COVID-19 underscored the global supply chain’s fragile nature and the need to develop a more resilient infrastructure to avoid critical shortages of personal protective equipment (PPE),sanitizers, ventilators, drugs and other products.
- Many factories closed temporarily, this is now continuing as COVID outbreaks persist.
- A large numbers of containers, estimated to be as high as 60%, were stranded in-transit, made worse with a reduction in ships-at-sea. This is staggering as the China to USA trade route uses on average 900,000 containers per month.
- Asian nations declared lockdowns and stopped exports to ensure their own supply.
- Combined with the shortage of containers is the doubling of lead times to 6-9 months for many items.
- JIT inventory holding made the problems even worse.
- New manufacturers could not scale-up quickly and many did not have the experience needed to make quality PPE.
Rising Container Cost & Extended Lead Times
Reviving the extended supply chains from Asia, especially China, is taking time and it is evident that the transpacific volume from Asia headed stateside is not slowing (according to Descartes Datamyne). The single biggest factor appears to be stranded containers from various lockdowns and governmental restrictions. Freight shipping is in the midst of a unique and unusual predicament that includes soaring demand, saturated ports, and too few available ships, dockworkers and truckers. No short-term fixes are in sight.
Container costs are already up over 2x pre-COVID and are expected to rise further. This is resulting in price increases. A fully loaded container from China to the USA was just below $6000 pre-COVID. It is rising to nearly $14000. To make matters worse, the lead time for some imports has more than doubled, going to 6-9 months.
Supply is Constrained
The supply situation is made severe by the heightened demand from the Health Care segment. Some
key findings by Becker’s Hospital Review are:
- Availability of exam gloves is expected to be constrained into 2023.
- Global demand for nitrile exam gloves exceeds production capacity by about 215 billion units, or about 40 percent.
- Shortages have been exacerbated by raw material scarcity, port closures and delays, and a twofold increase in usage since June 2020.
- Spending on Gloves rose 250 percent between November 2020 and March 2021.
- As COVID-19 cases drove a surge in demand for N95 masks during the first wave of the pandemic. One year later, the N95 market is still constrained, but not in active shortage.
- 3M has dramatically increased production.
Surgical & isolation masks
- Usage of surgical and isolation masks tripled between June 2020 and March 2021.
- By February 2021, surgical mask spend was about 100 percent higher than February 2020.
- When manufacturers began prioritizing N95s and other masks, isolation gown supply compressed.
- Isolation gowns surpassed N95 masks as the top PPE shortage concern by mid-April 2020, with 74 percent of health systems saying gowns were their top concern.
- Gown purchasing was up about 100 percent in February and March this year compared to February 2020.
Costs Still Well Above Pre-COVID Levels
Some have rolled back, but many are still well above pre-COVID levels. Nitrile gloves, in particular, are still nearly 70% above 2019 and expected to potentially increase further (as forecasted by Ansell in a May 20201 Market Updated). Fact.MR summed it as: “Sky-high demand for nitrile disposable gloves from the medical sector is aiding manufacturers, while initiatives undertaken by private and government organizations are spurring the growth of the market”. Protective clothing (+17%) and shoe covers (+15%) are still high. N95 masks have fallen back with the dramatic increase in manufacturing by 3M.
The World Health Organization has warned that “severe and mounting disruption to the global supply of personal protective equipment (PPE) – caused by rising demand, panic buying, hoarding and misuse – is putting lives at risk from the new coronavirus outbreaks and other infectious diseases”.
Be Careful with Alternate Sources
Many new manufactures emerged in 2020 – especially those with capabilities to manufacture similar products switching to PPE. They were trying to help in a difficult situation. However, there have been cases where such products that do not meet OSHA requirements and even outright fraud. Both Ansell and 3M have issued warnings and guidelines – especially on disposable gloves and N95 respirators.
Steps for “Next Time”
A lot has been written about key lessons learnt and steps to take for “the next time”. Four actions stand out for companies to seriously include in their planning for the future.
Below is a similar note by the American Health Association on steps to take to strengthen the supply infrastructure in the medical field.
4 Steps to a Stronger Supply Infrastructure By The American Health Association
1. Coordinate the Response to Offers for Help
Many hospitals and health systems were flooded with calls, emails and other inquiries about PPE needs as the pandemic unfolded. Some messages reached the supply team, others didn’t. This underscores the need for purchasing or another department to be the single point of contact for coordinating with alternative suppliers and donors.
2. Vet Equipment Designs to Ensure Quality
3. Develop Alternative Suppliers before They’re Needed
4. Test Supply Chain Availability
Here at Quest Safety Products, we are working hard to stay ahead of supply chain issues to avoid passing the rising transportation costs off to our customers. If you are looking to diversify your supply chain with a secondary supplier, 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.