Since the global outbreak of the COVID-19 coronavirus became more visible in February, Supply Chain Matters has placed a special emphasis on the monitoring of disruptions related to healthcare delivery, medicine, medical device and other related product demand and supply networks.
We did 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.
We observed that in the analogy of Triage, these are the product demand and supply chain networks that governs the subsequent indirect or direct impacts to all other industry supply chains. At the same time, a global pandemic is an extreme event, one that requires a lot of contingency and scenario-based planning as opposed to the feasibility for stockpiling of physical inventory.
In a blog editorial published in mid-March, we identified specific critical areas of focus, and a little over three weeks later, there has been critical and painful learning in these areas.
Further learning and observation will follow, and tragically reports of the consequences. 
It is now even more imperative for all associated with healthcare delivery supply chains to begin the serious thinking in lessons learned and what needs to change in the coming weeks and months.
In this specific Supply Chain Matters blog, our goal is to share added insights and observations relative to the strategy, process and technology challenges facing healthcare supply chains in the wake of COVID-19, with suggestions on areas of learning and action.
Normally, the content of this article would be included in one of our industry specific Research Advisories. Instead, the topic is so essential that we have elected to share this openly on this blog, thus the length of this commentary.
Coronavirus Testing Kits
Without question, the preparedness of standardized global testing for the virus, with a supporting supply chain built for global-scale and resiliency will be a major learning for future outbreaks of global diseases.
Here in the United States, the availability of virus testing was dangerously delayed because of initial snafus and lack of planning. The U.S. Center for Disease Control (CDC), the agency responsible for test development, was ill prepared and ill-equipped to manage U.S. wide testing and instead had to revert to commercial laboratories and private industry to manage scale. The supply chains supporting the global scale of testing proved to be both capacity and country constrained related to simple plastic applicators’, reagents and other needs.
When testing demand scales to the levels of global-wide populations, the material replenishment cycle has to be extremely responsive, almost to daily replenishment. When tests can be administered and reported by digital based machines, the danger to healthcare workers administering the tests can be mitigated.
Global scale implies highly coordinated, dedicated logistics networks that control the movement of test kits to and from diagnostic facilities on a local, regional or nation-wide basis.
Our belief is that every country will require a strategic operational plan for pandemic testing that has far more reliance on domestic based supply sourcing.
Surgical Masks, Medical Equipment and Personal Protective Equipment
Surgical Masks and PPE
A day does not pass without a headline depicting hospital and healthcare workers pleading for additional surgical masks and protective gear. The World Health Organization (WHO) had noted that healthcare workers would 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 that of medical protective gear locally and globally, including protective masks. The industry challenge was identified, but the learning and corrective actions related to needs for enhanced supply chain agility were not apparently heeded.
To understand this problem, consider that the supply chain design for these types of products are generally planned as low-cost driven in nature. Strategy and planning mostly reside with healthcare product distributors and wholesalers that control all the elements of the supply network including inventory stocking policies. A secondary supply chain network resides with the strategic inventory on-hand among individual nations for needs such as a pandemic or designated national emergencies. The default mechanism when the above two are constrained and over-subscribed are the sometimes-brutal dynamics of global-wide markets and where market order and controls are subsumed by significant demand and supply imbalance. In the current case of PPE, all dimensions have been exercised.
Relative to global mask production, there remains a significant demand and supply imbalance, which invariably leads to either hoarding, restrictions of price gouging. We noted in our prior posting that there were industry estimates that current production levels can accommodate about 70 percent of current global demand. Further, certain countries have restricted exports of protective masks to protect domestic supply needs during the health crisis.
To little surprise, China and the adjoining Asia-Pacific region produces a large percentage of the global supply of PPE materials. With countries such as the United States having woeful supply of N95 grade masks in the Strategic Stockpile, individual U.S. states have had to fend for themselves in the default open market to obtain needed supplies. Amazon was forced to police opportunistic online sellers. Making matters more challenging were certain directives among individual nations to limit exports to protect for domestic healthcare needs.
Individual U.S. state efforts have now turned to calling on major resident corporations, who have procurement contacts within China and other countries, to help secure additional supply in China. Companies such as Apple, Tesla, Salesforce, Virgin and others have stepped-up in both procuring and directly transporting millions of masks to hospitals and healthcare networks. Nations are turning to their domestic resident air and logistics providers to provide direct transport to areas in need.
In Massachusetts, where Supply Chain Matters resides, the Governor of our state, after losing rights to a needed large shipment of masks to another government willing to pay more, marshalled state resources, private industry and a local professional football team, the New England Patriots, to both secure a 1.3 million mask shipment, and at the same time, dispatch the team’s own Boeing 757 aircraft to fly to China to pick-up the needed masks and fly them direct to Boston. While this was an example of supply chain management ingenuity, collaboration and logistics response, the effort required over three days of negotiations, the leverage of a network of known influencers with contacts, expedited customs clearances and aircraft certification. The aircraft itself was only allowed to stay on the ground for three hours, with the flight crew unable to deplane without having to incur a 14-day mandatory quarantine in China. The aircraft was loaded with only 1 million masks with 10 minutes to spare.
This is now the existing challenge among individual buyers as the pandemic continues to spread illness and death.
It was not until late March and early April that the U.S. federal government, invoking the Korean-war era Defense Production Act, placed orders for over 700 million masks from suppliers 3M Company, Honeywell and others to augment strategic supply. As we pen this commentary, the U.S. Federal Emergency Management Administration (FEMA) has contracted for various PPE products that will require a total of 26 air freighters to transport. These actions, long overdue, come as health workers have already been put at risk. They further provide evidence of the reality that the bulk of supply sourcing still resides across China and adjoining regions.
Local universities, small businesses other firms with 3D manufacturing printing capabilities have marshalled to produce needed masks and plastic shields for local needs. National, local and individual tailors and seamstress’s have now volunteered to supply civilian protection masks, doing what they can to contribute to a supply shortage. They are also extensions of supply response.
Human Ventilators
Similar to N95 masks, global wide needs for human ventilators to treat the most critical patients infected with the virus were woefully inadequate, including the strategic stockpiles of governments.
While respective global-wide manufacturers of this equipment have been ramping-up production, and similar to what occurred in China, this wartime situation has forced governments to call on domestic manufacturers to convert manufacturing and assembly lines to the additional production of ventilators.
Product design innovation, in the examples of Dyson designing a shared human ventilator in a matter of 11 days, or Tesla designing a ventilator from existing electrical and air conditioning components designed for their vehicles have occurred. Physicians at hospitals such as Mount Sinai in New York are innovating in areas of how to convert sleep apnea breathing assistance machines for use in treating coronavirus patients.
Auto manufacturers Ford, General Motors and Toyota are partnering with existing branded ventilator manufacturer’s to provide manufacturing volume scale to increase output of needed machines.
In times of crisis and need, human innovation remains critically important.
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.
Since our last update, India has initiated its own measure to shutdown commerce and require people to shelter in residence. India is a major producer of generic and branded pharmaceuticals and there remains growing concerns as to what that implies for drug supply chains.
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. Supply Chain Matters anticipates that this area will be the next crisis to impact global healthcare delivery networks.
The Learning Thus Far- Thought Leader Perspectives
Across the globe, a lot of painful learning is occurring regarding how a pandemic can collapse associated healthcare delivery supply chains. Candidly, there is also a history, that of dysfunctional efforts driven by conflicting stakeholder interests across and within such healthcare supply chains. That includes drug manufacturers, distributors, insurance companies and government policies.
This supply chain industry analyst calls Supply Chain Matters reader attention to other industry supply chain thought leader perspectives.
Former AMR Research supply chain industry analyst alumni and now tracelink thought leader Roddy Martin has penned two recent opinion blogs addressing the COVID-19 impact within the healthcare network supply chain. In his Part I blog, Martin observes that supply chain leaders continue to face fragmented data silos and end-to-end supply chain visibility challenges. A key opening statement notes:
“The healthcare supply chain is changing forever. COVID-19 is exposing fundamental supply chain weaknesses, like those related to test kit security, healthcare infrastructure shortfalls, and the availability of critical supplies. The gaps in these key supply chain capabilities are highlighting the need for urgent transformation.”
In his Part 2 commentary, Martin implores industry supply chain leaders to step-up as the catalyst and change agent for transformation in redefining the business importance of the supply chain in patient-driven terms and outcomes. Included in the summary takeaway:
“Although no one wants to see a crisis like the COVID-19 pandemic unfold any further, dramatic events like this that pose high risks to patients, governments, and industries are an urgent catalyst for transformation. They are very visible to executive leadership in the business and command survival attention.”
This Editor encourages other industry thought leaders and practitioners to share their perspectives on the industry learning garnered from COVID-19. As global citizens, we all need to come together in a global-wide effort of insights sharing and calls to action to address the means for making healthcare supply networks the most agile and resilient they can be.
Additional Perspectives
Our own Ferrari Consulting and Research Group perspectives relative to learning and insights includes:
An urgency for private and public sector supply chain stakeholders to come together and collaborate on a strategy for pandemic response that relies on wider end-to-end supply chain visibility, joint collaboration, and greater leveraging of digital enabled technologies across product demand and supply networks. While a pandemic that occurs infrequently, when it does occur, the need is analogous to a war time marshalling of resources and supply response. Application of digital based technologies are a new tool for leveraging a response as well as managing exceptional needs.
In the area of critical PPE products, consideration for greater levels of strategic inventory balanced among private distributor and government stocking points. This is also an area that is fertile for high levels of automated additive manufacturing techniques. There should therefore be consideration for designating certain manufacturers to have supply contract readiness to “turn-on” such capability when a pandemic threat is perceived. Already, apparel, clothing, distillery, consumer products and industrial manufacturers are demonstrating that the leveraging of digitally based technology can provide the means to switch manufacturing toward needed pandemic level supply needs. More has to be done in these areas, since they will represent the on-demand flex capacity required to respond to global pandemics and national emergencies.
As many industry supply chain experts will attest, today’s healthcare supply networks are managed by predominantly sequential based planning and fulfillment processes, inhibited by data silos and coupled to Just-In-Time inventory practices that cannot be expected to respond to global emergency and sustain life saving needs. That obviously must change. What is required is considerations for leveraging multi-enterprise Cloud based B2B platforms that can transparently share information among patient and healthcare provider demand and supporting supply networks. It is a combination of physical data points of production and inventory with digital aspects of granularity of overall demand for specific products. It is a combination global and domestic based supply network designed with balanced risk, redundant and flexible supply sourcing. Contingency supply is based on identified manufacturers that have demonstrated abilities for flexible, additive manufacturing techniques grounded in digital based technologies who can rapidly scale-up when required. The same capabilities are required among global logistics and transport networks. Healthcare focused transportation and logistics workers need to be recognized as essential workers and provided the necessary personal and protective materials needed at times of national emergency.
Technology vendors need to step-up and facilitate seamless integration of data and information across various healthcare networks including consistent data standards, terminology and master data consistency. The concept is that of “network of networks” providing global-wide visibility to trouble spots or opportunities related to global demand, supply, logistics and customs bottlenecks.
Healthcare industry participants need to come to terms with the reality that either all players collectively come together and transform to digitally enabled response networks, or governments will set that agenda and timetable based on the power of nationwide safety of citizens. Industry and government collaboration has tended toward glacial progress, especially with mandates. COVID-19 is a wake-up call to non-readiness, and that mandates should not be continuously negotiable. Either the industry address its challenges, or the change is directed by external forces.
An industry and associated stakeholders that tend to shun sharing of information for perceived proprietary or competitive needs will likely recognize the critical learning of COVID-19 and its naked destruction of the supply chain. Other industries have already overcome challenges of data security in the Cloud, and more is being done in this area.
The Supply Chain Does Matter in business continuity, mission response and business results. As noted, industry Supply chain leaders need to take the lead, and business executives had better listen to their consul and insights.
Once again, we do not portend to be a singular voice or an industry expert. We encourage healthcare industry and other thought leaders to share in the learning and groundswell for action.
This is a collective call to action, which all of us as global citizens are the stakeholders.
Bob Ferrari, Founder and Executive Editor
© Copyright 2020, The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.
