Frost & Sullivan releases the 'Blue Book on the Current Situation and Development Trends of the Healthcare Supply Chain (SPD) Industry' (with full text available upon request)

The In-hospital Logistics Management System (SPD) is an abbreviation for Supply, Processing, and Distribution. It represents a modern hospital's in-hospital supply chain management model. Under the guidance of the concept of supply chain integration, SPD utilizes supply chain management theory and information technology to optimize services by comprehensively considering the characteristics, operational rules, and interconnections of medical supplies in various management stages of the hospital.

The SPD management model consists of an information-based software platform, intelligent hardware devices, and a professional service team. Unlike management software such as Hospital Information Systems (HIS) and Hospital Resource Planning (HRP), the SPD management model is a management reform model implemented through platform construction.

Source: Literature search, Frost & Sullivan analysis

There is an increasing global focus on the fiscal sustainability of healthcare systems. For healthcare institutions' supply chains, it is not only necessary to consider economic benefits but also bear the lofty mission of providing public health services and safeguarding human health. The pursuit of precision, efficiency, and digital intelligence in healthcare institutions' supply chains is not only a demand at the operational management level but also crucial for patient safety and improving medical quality. The SPD supply chain management model can help control healthcare costs and enhance the quality of medical services. It was first proposed in the United States and has been gradually developed and improved in Japan over the past few decades. With its widespread application in Chinese local hospitals, SPD has made significant progress in theoretical research applications and information technology integration.

The current situation in China's hospital traditional medical supply chain management, characterized by high costs, low efficiency, and inadequate safety management standards, urgently needs to change to adapt to the new positioning as a cost center. The SPD management model can not only solve the pain points of traditional medical supply chain operations but also serve upstream and downstream industries, empowering various sectors such as market and finance in an all-round manner to achieve a win-win situation for all parties.

Source: Literature search, Frost & Sullivan analysis

The increase in life expectancy and aging population in our country have driven up healthcare demand, leading to higher expectations for healthcare services. The innovation and development of clinical diagnosis and treatment technologies have provided a key boost to healthcare. A variety of medical supplies are emerging in an endless stream. With continuous innovation and development in the medical industry, it will further drive the development of the SPD (Specialized Pharmacy Distribution) industry.

Source: Analysis by Frost & Sullivan

In recent years, the demand for medical supplies within hospitals has been growing, and their proportion in hospital fixed assets has been steadily increasing. The original extensive and empirical traditional medical supply chain management model can no longer meet current needs. There are widespread issues in hospitals across China such as generally low levels of informatization and relatively weak logistics management capabilities. There is an urgent need to transform towards digital intelligence and refined management.

The Chinese government has formulated a series of far-reaching policies to continuously deepen the reform of the healthcare system. The SPD industry has adapted to the national policy orientation, showing a high degree of compatibility at multiple levels and having broad development prospects. In addition, a series of measures such as the introduction of local support policies, the establishment of industry associations, and the setting of standards at all levels have not only brought new development opportunities to the SPD industry but have also greatly improved the overall level and competitiveness of the industry.

Digital intelligence technology is a key support for promoting the application upgrade of medical supply chain management. In recent years, relying on the development of information software technology and intelligent hardware devices, great breakthroughs have been made in artificial intelligence, big data models, and Internet of Things technology. The SPD industry has truly achieved synchronous integrated management of logistics, information flow, and capital flow. It has advantages such as real-time dynamic supervision, traceability tracking, closed-loop circulation inside and outside the hospital, and intelligent decision-making, and is one of the important technological innovations in China's medical industry.

SPD conceptOriginally developed in the United States, it began to develop rapidly after being introduced to Japan and was applied in the medical field. After entering China, it also witnessed a new wave of development. Globally, the SPD model has become an important method for managing medical supplies.

Source: Literature search, Frost & Sullivan analysis

The Japan Medical Supplies Logistics Management Association (abbreviated as Japan SPD Association) points out that for a long time, hospital management has typically focused too much on clinical aspects centered around the diagnosis and treatment departments, while neglecting operational management methods, cost management, efficiency, and profitability. The implementation and practice of the SPD concept have taken shape in Japan, playing an important role in innovating the Japanese hospital management paradigm and contributing significantly to the improvement of Japan's healthcare system.

According to the research results of the Independent Administrative Entity Welfare and Medical Service Agency (WAM), in 2020 (the second year of the Ryosei era), 54.5% of hospitals had introduced SPD (Supply Chain and Distribution Management System). The operation of SPD covers a wide range of tasks and management responsibilities are numerous. As a supporting service for life-related medical facilities, various SPD service models have their own characteristics.

Source: Literature search, Frost & Sullivan analysis

The representative companies in Japan that carry out SPD business mainly include SPD specialty companies, general trading companies, and medical device companies. They have built a win-win relationship through long-term cooperation with hospitals to achieve common development.

Source: Public information, analysis by Frost & Sullivan

Globally, SPD has a history of several decades from its conceptual inception to gradual implementation and development. In China, the concept of SPD services began to be introduced into the country in 2009. Although the development of SPD services in China is still relatively new, driven by healthcare reform policies, market demand, and rapid technological advancements in related fields, the industry in China is thriving and has rapidly risen to an international leading level. In the future, it is expected to further internationalize and reach more countries.

SPD projects have a high penetration rate in regions with lenient medical insurance policies and favorable commercial environments, mainly distributed in the eastern coastal areas. Among them, the SPD model in the Yangtze River Delta region was introduced earlier and has maintained rapid growth driven by favorable policy support and hospital demand. It has continuously broken through and innovated in development, with a high market concentration and a preference for third-party service models; the implementation of SPD projects in Shandong Province was introduced earlier and has developed rapidly in recent years; Guangdong Province has strict supervision over SPD projects, with top 100 hospitals more accepting third-party service models; SPD projects in Hunan Province are carried out relatively evenly across all levels of hospitals and have gradually extended to primary hospitals.

Source: Literature search, Frost & Sullivan analysis

China's SPD service models are diverse, with third-party service models having multiple advantages such as professionalism, collaboration, and compliance. In the future, they are expected to become the mainstream model of SPD services. In recent years, the market share of SPD companies using third-party service models has been steadily increasing, with Anhui Guoyi Technology ranking among the top in terms of hospital traffic in the first half of 2024.

Source: Public information, analysis by Frost & Sullivan

The complete industrial chain of the SPD industry mainly includes: upstream pharmaceutical and medical device manufacturers, midstream SPD service providers located in the middle of the chain, and downstream various medical institutions and their vast patient base. There is a fierce competition among many participating enterprises within the SPD industry, with different business models having distinct characteristics, and there are gaps in market scale and value space faced.

SPD service providers integrate resources from upstream and downstream of the industrial chain, which not only enables value enhancement across the entire chain but also improves service efficiency and contributes to enhancing people's well-being.

Source: Public information, analysis by Frost & Sullivan

The construction cycle of SPD projects is long and complex. With the development of the industry, hospitals' demand for SPD services is becoming more comprehensive and refined. SPD enterprises that can provide all-round and complete services have significant advantages.

Source: Public data, literature search, Frost & Sullivan analysis

The competition barriers in China's SPD industry are relatively high, and new entrants need to face challenges in multiple aspects such as capital investment, personnel requirements, technical requirements, and brand requirements.

The SPD industry in our country is facing numerous challenges during its rapid development, such as the lack of a unified standard system, hospitals' concerns about information security, high project investment costs, great implementation difficulties, and diversified hospital needs. Currently, leading enterprises are actively responding to these challenges.

Source: Government official website, analysis by Frost & Sullivan

The long-term healthy and sustainable development of China's SPD industry requires the full cooperation of the government, industry, and hospitals. In the future, it is imperative to transform towards compliance and efficiency. As a third-party SPD service provider that is clearly not a stakeholder, it helps to promote the standardized development of the SPD industry. The third-party service model is expected to become the mainstream model of SPD services.

At present, the information system development of SPD has initially achieved intelligence, but there is still great potential for development. Many domestic companies are making efforts in the field of digital intelligence technology. For example, Anhui Guoyi Technology has jointly established a laboratory with the University of Science and Technology of China to carry out research in several key areas, including the optimization of fixed-order packages, automatic replenishment strategies, and surgical package sets.

SPD's services are reflected in various stages, including preliminary scheme design, mid-term R&D construction, and post-operative operation services. SPD service providers need to update and dynamically adjust according to the actual needs of hospitals, customizing personalized in-depth solutions across multiple dimensions. At the same time, SPD is offering more extended high-value-added services, including comprehensive services covering warehousing logistics, marketing, after-sales, financial services, etc., integrated into a full-process package.

Under the SPD management model, warehousing and logistics services will provide more possibilities for improving the efficiency of the industrial chain. In 2024, the pharmaceutical SPD market achieved significant growth. As digital intelligence technology penetrates and integrates into the SPD industry, the SPD management model will gradually develop in depth to meet the increasingly specific and detailed management needs of hospitals. Anhui Guoyi Technology has driven business upgrades through extensive field research, launched an all-hospital extreme logistics service, and is expected to fill a market gap.

tightMedical consortiumIt is an important measure to enhance the capacity of primary healthcare services and promote hierarchical diagnosis and treatment. In the future, by creating a regional SPD management model, it is expected to drive the comprehensive construction of medical communities, achieve optimal resource allocation, purify the industry environment, and improve the quality of medical services.

In addition, domestic third-party SPD service model enterprises demonstrate strong competitive strength with their rich service operation experience and professional talent reserves, and are expected to expand into international business areas. The scale and influence of these enterprises will continue to grow.

Anhui Zhongji Guoyi Medical Technology Co., Ltd., abbreviated as 'Anhui Guoyi Technology', was established in 2016 and headquartered in Hefei, Anhui. As a well-known domestic provider of intelligent supply chain management and operation services for medical supplies, Anhui Guoyi Technology is committed to serving the high-quality development of Chinese hospitals and has pioneered the domestic SPD third-party pure service and city-wide medical supply intelligent management service center (CGS) model. Anhui Guoyi Technology has served more than 200 large public medical institutions, cumulatively serving 15 of the top 100 hospitals nationwide, with customers distributed across 16 provinces and cities. The company adheres to the concept of innovative change and development, jointly building joint laboratories with universities such as the University of Science and Technology of China to promote the intelligent upgrading of the SPD industry. Anhui Guoyi Technology possesses a comprehensive solution capability integrating leading domestic SPD software R&D, hardware R&D, implementation, and operation services, and has received favor from multiple capital sources.

Konishi Medical Devices Co., Ltd. (Konishi 1st Class Medical Devices Co., Ltd.) is a leading medical device company with nearly 80 years of history, operating under the SPD Business Unit. As the needs in the medical field become more refined and diverse, Konishi Medical Devices has contributed to the field of medical logistics management by integrating the latest Information and Communications Technology (ICT). It has provided breakthrough innovative systems and services. The SPD Business Unit helps improve work efficiency and safety in the medical field while reducing the burden of item management and supporting hospital operations and management.

• China Federation of Logistics & Purchasing Medical Logistics Branch

The Medical Logistics Branch of the China Federation of Logistics and Purchasing is a national industry organization in the field of medical logistics approved by the federation in 2014. It has more than 700 member units, including over 400 pharmaceutical distribution enterprises. The branch has taken the lead in formulating and revising 13 industry standards, and has compiled the 'China Medical Logistics Development Report' for nine consecutive years. This report has sorted out the context of China's medical logistics development and led the industry's progress.

• Chinese Health Information and Health Medical Big Data Society Hospital Logistics Supply Chain (SPD) Big Data Application Branch

In October 2021, the Chinese Society of Health Information and Health Medical Big Data approved the establishment of the Hospital Logistics Supply Chain (SPD) Big Data Application Branch. Since its establishment, the association has held industry summits and academic exchange meetings in Shandong, Anhui, Guizhou, and other places, providing active support for the promotion and development of SPD nationwide, as well as its dissemination and popularization within medical institutions.

• Beijing Smart Healthcare Industry Technology Innovation Alliance

The Beijing Smart Healthcare Industry Technology Innovation Alliance (BWITA) was established in 2016, dedicated to conducting academic research, exchanges, and other activities in the field of smart healthcare. In August 2024, to implement the spirit of the 20th National Congress of the Communist Party of China and the second and third plenary sessions of the 20th Central Committee, and to promote the development of new quality productivity in the smart healthcare SPD field, the alliance has specially established an SPD Special Committee. It holds SPD industry conferences every spring in Hangzhou, Hefei, Chengdu, and other places. In addition, the alliance participates in the formulation of national and industry standards, project applications, industry seminars, and other activities to assist in the standardized development of the SPD industry.