According to a recent Wall Street Journal article, UPS has
big plans for the China healthcare market. Indeed, according to Jim Barber,
President of UPS International, UPS is interested in acquisitions to broaden
its healthcare supply chain within the country. In particular, the company
appears to be in search of domestic transportation companies.
While much of the focus has been on the export market, the domestic
market holds great opportunities for logistics providers such as UPS. In 2011,
China’s government adopted a national strategy to expand and improve the
country’s healthcare system. With a population of over 1.3 billion, the
potential is great and opportunities abound for all involved in the healthcare
industry.
However, according to Barber, one of the biggest challenges
in China’s healthcare sector is delivery. True, infrastructure connecting
cities, towns and villages is problematic. The unevenness of the transportation
infrastructure for example has resulted in regionalized networks. Because of
this Barber noted that UPS is considering multiple acquisitions of domestic
competitors that have regional advantages.
While the opportunities are great, the competition is strong
and fragmented. Domestic express providers such as SF Express and STO Express
have been working towards expanding their reach across China by acquiring
regional providers.
Meanwhile, pharmaceutical manufacturers/distributors such
as Sinopharm are also expanding their geographic reach. Sinopharm has built out
both its national distribution and retail network by focusing on acquiring
regional distribution leaders, expanding into second and third tier cities and
into traditional retail channels, as well as emerging channels such as
e-commerce. Since 2009, the company has made over 60 acquisitions.
Sinopharm manages its logistics network through its
subsidiary, Sinopharm Logistics, which manages eight major regional hubs in Shanghai,
Beijing, Guangzhou, Shenyang, Xi’an, Xinjiang, Wuhan and Chengdu. Sinopharm Logistics provides such services as
warehousing, distribution and delivery of medical devices, pharmaceuticals and
clinical trials. It has its own fleet of over 300 vehicles.While Sinopharm is one of the largest domestic manufacturers/distributors of healthcare solutions, its market share remains relatively small in the fragmented market. In fact the three largest Chinese distributors, including Sinopharm, comprise less than 30% of the domestic Chinese market.
The domestic healthcare logistics market is even more fragmented with no clear leader. However, Sinopharm's logistics subsidiary is perhaps one of the more established and one with a broader reach than most other providers.
A challenging strategy for UPS to undertake for sure but one
that could provide many benefits if successful. The company has invested in specialized
healthcare distribution centers in China and has also received government
approval from the Chinese government to provide domestic express transportation
in several cities. A good start as it sets its eyes towards inland China and
plans its national healthcare logistics network in China.