Our Supply Chain Matters readers may have noticed that in our ongoing commentaries related to the multi-industry impacts of the ongoing global-wide COVID-19 coronavirus outbreaks, we have been placing a special emphasis on potential disruptions related to healthcare delivery, medicine and medical device product demand supply networks. COVID-19 China outbreak

We do so because in pandemics, virus spread and safety of human life is predicated on the ability of governments and healthcare agencies to be able to respond with required medical supplies, testing, proper medicines and medical equipment. In the analogy of triage, this is the supply chain that governs the subsequent indirect or direct impacts to all other industry chains.

Already, this is evidence of the criticality.

Coronavirus Testing Kits for the United States

Here in the United States, the availability of virus testing has been dangerously delayed because of snafus. The U.S. Center for Disease Control (CDC), the agency responsible for test development, reportedly encountered initial problems with one of the chemical compounds specified for the test. According to a published report by the Financial Times (Paid subscription or metered view), that snafu caused the agency to have to throw out the initial test.

Now, with a revised test procedure specified, and with private laboratories receiving the go-ahead to supplement population testing needs, the report points to shortages of some of the key reagent used to extract the RNA of the virus from the samples.

The prime supplier reportedly: “has been forced to ration supply after shipping more than twice the number of testing kits so far this year as it did in 2019.” Supplier Qiagen, manufactures the reagent chemicals at factories located in Germany, Spain and the United States, and reportedly has been initiating extra shifts and hiring at its U.S. facility. A spokesperson for the supplier told the Times that like all industry suppliers, unprecedented demand has resulted in supply allocation to customers with the highest needs.

Promega, a further Wisconsin supplier has also ramped-up production to seven days per week.

We urge readers originating in hospital and healthcare procurement and delivery settings to review and monitor this and other industry supply chain reports in order to gain a sense of the supply chain reagent shortage.

 

Surgical Marks and Protective Gear

Another obvious need in for surgical masks and protective gear. Publications such as The Economist report that according to the World Health Organization (WHO), healthcare workers will require upwards of 89 million medical masks a month in order to respond to medical care needs. During our blog coverage of the African Ebola outbreak, one of the initial critical shortage areas we highlighted was a shortage of medical protective gear locally and globally, including protective masks.

Relative to mask production, the report indicates that there are industry estimates that current production levels can accommodate about 70 percent of current global demand, but there has also been evidence of price inflation. Further, certain countries have restricted exports of protective masks to protect domestic supply needs during the health crisis.

To little surprise, China produces a large percentage of the global supply.  While that country has not banned exports, being the epicenter of the original outbreak forced a nationwide shortage of masks. Manufacturing services providers such as Foxconn, which assembles Apple iPhones along with other high-tech products, initially converted production lines to producing protective masks for the manufacturer’s upwards of 1 million workers, in addition to other needs by domestic businesses, in order to help the country resume production operations.

According to the Economist report, a General Motors joint venture auto production factory was also motivated to produce its own masks for factory workers as well as producing additional mask production equipment for the many other companies with similar needs.

In Hong Kong, manufacturers were marshalled to augment production equipment necessary to produce 10 million marks per month, with the government providing direct cash subsidies to manufacturers.

Reuters reported in early March that diversified global manufacturer 3M Company had reportedly avoided major supply disruptions relative to 7 by 24 production of N95 compliant protective masks by utilizing regional supply sourcing. While reporting no supply shortages, 3M has acknowledged the overall demand is outstripping available capacity at this time with ongoing efforts underway to be able to respond to that demand. The U.S. government is reportedly seeking to have 3M produce 35 million additional masks per month for the Strategic National Stockpile, but the report indicates that contract had not yet been solidified.

Drugs and Medicines

As Supply Chain Matters has highlighted in recent updates, China, and specifically Hubei Province, represents sourcing of quite a number of active pharmaceutical ingredients (API), required for many medicines and drugs. Procedurally, pharmaceutical and drug companies had bulked up safety stock levels to prepare for the Lunar New Year production shutdown in China. General safety stock levels are also usually planned at higher levels because of the criticality of supply. None the less, there remains a lot of concern if China API suppliers cannot resume required supply levels to support a global pandemic.

That stated, U.S. and other country health agencies remain closely monitoring drug and pharmaceutical companies requiring  timely notification of potential or actual drug shortages.

General Cleaning Supplies

Here in the United States, and likely in other countries, the enormous effect of forcing populations to practice either 14-day self-imposed quarantine, residence healthcare, or residence bound community distancing, has forced huge runs on grocery stores, supermarket and warehouse club retailers.  The resulting fear and anxiety buying resulted in total emptying of shelves that stocked cleaning supplies, disinfectant, canned foods and other perceived emergency staples.

All of this extraordinary demand is now cranked into various supply chain planning replenishment systems with the risk of the rippling bullwhip effect if planning systems are not equipped to spot and alert to extraordinary unplanned demand. Planners as well as consumer goods manufacturer sales and operations teams will be hard at work and collaborating together in efforts to adjust supply plans to determine what will be considered most accurate or responsive regional or global inventory to meet demand during this outbreak. Planning applications augmented with scenario based or machine-learning capabilities will have to be rationalized to determine what expected demand will be in light of nationwide supply shortages.

 

The bottom line is that for the foreseeable future, healthcare delivery product demand and supply networks, and respective network wide planning, collaboration  and demand fulfillment process capabilities will in the end, be the supply chains that matter the most in combating the novel COVID-19 coronavirus outbreak.

Let us all lend whatever assistance and support that we can to help in the ensure that this supply chain can respond to this global healthcare crisis.

 

Bob Ferrari