable and affordable healthcare services. We’re seeing an increase in demand across nearly every developing market globally – in large part due to the startling inequities in healthcare spend today: 80% of the world’s healthcare spend is spent on just 20% of the global population.”

But what problems might a company expect to face when trying to take advantage of these emerging markets?

Each developing nation is different, a situation further complicated by each region or country having its own set of specific challenges such as complex and time-consuming customs and border controls, or a politically and socially unstable landscape.

Now consider the IT infrastructure: in developed markets, there will be middle-to-leading IT systems in place, with readily available data on products and processes to draw from. In a developing market, this infrastructure might be lacking or non-existent. Where there is use of IT structures, it is limited, and the quality of IT systems will vary. Data is commonly split across several systems, collected manually – or not at all. Factor in a lack of specialist technology solutions, and management systems, background and benchmark data can be difficult to find, while data collection can be more complicated.

Road, railways and bridges are taken for granted in developed countries; they are well used and well maintained, but the same cannot be said for such infrastructure in developing countries. Railways and roads outside of towns and cities are often of poor quality – where they exist at all – and most routes are unlikely to have been used for commercial purposes. Access to power and water may also be limited and unreliable, with partial power and blackouts often occurring in countries with an underdeveloped infrastructure.

“There is insufficient infrastructure, which is exacerbated by the fact that what does exist is concentrated in urban centres, while 75% of the population lives in rural settings,” states Slupecki. “Emerging markets continue  to expand infrastructure to support healthcare investments and related needs such as reliable power, access to clean water and transportation infrastructure. All are critical to logistics flow for healthcare equipment, but in many rural areas, these are still in development stages,” he adds.

Unforeseen environmental factors and natural-disaster risks such as flooding and mud slides can also affect the reliability of a consignment. Limitations of the current infrastructure can lead to longer-than-expected lead times and a greater variability in shipment cycle times, meaning higher costs to the company. Improvements in the infrastructure will not only aid a logistics programme, but also help the population of the emerging marketplace and contribute towards modernising the entire region and industry.

Slupecki says that complicated financing, customs regulations, and uncertainty around global trade and export-import funding are impacting global healthcare markets. Indeed, transit times can be increased due to border crossing and customs processes: traversing not only international but domestic borders too can often involve lots of administration, and typically takes much longer. Infrastructure constraints, inefficient processes and extensive regulation varying from country to country can also increase transit time. Taxes will also vary, leading to an added cost every time a product enters a new market.

Skills gap

In a developed market, there is a wide variety of skilled workers and management professionals. Companies have a well-established logistics plan, with defined routes to market tailored for each customer. They have widely available providers with a range of capabilities and competitive rates, with specialist logistics providers readily available to develop business in new geographical areas. In developing countries, sales channels – if they exist – are likely to vary dramatically from country to country due to geography, social class and access to infrastructure. Emerging market locations often have low-cost sources of labour and materials, and a poorer availability of skilled employees, management professionals and third-party logistics, especially if a specialist is required. The nature of the emerging market means that the number of logistics service providers with appropriate experience is limited: there simply isn’t the skill or expertise, making it a challenge for global providers to develop new business in these areas.

“There is a dearth of skills in healthcare delivery. Emerging economies have roughly a sixth the healthcare-delivery skills of developed markets,” notes Slupecki. “In fact, some emerging markets, like many sub-Saharan nations, have less than one doctor per 10,000 people compared with more than 25 doctors per 10,000 in the west. Facilities (hospitals, clinics) and trained resources (clinicians, nurses, technicians, healthcare workers) see significant gaps.”

So what does Slupecki advise? GE Healthcare has a global manufacturing strategy with nearly 70 plants worldwide, complemented by global sales, service, product development and support teams.

“GE Healthcare’s model puts order management and logistics closer to the customer through a regional order-operations capability and global order-fulfilment expertise. This localisation, combined with our global expertise in shipping and logistics, and ‘door-to-door’ fulfilment coordination, will help us deliver faster, ‘ship-complete-on-time’ results for our customers,” Slupecki adds.

In order to combat the gap in healthcare distribution, the company established a Sustainable Healthcare Solutions (SHS) business, aiming to serve the 5.8 billion people in the world who currently have little or no access to healthcare, comments Slupecki. It brings together the company’s operations in India, Africa and South-East Asia, as well as its affordable healthcare portfolio, which is designed to bring relevant solutions for better access and quality to underserved populations.

“Making healthcare affordable and accessible to the world will not be possible without the participation and collaboration of the larger ecosystem, which includes NGOs, funding agencies, donors, healthcare providers, governments, start-ups and other companies,” explains Slupecki. “In Africa in particular, we’re seeing governments and private companies now working together to design and implement new, bold, long-term models that combine financing mechanisms with technology, service agreements and training for local healthcare professionals.

“GE Healthcare also invests in educational programmes as a key pillar of the total solution needed to create a sustainable healthcare system. Last year, GE opened a dedicated training institute in Kenya that aims to train 10,000 healthcare professionals by 2020. In Nigeria, we are collaborating with the Kaduna State Government to build more capacity in primary care.”

Slupecki believes this kind of public-private partnership model and risk-sharing will likely continue, helping to increase access to healthcare at many levels in developing and developed markets.

“Improvements in infrastructure and skills will also enable such access,” he predicts. “Technology will continue to advance, in terms of product technology and digital, and we’ll see new innovations designed specifically for developing markets. Governments will continue to seek solutions providers who can look holistically at the long-term development needs of a market and help deliver on those needs.”