COVID & Change Management: How Global Supply Chains are changing in the Medical Industry
One of the medical industry’s greatest challenges during the pandemic was the production and distribution of medical supplies and personal protective equipment (PPE). Medical device and product companies were thoroughly unprepared. The closing of national borders, operations, plants, and enforcement of new restrictions led to hundreds of supply chain links breaking, causing shortages in medical supplies and prices to soar. This pandemic has revealed the fragility of global supply chains and the need to reconsider operations. In other words, a call for Change Management.
In this blog, we will outline how the medical industry addressed the short-term issues of medical supply and equipment shortages, and how businesses are developing long-term capabilities to be better prepared for handling future catastrophic events.
Addressing Challenges: Shortages and Broken Supply Chains
The global outbreak led to an unprecedented skyrocket in demand for medical supplies and PPE. Suppliers and companies struggled to address these shortages. By March 2020, some U.S. hospitals reported using:
- 1,700% more N95 respirators
- 500% more isolation gowns
- 860% more face masks
- 300% more surgical masks
In the past 40 years, U.S. health industry supply chains became highly concentrated in Asia. China has become the source of importation of 72% of the surgical masks and 54% of medical gowns, and Malaysia has sourced 65% of the world’s medical gloves.
During the pandemic, shortages of medical supply and PPE were felt as factories shut down and international trade restrictions came about. This caused production congestion and downstream effects. By August, 76 countries imposed 152 export restrictions on medical supplies, medical equipment, pharmaceuticals, and other medical goods. Since the distribution of medical supplies is contingent on the delivery and sustainability of global providers, the U.S. was left particularly helpless with shortages during the pandemic.
To address the pressing demand for medical supply and PPE, the medical industry turned to local distributors and suppliers to quickly respond to demand shortages. Local businesses and suppliers stepped up to fight against Covid by changing their production. Examples include:
- Distilleries like Tito’s Vodka and Bacardi transitioning from alcohol production to hand sanitizer
- Automakers like Ford and GM switching from producing cars to air respirators and ventilators
- Luxury retailers like Nordstrom and H&M transitioning from clothing production to face masks
- Individual Americans creating DIY PPE for donation
Developing Long Term Strategies: Resilience and Flexibility
The aftermath of the pandemic demonstrates a need for Change Management to consider the development of a long-term procedure to handle disruptive and catastrophic events in the future. To become prepared for future disasters, companies should focus on building resiliency and flexibility into their risk management plans. This could be approached through many methods:
1. Reconsider Manufacturing Locations
Although global supply chains lower costs through overseas production, the pandemic demonstrated the fragility of supply chains in the face of an unexpected event or change. One solution to building resiliency is to reconsider manufacturing locations in addition to international relations:
- Bring production back to the US
- Bring production nearshore
- Or, partial reshoring of manufacturing
By considering any of the manufacturing solutions above, it will create resiliency by shortening response times in the face of an unexpected supply shortage. Our consultants routinely engage with clients in supply chain process redesign and provide our clients with guidance and support throughout the transition.
2. Having alternative suppliers
Having suppliers from different locations adds flexibility to production. One of the greatest challenges during Covid was healthcare organizations’ overdependency on Asian (particularly China) suppliers. As demand for medical supplies and PPE suddenly spiked, American companies were unable to obtain the needed supplies because of international regulation and sudden shortages.
While overseas production reduces cost, these crises demonstrate a need to reconsider dependency on overseas suppliers as sole providers since it can leave health care organizations vulnerable in the face of crises. Logan Consulting resources are well-seasoned in the design and implementation of supplier sourcing and certification processes
3. Improve supply chain transparency
Whether another epidemic or crisis arises, supply chain resilience can be improved by increasing transparency into potential risks. Early on during the pandemic, some downstream players of global supply chains falsely exaggerated supply needs in anticipation of supply shortages creating issues of unpredictability and preventing the supplies from getting to more important locations.
Transparency also includes developing strategies and using tools to gauge potential risks, regulations, disruptions, obstacles, gaps, etc. By improving transparency, businesses can prevent potential crises from arising and follow a procedure that mitigates a particular crisis. Logan Consulting can assist in developing data-driven toolsets that provide greater insight into the state of the business and impacts from multiple factors.
4. Create a dedicated crisis unit
Although the points in this blog can be given as general business advice across different industries, establishing a dedicated crisis unit and developing a business contingency plan improves global supply chain resiliency. By considering potential risks such as a foreign government’s new trade regulations, businesses can establish a plan that mitigates downstream effects and address issues quickly.
Having a dedicated crisis unit that considers potential risks, holds preparation drills, and tests supply availability is an additional step that can be taken to strengthen global supply chain fragility that was highlighted during the pandemic. Logan Consulting’s organizational change management approach includes the tools and methods required to identify and coalesce the right resources in the organization to most effectively play this role.
This pandemic has highlighted market failures in the medical sector that could’ve been partially prevented or at the very least, stopped from spiraling. It is a call for companies to think about the issues that came up as a result of overdependency on global supply chains and how to build resiliency and flexibility into their risk management plans. We at Logan Consulting are here to help with a friendly remind that you do not need to go through this difficult endeavor alone. To learn more about how Logan Consulting can help build resiliency and flexibility into your business’ global supply chain through Change Management, click here.
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