By Linda Rouse O’Neill, Vice President, Supply Chain Policy and Executive Branch Relations, Health Industry Distributors Association
Since December 2021, the Health Industry Distributors Association (HIDA) has monitored delays in the healthcare supply chain. We’ve canvassed our member companies to get their first-hand experience in how their goods are moving by sea, by rail, and by truck. Unfortunately, transportation delays persist, and they have been compounded by increases in shipping and raw material costs.
The latest research from HIDA has found persistent delays in the healthcare supply chain.
- Despite a modest drop in delay times since December 2021 (from 37 to 27 days), transportation times are still 440% longer than they were before the pandemic.
- The volume of medical supply containers awaiting delivery has increased 13% in the last three months. Approximately 9,000 to 14,000 containers remain delayed.
- As West Coast ports remain congested, the volume of medical supply containers at East Coast ports has skyrocketed. The ports of New York (+124%) and Charleston (+84%) seeing the greatest increase in container volume of medical supplies.
- When surveyed about the trend in transportation delays, 61% of medical distributors have seen no appreciable improvement, while 21% say delays have worsened.
Transportation issues in healthcare products distribution aren’t just a matter of days and delays. It is also a matter of dollars and cents as transportation costs are rising quickly worldwide.
- Shipping Costs: Container freight rates between Asia and the U.S. West Coast exceeded $15,000 in January 2022, more than a 250% increase.
- Trucking Costs: A lack of available drivers, trucks, and trailers is increasing costs for shippers and making it more difficult for carriers to haul more freight.
- Parcel Freight: Higher annual rate increases and expanded surcharges will make 2022 an even more expensive year for unprepared parcel shippers.
Furthermore, volatility in commodity markets is a key factor putting pressure on the cost of producing medical supplies. While transportation costs impact the cost of distribution, commodity price spikes impact the cost of manufacturing medical supplies.
- Aluminum shortages have raised prices to their highest point in over a decade. A lack of crutches, walkers, and wheelchairs have forced providers to ask for donations.
- Nickel is key to the manufacture of medical instruments. Russia is the world’s third-largest producer of nickel. Market volatility following the Russian invasion of Ukraine has caused nickel prices to spike. At one point, nickel prices doubled in a matter of hours to over $100,000 per ton.
- Chromium is a component of stainless steel surgical probes. War in Ukraine has disrupted shipping routes from key suppliers of chromium in Central Asia. In the first three weeks of March, prices for ferro-chrome ore increased more than 40%.
- Silicon chip shortages have been exacerbated by rising demand for medical devices used to treat COVID-19 in emergency rooms and intensive care units.
These issues aren’t going away. The healthcare supply chain should remain top of mind for policymakers. At HIDA, we are advocating for solutions like a “fast pass” that would prioritize the handling of medical supplies at our nation’s ports. Shipments of critical medical products cannot wait for supply chain congestion to resolve itself. As long as these supply chain disruptions persist, HIDA will continue to stress the importance of getting life-saving medical supplies into the hands of front-line healthcare providers.