They say hindsight is 2020 which, in this case, is right on the nose. Its no secret that the healthcare system was fully unprepared to handle a crisis of this magnitude so suddenly. There were breakdowns and failures at virtually every link in the supply chain, from raw materials all the way up to manufacturers, distributors, and providers.
Perhaps the most haunting thing right now is that, although we weren’t ready for this crisis, we weren’t without warning.
Even before the Affordable Healthcare Act – as far back as the early 2000s, there were plenty of people working to identify all the ways in which the U.S. healthcare system would be affected by a crisis such as a global pandemic.
A 2006 article in The Wall Street Journal even describes how a crisis would cause a catastrophic breakdown of the U.S. healthcare supply chain in a way that almost exactly matches what we’ve all experienced during the past year with the COVID-19 pandemic.
“The very rules of capitalism that make the U.S. an ultra-efficient marketplace also make it exceptionally vulnerable in a pandemic. Near-empty warehouses are a sign of strong inventory management… Most fundamentally, the widely embraced ‘just-in-time’ business practice – which attempts to cut costs and improve quality by reducing inventory stockpiles and delivering products as needed – is at odds with the logic of ‘just in case’ that promotes stockpiling drugs, government intervention and overall preparedness.”
In 2006, the concerns about shortages were the lack of raw goods to make the products in the U.S. because 80% of the components came from outside the U.S. Since then, those concerns have shifted, since now least 80% of finished goods come from outside of the U.S.
The article also predicted that one of the major issues we would face would be a shortage of N95 masks. This prediction was based on what happened in Canada in 2003 when there was a small outbreak of SARS. Add to that the fact that, at the time of the article, about 80% of face masks used in the U.S. were also produced in the US. Today, only 1 in 9 are produced in the U.S.
“The main companies that manufacture the masks – 3M Co. and Kimberly-Clark Corp. – had to scramble to meet the sudden demand because, like many companies, they didn’t have an existing stockpile. The outbreak was relatively brief and limited in location — a minor blip compared with what would likely happen with pandemic flu.”
The 2006 article warns that expansion and dependence on a global supply chain combined with a shift to lower inventories dramatically increases vulnerabilities and risk to the supply chain. Additionally, the article outlines some key actions that the U.S. should take in order to prepare the country to effectively handle a future epidemic while acknowledging the various market barriers.
The most gut-wrenching part of all is that it points out that the most significant risk we could take is doing nothing.
It further points out that, at the first sign of shortage, there people will make a panic run on the current supply of critical items, wiping out the national supply within a week and putting product in the hands of those quickest to act, while leaving those with the greatest need without access to the products.
Central to the solutions presented is the shift away from a “just in time” way of sourcing supplies to creating a stockpile of “just in case” inventory. It introduces the concept of “critical product continuity” that includes stockpiling in a way that would require collaboration, visibility and transparency across supply chain stakeholders.
The larger lessons from the article may come from what has happened in the 14 years since the article was published.
The Bush administration paid attention to these issues and there was significant funding and energy devoted to increasing the stockpiles. Additionally, a very specific plan was put in place with the steps to take to address a pandemic.
Over the next several years, we faced several challenges, such as H1N1, SARS, and others that exposed the challenges of accessing the stockpile. However, rather than active management and testing, the valuable and vital product just… sat. This lack of management meant that no product rotation happened, and over time, a growing percentage of the supply was either expired or in poor condition.
The experience of many providers was a lack access when they had a critical need for it. The lesson is that stockpiling works good in theory, but the method of stockpiling and managing the stockpile is critical to its usefulness and success. Stockpiling islands of inventory in a disconnected system while also not actively managing or implementing that resource will inevitably break down during a crisis.
The implications of our past actions have made some points very clear:
- Maintaining a critical supply continuity cannot be a single event, it is an active perennial task
- Stockpiles must have an inventory turnover strategy to avoid obsolescence
- It is critical to know where real demand is happening, which means that continuous visibility and supply chain stakeholder engagement must be established prior to the crisis, not during it.
- The best thing we can do today to better prepare for the next pandemic is to establish a marketplace that allows for visibility into inventory across the entire supply chain, from start to finish.
As the healthcare supply chain deals with the strain brought about by the pandemic, many are beginning to focus their regrouping efforts with an eye toward the future.
The good news is that, in planning for the future, we don’t have to “re-invent the wheel.” The advice from the past and the practical lessons we’ve learned this year make it clear that we need to create better visibility in the supply chain. Implementing and maintain an industry wide healthcare product safety net gives us two great benefits: 1) It will allow us to have fresh inventory with a healthy turnover that minimizes waste and 2) it eliminates the need for individual facilities to stockpile critical supplies.
Just because we were unprepared for the reality of this event doesn’t have to mean we have to be caught off guard for when something similar happens again. If we take advice from the past that, in hindsight, we should’ve taken more seriously – and build upon that advice with the practical lessons learned over the past year, we can create a supply chain that can weather even the biggest storms.