UPS eyes China's medical products

United Parcel Service Inc, the world's largest package delivery company by revenue, is betting on China's growing demand for healthcare products after opening a specialist facility in Hangzhou, capital of Zhejiang province, to handle shipments of medical products.

In 2011, China overtook Germany to become the third-largest pharmaceutical market, with an estimated value of $64 billion ($10.4 billion), and it is expected to overtake Japan to become the second-largest market in 2015.

China was recently voted the market with the most expansion opportunities by healthcare industry executives surveyed for UPS's fifth annual Pain in the Supply Chain study, a global survey of issues and opportunities in the industry.

The new Hangzhou facility consists of 22,000 square meters of storage space and is designed to meet the demands of specific storage of medical devices, biologicals and pharmaceuticals, and distribution needs of pharmaceutical companies, said Jim Barber, UPS' international president.

MSD - sometimes known as Merck Sharp and Dohme - the world's second-largest drugmaker, is the first partner company in this facility.

The facility is designed to maintain product safety and integrity, added Barber, offering what he called a seamless, global operation for healthcare companies looking to expand into, transport within, and export from China.

Since 2002, the US company has invested $1 billion to increase market share in China.

"China represents one of the most important markets for UPS and our customers," said Barber

"To capture the growth in consumer demand for healthcare, as well as catching the opportunities from China's e-commerce boom, the online demand for healthcare products will surely surge over the next five years, and we believe that logistics is critical to the success of e-commerce in this market.

In comparison with the US or Europe, China is a very fragmented market and its State-owned enterprises play a big role in this industry, Barber added.

"However, the market is big and the nation's healthcare logistics distribution model will change from internal operation to outsourcing services," he said.

With the addition of the facility, UPS aims to introduce a more efficient business model to the market, designed to reduce costs in the supply chain and eliminate the need for healthcare companies to build and invest in their own distribution warehouses.

"With many healthcare companies demanding rigorous supply chain solutions in China, we are seeing increasing opportunities," added Richard Loi, UPS president in China.

"The Hangzhou facility, along with our existing Shanghai medical device facility, will speed products to key locations and strengthen our service network within the country."

The opening of the facility is also part of a wider global healthcare expansion strategy by the company.

UPS opened its first Asia healthcare facility in Singapore in 2011, and has followed that with the opening of three additional facilities in Hangzhou, Shanghai and in Sydney, Australia.

This year, UPS expanded five existing North American facilities, and plans to buy a European healthcare company.

Its global healthcare network is made up of 41 dedicated facilities and 683 aircraft worldwide.

UPS has so far been granted 19 licenses by the State Post Bureau of China to operate domestic courier services in cities such as Shenzhen, Guangzhou and Shanghai.

Barber said it is in the process of applying for more inner-city express service license from the Chinese government.

"Our healthcare logistics service will be connected with inner-city express services in the future along with a rise of our domestic capability in China."