5-Minute Read: How is COVID-19 Reshaping PPE Supply Chains?

Once upon a time PPE was listed somewhere under a miscellaneous category – and then COVID-19 came. How has it reshaped PPE Supply Chains, and how will it continue to?

As demands for PPE grew at the height of the pandemic, PPE Supply Chains were stretched to their limits. PPE became a hot commodity, and thus its supply chains became hyper-busy

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When COVID19 shutdowns swept the world, procurement teams found themselves scrambling to source personal protective equipment (PPE), as well as staples like toilet tissue and janitorial supplies. Demand was high in PPE Supply Chains as companies competed with consumers and governmental agencies for these critical supplies. For organisations striving to keep workers safe, PPE became more valuable than a roll of two-ply bathroom tissue.

During the initial lockdowns, countries scrambled for PPE at airports, offering cash to divert shipments at the runway. The World Health Organisation estimated that healthcare organisations required 14-24 sets of PPE for each coronavirus case. One U.S. healthcare organisation reported using 1 million pairs of nitrile gloves every day.

PPE may have been listed in the miscellaneous category until it transformed into high-priority commodities, as procurement teams were charged with sourcing large quantities of PPE from unfamiliar sources.

While the initial surge has subsided, the PPE supply chain will be a factor for months to come as businesses strive to return to whatever the new normal may look like.

Whether you work for a healthcare organisation or a company with responsibility for employees and customers, the global supply of personal protective equipment remains a high priority. Here’s a look back at some of the obstacles that procurement leaders overcame while sourcing PPE and some of the challenges still facing them as the pandemic enters its second year.

1) PPE supply chain remains uncertain

While the initial crush for PPE has subsided, there’s still a strong demand. Shortages continue for N95 respirators, disinfecting wipes and surgical masks, according to Get US PPE, a non-profit that manages PPE donations.

Early on, many manufacturers pivoted production from their usual products to turn out PPE, as the EPA relaxed regulations. Distillers turned over their tanks from bourbon or vodka to produce alcohol-based hand sanitisers. Factories that weave fabrics for automobile seats and seatbelts diverted to making masks and gowns. Some producers haven’t returned to their core products. While most major healthcare facilities have adequate stocks, many small facilities and those in rural locations struggle to maintain supplies.

Supplies of disinfectants and cleaning products are still stressed, as consumer demand remains high. When schools, universities and companies fully re-open, expect shortages to be significant. Manufacturers were booking production 12 to 18 months ahead. Many of those products are imported as well, and ocean shipments take four to five weeks at minimum. The surge could cause delays of a week or more.

At the same time, manufacturers are reluctant to invest in capacity that could be surplus in a few months. They’ve added extra shifts, but there’s only so much capacity to be wrung out of existing equipment and employees.

2) Reduce, reuse, recycle medical supplies and waste

While workers must discard many PPE items like masks and gloves after use, there are opportunities to reuse and recycle some products. Many gowns are one-time use, but reusable gowns on the market can save millions of dollars and divert tons of waste from landfills.

Industry research indicates reusable gowns that are laundered provide better protection from infection, even after dozens of washings.

N95 respirators that still suffer from tight supplies can be decontaminated and reused on multiple shifts. Procurement teams can help with finding technology or vendors to turn disposable items into reusable treasures.

Overall, hospitals generate about 30 pounds of waste per patient per day. There are many opportunities to gather unused items and put them to use, but sometimes the logistical costs of gathering, sanitising and redistributing outweigh the benefits. One alternative is to source items made from recyclable materials, such as plant-based trays for surgical packs used in the operating room.

Sourcing reusable and recyclable products where possible can reduce overall spend and stress on suppliers. Your organisation can lessen its environmental impact as well.

3) Rethink global sourcing

The rush on PPE supplies highlighted some of the shortcomings of global sourcing. Companies outsourced production to the lowest bidder, most often in China. The PPE suppliers didn’t maintain production capability in their own countries or other higher-cost locations.

Just-in-time manufacturing and distribution were typical in the PPE supply chain as well. Stockpiles held by government agencies were incomplete or depleted from previous crises were never replenished. While carrying inventory is often seen as an unproductive cost, the financial losses from a disrupted supply chain may be many multiples of that.

Even if Tier 1 suppliers are found in the homeland, their supply chain may be unexpectedly dispersed worldwide. Certain types of plastics and fabrics used in masks and other PPE were single-sourced in China. There were simply no other alternatives available at the time. However, turning to numerous smaller suppliers could lead to fragmentation in the supply base and difficulty maintaining quality standards.

 4) Vital role for procurement & supply chain professionals

The coronavirus pandemic wasn’t the first time procurement pros were called to lead companies during a crisis, McKinsey noted. The 2008 financial crisis and various natural disasters come to mind.

In the initial stages of the pandemic, procurement departments switched into crisis mode as airports and seaports closed and drivers idled trucks. As companies have recovered, they still rely on procurement to ensure vital supplies and commodities are where they need to be.

The crisis once again highlighted the strategic value of procurement. But to prepare for future emergencies, procurement leaders must re-examine procurement processes, technology, and people.

 Processes

• Deeper supply chain transparency is a must-have to anticipate disruptions, especially with single-source suppliers.
• Contracts should be renegotiated to reflect rapidly changing costs and market dynamics.
• Using historical data for forecasting won’t be relevant.

Technology

• Remote work may be the future of work, so digital communications within the organisation and suppliers are critical.
• Automation speeds up reaction time to take advantage of shifting market dynamics.
• Gather and analyse spend analytic data to drive future strategy and negotiations.

People

• Data-driven and automated procurement require analytical skills more than traditional negotiation prowess.
• Partnerships and contracts that incentivise collaboration will support innovation and business continuity during times of crisis.
• Incorporate agile methods so the team can adapt to changing priorities and market forces.

Procurement continues to lead the way as companies transform their supply chains for the current climate and beyond. Recognising and implementing some of the lessons from the pandemic help procurement leaders face challenges of shifting supplier dynamics, new ways of working, and uncertain demand. Forward-thinking organisations will consider transforming the procurement function to deliver greater value and prepare for future crises.