At an inflection point, why the supply chain must rise above ‘every man for himself’ type behaviors
The COVID-19 pandemic has brought us to an inflection point. More specific to our industry, we might be at one of the more important inflection points in the history of the U.S. supply chain, said Jeromie Atkinson, supply chain leader and essentialist, Supply Chain Sherpas. In the last few decades, we’ve seen progressing healthcare supply chain maturity, technology solutions and a more global supply chain all converge.
However, “the supply chain’s inherent inability to sustain longer term disruption with greater resilience should be a call to action for supply chain professionals globally,” Atkinson said. “The supply chain, if we do not react at this time, may end up being exposed as one of the weak links in the health system value chain.”
In the following interview, Atkinson provided his thoughts on several supply chain-related topics linked to the COVID-19 pandemic.
Repertoire: Can you provide us with some insights into what is going on at a national level in the U.S. healthcare supply chain? How is the government coordinating with providers, GPOs, associations, etc.? What are the conversations like?
Jeromie Atkinson: I haven’t heard of many direct federal government to health system interactions currently taking place at the level of the supply chain, other than monitoring where shortages are occurring or likely to occur. There tends to be more communication and connection at the state and local level (governor and mayor offices) as officials stay in contact with health system leadership and monitor the situation to be able to react appropriately to the factors that they can control.
However, the federal government appears to be working on a more direct basis with health systems on other types of topics, primarily through organizations like the Centers for Disease Control and Prevention (CDC), and that guidance is typically more focused on supply utilization documentation like how to optimize their PPE through restricting use to only those in care areas, reducing face-to-face encounters, cancelling elective procedures, and maximizing telehealth to name a few. The federal government is also working with supply chain’s upstream partners on trying to determine where products may be impacted. For example, the Food and Drug Administration (FDA) has been working with drug manufacturers to remind them of their responsibilities in notifying the FDA on any supply chain disruptions, including analyzing their API and other components manufactured in China to anticipate shortages. They are also monitoring the situation with the 60-plus medical device manufacturers in China as well as other commodity manufacturers, but it might be too early to tell yet how those will be impacted.
I’ve heard frequently from my healthcare colleagues, however, and getting good information is most often what people are seeking. It’s been more difficult than expected to get to one source of truth about current status on topics related to COVID-19. Collaborating, at least at a high level of conversation, does appear to be happening directly in health system to manufacturer or distributor types of interactions, most typically to cover inventory gaps and to look for solutions to cover the immediate needs.
There are some discussions taking place obviously from health system peer to health system peer. At Sherpas, we’ve had a number of colleagues over the last couple of weeks reach out, primarily for insights or for general information on what we are hearing nationally. We’ve seen some interest in health system to health system collaboration among some of the providers nationally, but that doesn’t seem to have gained the traction that it potentially could. The GPOs are offering guidance where they can and are trying to work proactively with their members where possible, and of course the supplier community is trying to be proactive in serving their customers.
Repertoire: What about at an individual health system or even hospital level? What does it look like?
Atkinson: Many individual hospitals or individual health systems are fending for themselves and doing the best that they can. Typically, the smaller the health system, the more impacted they will be by the unavailability of inventories and the allocation efforts of distributors and wholesalers (for smaller systems, they often have less purchasing power and less influence and may receive less allocation of the available inventory).
The impacts seem to be more strongly felt in rural hospitals, those who simply don’t have the space or the purchasing power for large safety stocks of the inventory that is needed today, but we are also in a settling period where inventories and ‘what is real demand’ vs. ‘what is panic demand’ is not well understood. Just like many U.S. citizens made the rush to the grocery store to stock up on unneeded supplies or supplies in excess of what they could consume, there was an initial rush by many to purchase medical supplies, and it is still unknown if that was in excess of need or adequate supply based on need since we are still unable to test or predict the COVID-19 growth at this point and where patient populations may be most intense.
Repertoire: What product categories are most effected by COVID-19?
Atkinson: This is far more complex than most people realize at this point, because we are too often only focused on the emergency needs of today – PPE, respirators and very likely ventilators. PPE is affected in two ways. Many medical goods like PPE are manufactured in China at factories that were affected by China’s suspension of operations during their height of their case growth, in effect, limiting some of the available supply. Add in the world’s increased need for PPE and you can see the makings of the problems we have in some areas. There are manufacturers who are shifting to produce more inventory, but that shift does take time to influence current on-hand inventories.
The next round of products is those you may not have heard as frequently about in the news. When you look past the immediate supply chain shortages and needs, the future category potential shortages become more complex in other categories and the full scope of that impact will take time to develop. I mentioned pharmaceuticals earlier, but approximately 13% of the API – active pharmaceutical ingredients – in drugs are manufactured in China, so manufacturers in other countries besides China have also gone through lengthy suspension of operations to try and ‘flatten the curve’ in their own countries and workforces. Additionally, the U.S. has a high usage (about 90% of the total prescriptions) of generic drugs. Many of these are Chinese made including antibiotics, diabetes drugs and birth control drugs.
The full impact of how that will affect the drug supply chain remains to be seen and may take months to develop. The medical device industry is also likely to be impacted and U.S. reliance on Chinese medical devices has been a topic with some visibility even prior to the coronavirus outbreak. Even when you get outside of the medical products people typically think of when it comes to healthcare, there are likely to be supply chain ripple effects from everything to food products, to linens and textiles, and capital equipment like beds and monitoring equipment and supplies.
Repertoire: How are you advising hospitals and health systems to navigate any supply disruptions?
Atkinson: Because this is an emergency situation, our human nature and the cultural nature of our industry is to focus inwardly, to huddle up with our own teams and solve the problems that no one is going to solve for us. At best, some organizations will reach out to others and try and share information at a very high level only, to determine where they might work together to solve problems that they both face. At worst, you will see ‘every man for himself’ type behaviors with a rush on hoarding products for their own use just like we have seen our neighbors rush out to hoard toilet paper. Both are understandable, if misguided responses. We have to avoid only putting out the fire on our own house while the whole neighborhood is smoldering, because as soon as we get one section put out, it will catch again in another section we weren’t paying attention to.
We are at an inflection point in history and maybe one of the more important inflection points in the history of the U.S. supply chain in the last few decades as progressing healthcare supply chain maturity, enabling technology solutions, and a more global supply chain all converge. The supply chain’s inherent inability to sustain longer term disruption with greater resilience should be a call to action for supply chain professionals globally. The supply chain, if we do not react at this time, may end up being exposed as one of the weak links in the health system value chain.
It is OK to have missed the signals on supply continuity, and maybe many of us have up to this point, but to miss it now and going forward would be a potential catastrophic failure for our organizations yes, but mostly for the responsibility we owe our patients and communities that we operate in and are a part of. COVID-19 is our current crisis but is extremely unlikely to be the last, and shame on us if we don’t use these experiences to be more prepared the next time.
There is good news though! I’m always humbled by the talent and commitment in this industry. Once we get through the immediate crisis, we can use this time to regroup, to think proactively on how we will address these challenges in the future to build more collaborative and cohesive relationships with our upstream supplier partners and their providers of raw materials. As today’s supply chains become more interconnected, and as more manufacturing continues to be located in lower cost countries and regions, they become more susceptible to global external factors like COVID-19 and natural disasters.
When supply chains have visibility as far upstream as possible, they can more proactively react to these external forces in proactive ways. We can use this time to build systems to more accurately shift excess inventories to regions of need (heat mapping). We can use our process expertise to support and lend guidance and leadership on the human supply chain through shifting caregivers to where they are needed. Ultimately, we should use some time to reflect on how we can be influencers, champions and leaders of the supply chain shift that our own internal customers, and more importantly, our patients need us desperately to be.
Repertoire: What are a few things that every supply chain team should being doing today as a result of COVID-19?
Atkinson: Every supply chain team individually should be looking forward to how they can actively help prevent supply chain shortages in the future. This doesn’t necessarily mean increasing safety stock levels.
- Building upstream visibility and understanding where our products come from, the market forces they may be susceptible to, and how to appropriately respond to any one of those individual supply chains breaking down.
- Look for and support emerging technologies that will continue to disrupt, in a positive way, the industry. Not all of those will be successful, but in an Internet of Things (IoT) environment, we will have to continue to sift through the traffic and find which introduce meaningful progress and change and which are noise. When we find something worthwhile, celebrate it and spread the word.
- Build collaborative networks outside of our own ecosystems. Consider supply chain response teams at the local level, but also work to bring colleagues along for a national discussion.
- Collaborate, collaborate, collaborate. Not just at conferences over drinks, but at formal levels with industry groups, with your GPOs with other members, with informal or formal peer groups, with your supplier partners, with suppliers who are innovative even if you do not have a current contract with them but they are advancing the supply chain agenda nationally, with local governments, and with clinical leadership in and outside of your companies. Collaboration is very much a key enabler of success in the supply chain and in a time when we have more national dialogue around collaboration and more technology enabling collaboration, we do not seem to have improved measurable collaboration around the topic of supply continuity.
Jeromie Atkinson leverages more than two decades of strategic customer-focused experience and extensive knowledge of the healthcare supply chain, both as an internal transformation agent and external business partner, Atkinson is a passionate educator and advocate for helping organizations develop solutions tailored to their own internal DNA and to discover and unlock their own supply chain abilities.
He earned his supply chain credentials in a variety of industries prior to joining some of the nation’s most progressive health systems where he applied his focus and passion to elevate supply chain discourse nationally.
For more information, visit: www.supplychainsherpas.com.