Procurement is one of the areas that has been found most wanting. Global supply chains have been ruthlessly optimized for efficiency, leaving them with little capacity to accommodate sudden fluctuations in demand – as consumers trying to stock up on toilet roll found to their dismay.
Over the last 30 years of globalisation and outsourcing, the world’s manufacturing base has shifted overwhelmingly to Asian countries, particularly China, which makes more than 50% of the world’s PPE. Hubei province, where the virus struck first, is one of the country’s most important manufacturing centres. As governments realised the scale of PPE that would be required, international cooperation broke down. Exporters froze shipments, and buyers found themselves in a desperate scramble for masks, gowns, gloves and goggles, competing with international neighbours and with providers in their own market. In March, the World Health Organization called for a 40% increase in PPE production, and warned that supply chain disruption – “caused by rising demand, panic buying, hoarding and misuse” – was putting the lives of frontline medical workers at risk.
“The global supply chain just stopped because everyone wanted the same product at the same time, even though they didn’t need it at the same time,” says Mathias Elmfeldt, a hospital logistics expert with WSP in Sweden. “That created a lack of trust in the system, and that was right – you can’t trust an imperfect system.” Cooperation failed because the system wasn’t primed for it in advance – once a crisis has hit, it’s too late. This lies partly in the realm of global politics, but a practical stumbling block is that healthcare does not use a common language to describe medical equipment, says Elmfeldt. “You can’t cooperate unless you have full transparency of your supplies. The same tube will have different names, so even though there are a lot of electronic systems, it is impossible to aggregate information on stock levels.” A common language has been developed by GS1, the not-for-profit inventor of the barcode, which covers not only equipment but every kind of information about hospitals, caregivers and patients, and Elmfeldt thinks this could improve efficiency and resilience in many areas. But while the fiercely competitive grocery sector has been using an equivalent for 50 years, healthcare has been slow to implement it.
There are already initiatives to increase regional manufacturing to counter the over-reliance on Chinese healthcare suppliers. Elmfeldt says that taking advantage of advances in digitalisation, automation and 3D printing could make local suppliers more competitive, but that procurement needs to look beyond lowest cost and factor in proximity, lead times and geographic diversity too. Materials requirements planning (MRP) systems could also make better use of artificial, or human, intelligence to forecast the impact of a range of different scenarios, rather than treating the future as a steady continuation of the recent past.
“If you can categorise articles and understand potential demand, then those very important items can be stockpiled and held in reserve, and you can have greater requirements for multiple sourcing and regional manufacturing,” he says. “Before, we just procured from the cheapest company and then everything happened to be manufactured in Asia. Now we might have a requirement to have a supply in Europe or within five hours.” Products coming from Asia via container ship can take two months to arrive, he points out – an unacceptable delay for essential items.
Gearing up local manufacturing industries would also tap into the greatest source of resilience in the system: people. “What I learned is that the people themselves created a lot of the agility, in terms of the fast-moving reaction to COVID, and they were very, very good at doing that,” says Elmfeldt. “That will be the case the next time too.”