How much of this sounds familiar?
If someone told me in the first week of March 2020 that we would be doing all of the above, my most likely response would have been “what have you been smoking lately?” But that’s exactly what we did. We threw all logic aside and chased every lead that claimed to help us with PPE supplies. We saw our clients challenged and decided to help in whatever way we could, all free of charge.
After innumerable hours checking the validity of suppliers and cross referencing their credentials, we realized that the advantage had shifted entirely to them and we were at the mercy of what was available. Take it or leave it. And by the way, can you wire 100% of the money to China now?
While there is a lot of discussion on how we got here, the answers to us are fairly obvious and straight forward (how we acted on the numbers provided by the Chinese Government and built models accordingly is a story for another day):
1. Supply chain is not viewed as a strategic asset: If something goes wrong, it’s usually the supply chain team that is responsible for the mess, but it’s often clubbed by the administration spend bucket and gets scant attention, dollars, or importance if any. When was the last time you saw a supply chain leader on the board of any provider organization? Or in a corner office?
2. Under investments in healthcare supply chain: Even though it’s the second largest spend in provider organizations, there is very little investment to analyze supplier risks, build resiliency, hire and pay top talent, or invest in systems. Often times the argument is that it does not justify the ROI. Compare this to the amount of investments that have gone into electronic medical records and electronic health records (mostly with disastrous results).
3. Extended supply chains: if you analyze many of the air disasters in the last two decades, you will notice they weren’t caused by engine failure alone; rather, there was a faulty nut, washer, bolt, small assembly or other small part that cost less than a dollar to make. Your supply chain is as strong as your weakest link, and in this case our weakest links turned out to be PPE. Considering that these are consumables and had to compete solely on the basis of unit price, they have been outsourced to the cheapest manufacturer. And because of the consolidation in the industry, there are very few large manufacturers and even fewer here in the USA.
4. Resiliency and extensibility: Unlike other industries such as manufacturing or retail, healthcare supply chain does not spend anywhere near the dollars or time in periodic supplier risk analysis. While everyone was caught off-guard with respect to PPE, a simple analysis would have shown that this supply chain is overly dependent on a handful of suppliers, none of the significant ones are on our shores, and there are capacity constraints arising out of countries acting out of their own national interests. None of this requires data science or machine learning and artificial intelligence.
5. Loss of core manufacturing base: While this is not the time or the place to debate about the benefits and challenges of outsourcing, it’s also a fact that existing manufacturers cannot very quickly re-orient their manufacturing capabilities and start producing PPE. As mundane as these products look, they still need raw materials, people on the assembly lines need training, customized shipping, packaging, and delivery. It’s the same case with food delivery as well; most meat manufacturers cannot re-size their restaurant sized packages to cater to grocery chains easily.
A national and international re-thinking needs to happen in terms of building strong, resilient, and flexible local supply chains in combination with global ones. And that raises its own questions:
Without a doubt these are some of the saddest days of our lives. We had anticipated a third world war, but this is much worse than that, without a single shot fired. It would be wise for all of us in supply chain to arm ourselves for the days ahead.
Safe and healthy.
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