16 Nov 2020
Pharma worker in face mask and glasses

Supply Chain Disruption: Single-Sourcing Is No Longer a Solution

Managing disrupted supply chains is top of mind and has become more and more important for PPE, medical supplies, and other “essential” products. As COVID-19 cases spike around the country, the increased need for supplies will challenge supply chains again. In recent surveys, 94% of the Fortune 1000 companies have reported seeing coronavirus-driven supply chain disruptions and 56% of CFOs identified this as a key issue facing their company. Risk mitigation has become critical.

"The pandemic has been and will continue to be a major shock to global supply chains and sourcing strategies." -Harvard Business Review

When supply chains are disrupted, those who single source, in particular, suffer most. There are many examples of this especially for PPE and medical supplies. In times of shortages, most suppliers focus on their core customers. Many U.S. businesses are looking for multiple suppliers including ones in Mexico and Central America. Their proximity makes them more attractive, with lower shipping costs, no duties, and imports that aren’t on the high seas for weeks at a time. In other categories, Apple is moving a part of its supply chain to India. Indonesia has made dramatic changes to become more “business-friendly." This is what PwC and AmCham call a ‘China+1’ strategy.

In situations like a pandemic, companies need multiple suppliers, particularly for essential supplies. Spikes in demand, temporary trade restrictions, and shortages of critical supplies make consistent supply less reliable. A McKinsey survey shows that 93% of supply chain leaders are looking to improve resilience by dual sourcing (53%), increasing inventory of critical items (47%), nearshoring and increasing their supply base (40%), and regionalizing supply chains (38%).

WHERE TO START

With the COVID-19 spikes, the time to add an additional supplier is now.  According to McKinsey, “Actions taken now to mitigate the impact on supply chains can also build resilience against future shocks.” 

"Without data, you're just another person with an opinion." -W. Edwards Deming

Identify

To begin, businesses must identify at a granular level the items that are at high risk and develop a realistic plan going forward. It is necessary to critically review requirements to identify those that are sourced from high-risk areas and lack ready substitutes. McKinsey recommends developing a risk index for each based on the uniqueness and location of suppliers.

Research

Once you have identified your critical items, there are several factors to consider anytime you add a supplier to your supply chain. There are companies that typically specialize in certain industries or geographies. Finding one that has a deep knowledge and experience in your industry and understands the unique challenges your company faces will help to shorten the onboarding. These companies that already know your industry have experienced staff that is technically trained so they are hyper-focused on what impacts customers.

Learn

In addition to aligning with a company already familiar with your industry, you want to partner with suppliers that diversify their own supply chains in order to provide your company with peace of mind that they can deliver the products you need. They continuously monitor critical-to-business products and practices to limit disruptions and prepare for changes. A company that can provide you with demand forecasting and reports usage information by working closely with customers and manufacturers alike help to limit challenges in the future.

PARTNERING WITH SUPPLIERS

Once you have found a reliable supplier, commit to being transparent and responsive. Suppliers that make good partners often use the same protocol for their own supply chains. Due to their position in the marketplace, they can report potential issues to customers before they can negatively impact the safety of employees or pharmaceutical production. Decision-makers and manufacturers that foster frequent and transparent communication have better outcomes.

Another good practice for both suppliers and customers is to purchase and warehouse additional inventory on items that may have emerging supply constraints. Your supplier should be able to work with you to mitigate most risk. Often is the case in shortages, COVID-19 related products have been placed on a restricted-access list and purchases of these must be cleared by senior management; priority for COVID-19 products typically goes to top customers.

SUPPLY CHAIN RESISTENCE

Most companies are assessing their supply chains and taking action to improve resilience. As a start, they are identifying the products and materials that are at high risk and developing realistic plans going forward. Gartner has identified six strategies. Some best practices include:

  • Diversifying sources for critical components and materials; this includes geographic diversification, partnering with the same supplier, or using secondary sources. Those highly dependent on China are considering a China+1 strategy.
  • Building higher levels of safety stock or strategic inventory reserves of, at the least, critical supplies and “essential” items.
  • Multiple- sourcing, especially for high-risk items, and building partnerships with a few suppliers. In addition to reducing disruption risks, this can have additional benefits such as access to more capabilities, more ideas for cost reductions, etc.
  • They are ensuring that transportation is not a bottleneck. This is one reason companies are looking to have supply options closer to home.

Gartner supply chain resilience chart

05 Oct 2020

Restructuring Disrupted Supply Chains: Single Sourcing is No Longer a Solution

Supply chain management is a critical factor in many businesses’ long-term success, and the COVID-19 global pandemic has wreaked havoc across many industries. When a disaster strikes, everyone suffers: buyers and suppliers alike. Managing disrupted supply chains is top of mind, but it has become more important than ever for companies dealing with PPE, medical supplies, and other “essential” products. In recent surveys, 94% of the Fortune 1000 companies have reported seeing coronavirus-driven supply chain disruptions, and 56% of CFOs identified this as a key issue facing their company (PwC). Risk mitigation has become critical.

“The pandemic has been and will continue to be a major shock to global supply chains and sourcing strategies.” –The Harvard Business Review

When supply chains are disrupted, those who single source, in particular, suffer. There are numerous examples of where this has become an issue, especially for PPE and medical supplies. Many US businesses are looking at the Far East, Mexico, and Central America for additional suppliers. In other categories, Apple is moving a part of its supply chain to India. Indonesia has made dramatic changes to become more “business-friendly.” Mexico and Central America’s proximity makes them more attractive, with lower shipping costs, no duties, and imports that aren’t on the high seas for weeks at a time. PwC and AmCham call this a ‘China+1’ strategy.

Companies are identifying items at risk, developing realistic plans for moving forward, becoming more flexible and agile, gaining greater visibility to suppliers, and more accessible processes for onboarding new ones.

MULTIPLE SOURCING PARTNERSHIPS ENSURE EFFICIENT SUPPLY CHAINS

Quest Safety Products has been proactive in managing its supply lines and inventory by leveraging and expanding its sourcing partnerships.

The Power of the Network

Quest Safety leverages the power of the SafetyNetwork buying group of 55 members. This gives Quest access to manufacturers’ and suppliers’ top-level decision-makers. The buying group shares available inventory to meet customer demand and shares best-in-class, next-level suppliers outside the buying group. The size of the buying group’s orders allow them to negotiate large volume buys such as an N95 mask program with Honeywell or a Container Purchase Program for Nitrile gloves. With 55 members in the networks, customers receive excellent service nearly anywhere in the country.

Global Supply Relationships

Quest Safety works directly with overseas manufacturers to reduce costs and increase availability. We have long-standing relationships with Far East manufacturers. Quest is also in discussions with leading manufacturers in Mexico and Central America to strengthen the supply chain and ensure continuity. Samples are being manufactured for a number of products to ensure quality. These global relationships also help our company better understand events or disruptions occurring outside the US.

Transparent Communication

Quest Safety understands the importance of transparent communication, especially related to the products customers need to operate. This includes discussing any potential issues before they negatively impact the safety of their employees or pharmaceutical production.

COVID-19-related products are on a restricted-access list, and purchases must be cleared by senior management at Quest and top customers get priority.

UNIQUE SUPPLY CHAIN REQUIREMENTS OF THE PHARMACEUTICAL INDUSTRY

Quest Safety Products has developed a deep understanding of the pharmaceutical industry’s needs and requirements through technical training and decades of experience. This enabled Quest to be hyper-focused on what impacts pharmaceutical customers at this time and source high-quality PPE alternatives during recent supply chain outages.

Quest has a conference call with PPE manufacturers every two weeks to understand the supply chain status and work through challenges. The company continually monitors critical-to-business products and practices, doing this every two weeks or monthly with the customer’s end-users or usage committee group. Consistent communication allows Quest to provide demand forecasting and reports usage information by working closely with customers and manufacturers to ensure a smooth flow of information.

MITIGATE RISK THROUGH A CONSISTENT SUPPLY

Most companies are assessing their supply chains and taking action to improve resilience. As a start, they are identifying – at a granular level – the products and materials that are high risk and developing realistic plans going forward. In summary, best practices include:

  • Diversifying sources for critical components and materials; this includes geographic diversification, partnering with the same supplier, or using secondary sources.
  • Those highly dependent on China are considering a China+1 strategy.
    Building higher levels of safety stock or strategic inventory reserves of, at the least, critical supplies and “essential” items.
  • Multiple-sourcing, especially for high risk items, and building partnerships with a few suppliers. In addition to reducing disruption risks, this can have additional benefits such as access to more capabilities, more ideas for cost reductions, etc.
  • Ensuring that transportation is not a bottleneck. This is one reason companies are looking to have supply options closer to home.

When a pharmaceutical company needs to consider adding a vendor to guarantee they get the products they need, Quest is experienced in managing the Supplier Change Process to ensure a smooth addition. If this is something your organization is working though, we are here to help.

Founded in 1997, Quest Safety Products is a full-line distributor and manufacturer of safety products, disposable garmenting, and equipment for any environment that requires safety equipment, risk mitigation or hazmat protection. Quest is a certified SBA HUBZone company, Board Member of AD SafetyNetwork Buying Group, and PSCI member company – Audited. Award winner from Eli Lily, AstraZeneca, NMSDC, HUBZone Council and SBA.

22 Sep 2020

Safety & Personal Protective Equipment Post-Pandemic

Safety and PPE have been at the forefront for governments, health care systems and C-suites across the world. Wearing masks to significantly reduce the spread of COVID-19 has been highly recommend and even mandated. For your own personal protection gloves, hand sanitizers, using cleaning wipes and regular hand washing are essential. Occupational Safety and PPE will continue to be critical as the economy starts to open. A major discontinuity is the heightened awareness and need for cleanliness and hygiene which, experts agree, is likely to continue well beyond the virus.

-Rahul Kapur Ex-Chief Strategy Officer, Aearo Technologies (now 3M) Managing Director, Icon Investment Partners Senior Advisor, &Marketing, Crossroad Transactions July 2020

HOW THE WILL THE PANDEMIC CHANGE SAFETY AND PPE?

There have been unprecedented changes in the Safety and PPE over the last few months. Many of these are expected to continue as economies around the globe start to re-open – probably in fits and starts as there have been, and will be, local flare ups of the virus. Learning on better treatment of the virus has, thankfully, reduced the number of people passing away. Many of these changes are likely to be more permanent in nature or at least last for several years.


The COVID-19 pandemic has highlighted the critical role of workplace safety – starting with health care but in industries across America and the world. As companies reopen it is important to communicate with returning workers to make them aware of the safety measures in place, how to comply with them and that proper personal protective equipment and general cleaning materials such as soap and hand sanitizer are available. It should be clear who within the company will answer questions that will arise.

OSHA has already published guidelines that include what workers should understand about the virus. It is offering free on-site consulting for small to mid-size companies. As per OSHA, health care workers are at the highest risk followed by “workers with high-frequency interaction with the general public” (e.g., schools, restaurants and retail establishments, travel and mass transit, etc.). In many cases office workers are continuing to work-from-home where possible, but others returning to their work sites. Strict protocols need to be in place to these protect these workers, especially those at greater risks such as certain age groups and those with certain health histories.

OSHA Guidlines

Employers should ensure that their workers understand:

  • Differences between seasonal epidemics and worldwide pandemic disease outbreaks;
  • Which job activities may put them at risk for exposure to sources of infection;
  • What options may be available for working remotely, or utilizing an employer’s flexible leave policy when they are sick;
  • Social distancing strategies, including avoiding close physical contact (e.g., shaking hands) and large gatherings of people;
  • Good hygiene and appropriate disinfection procedures;
  • What personal protective equipment (PPE) is available, and how to wear, use, clean and store it properly;
  • What medical services (e.g., vaccination, post-exposure medication) may be available to them; and
  • How supervisors will provide updated pandemic-related communications, and where to direct their questions.

Increased Demand for PPE

Demand for PPE such as masks, gowns, gloves, face shields, cleaning wipes and hand sanitizers has sharply increased since these are the only products that can protect you from contracting the disease until vaccinations are available. This will take time. Given the stringent social distancing rules more widespread usage of PPE is crucial. This is especially true as the economy re-opens and if there is a second wave of infections. PPE products will be worn by individuals plus there will be demand by companies as people return to work after the lockdowns. Workplace safety is a major concern and, for now, PPE usage is the only option.

The PPE market is estimated to be $46 billion in 2019 according to a MarketsandMarkets report and should grow to $58 billion by 2022, at a compounded annual growth rate of over 6.5%. 

Supply issues around PPE were a major factor in the initial months, especially imports from China. Those that were aggressive in finding supplies gained not only in sales but also their customers’ gratitude.

More and more end-users are approving secondary suppliers and SKUs as part of their Risk Mitigation program as well as setting up monthly meetings with suppliers to get updates on the key product supplies.

A number of companies stepped up to expand manufacturing capabilities and increase production. This includes the traditional safety companies like 3M, Honeywell and Draeger as well as a number of new entrants, many of whom saw the opportunity to help their country in a time of shortage. This particularly includes those with sewing capability, those with the ability to bottle hand sanitizers and companies who could manufacture sophisticated ventilators. Good examples are Eddie Bauer, Nike, American Seating, Graffiti Shield, My Pillow, Jim Beam and even GM & Ford.

Long Term Change Expected

Based on my experience working with safety companies, research conducted and perspectives from prominent voices in safety by Safety+Health magazine there are four more significant longer-term changes expected:

  • Personal hygiene and area disinfection practices will become a part of the routine for the foreseeable future.
  • Strict protocols and administrative controls will be required & enforced for locations with more than a certain number of people.
  • Company and organizational policies will be needed for activities such as employee travel, sanitizing, disinfecting, additional training requirements and using/leveraging technology for safety.
  • Many PPE companies faced serious problems with their supply chains; particularly those importing from China. Now is certainly not the time for single sourcing. Many are seeking alternatives in Mexico and Central America. Other Far Eastern countries are becoming potential suppliers.

There are likely to be more guidelines developed by the CDC, OSHA, etc. to help organizations deal with this emerging “new normal.”

Beyond these, there will be other changes in occupational safety that business leaders should be considering. These include:

  • More and more companies will improve their Disaster Preparedness Plans starting with an evaluation of how they reacted to this pandemic and what they learned. The pandemic has forced Disaster Preparedness Plans from being “nice to have” to an essential.
  • There will be continuing updates to product standards, new workplace protection requirements and guidance, federal and state policy enhancements, and strategic undertakings by the PPE industry and governments to increase preparedness efforts. Following these will be important.
  • With these new guidelines, safety professionals will need to ensure that procedures to verify these practices are in place and performed properly. Primary these will include ensuring social distancing and barriers if people cannot meet distance requirements (shields at retail establishments are a good example). Other guidelines may emerge as we gain new knowledge about the virus.
  • Safety training will increasingly go online and innovative methods are evolving. Internet training will push beyond clicking a PowerPoint to become more interactive and with live demonstrations. Knowledge checks will be incorporated.
  • There will be safety implications on working from home. These are not yet clear.

Strategic Implications for PPE Providers

So what does this mean for PPE providers as they navigate through these uncertain times? Here are somethings that business leaders should be thinking about.

Fixing disrupted supply chains is mission critical. PPE was not alone. This affected almost every company. Out of the Fortune 1000 companies, 94% reported seeing coronavirus-driven supply chain disruptions (Fortune, 2020). There is increasing discussion on domestic manufacturing of “essential supplies” with PPE near or at the top of the list. While moving completely away from China may be difficult, more diversified supply chains are emerging. Companies are looking at the East Asia, Mexico and Central America. Mexico and Central America’s proximity makes them more attractive with lower shipping costs and imports not being on the high seas for four weeks. This is what PwC, AmCham call a ‘China+1’ strategy.

Selling PPE at retail and online will exponentially expand. These channels are becoming more and more important to tap into the consumer demand for masks, gloves, cleaning wipes, hand sanitizers, etc. Sales of these products have exploded on Amazon, even gas stations are stocking them. More and more companies are starting to sell direct from their websites.

The winners will be those who innovate. This creativity can already be seen in face masks where a tremendous range of products are already available. These include colors, designs, and logos. Many are reusable and there are even copper infused masks that are “breathable with a double-layer barrier.”

A number of COVID Safety Kits have been introduced. These include an employee safety kit with a selection of safety products for people returning to the workplace by Arbill, Samsara Luggage globally launched Essentials for COVID for travelers, and here at Quest we are introducing kits targeted at several uses.

There have been other recent innovations, including (i) antimicrobial scrubs for medical staff and scrubs with anti-chafe stitching, four-way stretch, articulated knees, and stretch waistbands that enable greater mobility and increased comfort; (ii) antimicrobial respirator masks where silver and copper act as antimicrobial agents that kill and inhibit the growth of bacteria, viruses, mold, and fungus; and (iii) surgical gloves with perforation indicators and a higher level of protection using double gloving.

Maintaining relationships with new customers. Many PPE companies, especially distributors, have gained new customers especially where they had much needed supply. Continuing to build these new relationships can be an opportunity for growth. Here a combination of Account Based Marketing (ABM), sales force efforts and Inside Sales programs and help. ABM is a strategic marketing approach that targets a set of customer via digital marketing to build awareness and uses content marketing to build brand image at multiple levels in the customer’s organization.

In Conclusion

Personal protective equipment (PPE) has emerged as the only normal way to step outside when the world is faced with the highly infectious coronavirus. The major trends that are likely to persist are increased personal hygiene and area disinfection practices, strict protocols and controls will be required & enforced where larger numbers of people congregate, policies will be needed for activities where there is employee interaction with the general public, additional training will be required and supply issues will need to be fixed. Retail and on-line sales of selected PPE products to individuals and small businesses will be a more significant opportunity. Innovation, that meets consumer and end-users needs, will be crucial. Finally PPE companies have gained customers in these unprecedented times and should make an effort to build relationships with them.

About the Author

Rahul Kapur has 40+ years of successful business experience spanning a variety of areas. As a business consultant, he provides companies of all sizes with his expertise in strategy development, M&A, new products & innovation, and data analysis and modeling. His experience includes Unilever, Dow Chemical and Aearo Technologies (now 3M). He is Managing Director of Icon Investment Partners, Chairman of Guilford Group, Managing Member of Ark Capital Investments, LLC, and Senior Advisor for &Marketing, Crossroad Transactions, and Quest Safety Products, as well as on the boards of several start-ups.