June 13, 2019
By Lisa Baertlein
LOS ANGELES (Reuters) – Deutsche Post DHL Group on Thursday said it will spend $150 million this year to expand its U.S. healthcare distribution network capacity by roughly 40 percent.
The investment from DHL, the healthcare logistics leader with worldwide annual medical-related revenue of more than 3 billion euros ($3.4 billion), comes as rivals United Parcel Service Inc and FedEx Corp also eye that sector for growth.
DHL’s Supply Chain unit will add or expand nine Food and Drug Administration-compliant distribution sites for pharmaceutical, biotech and medical device companies in Indiana, North Carolina, Tennessee, Pennsylvania, California and Virginia – bringing the total of such U.S. facilities to 30.
Healthcare is the fastest-growing sector for DHL’s North American Supply Chain unit that counts Zimmer Biomet Holdings and Avanos Medical Inc among its U.S. customers.
It stores products in temperature-controlled facilities for healthcare customers, who send orders to the site to be packed and shipped to wholesalers, hospitals and doctors’ offices.
Outsourcing those services helps companies increase reliability and reduce costs that can help slow ballooning U.S. healthcare costs, experts said.
“This market is changing pretty dramatically,” Scott Cubbler, president of Life Sciences & Healthcare at DHL Supply Chain, said of the U.S. healthcare industry that is navigating consolidation, changing regulations and cost pressures.
U.S. car makers and other manufacturers have been squeezing cost and waste from supply chains for years, but “healthcare is relatively late” to such efforts, said Steven Melnyk, professor of supply chain management at Michigan State University’s Broad College of Business.
DHL’s investment also covers technology that reduces labor and inventory costs – including robots that assist with “picking” products; glasses that guide warehouse workers to the location of particular items; and computer “dashboards” that allow customers to track goods.
Parcel delivery companies like DHL, UPS and FedEx have spent years building and acquiring the expertise and infrastructure to handle heavily regulated, high-value and sensitive products like cancer drugs and vaccines.
That gives them a leg up over would-be rivals like Amazon.com Inc, which is building its own logistics network and inching into the healthcare business.
(Reporting by Lisa Baertlein, Editing by Rosalba O’Brien)