6 minute read
for medical distribution
from REP January 2022
Disruptions in Supply Chain
Supply chain experts discuss the challenges, complications – and opportunities – that the pandemic has created for medical distribution
By Pete Mercer
Over the last year and a half, the medical distribution supply chain has seen numerous challenges and complica-
tions, resulting in massive disruptions throughout the supply chain.
Billy Harris, CEO of Sri Trang USA, Inc., and Mark Seitz, President and CEO of NDC, Inc., recently spoke in a joint session at Share Moving Media’s Healthcare Supply Chain and Distribution Summit, sharing their insights on the current state of the medical distribution supply chain and how the industry can move forward.
Sri Trang USA (STU) is headquartered in Tampa, Florida with distribution centers throughout the United States. STU serves the general purpose and exam disposal glove markets, including healthcare, dental, veterinary and food service, and others. Sri Trang USA is wholly owned by Sri Trang Gloves Thailand (STGT). As one of the world’s leading glove production companies, and the manufacturer of Ventyv brands, STGT has five state-ofthe-art production facilities with its first factory established in January 1989. Currently the largest glove producer in Thailand, Sri Trang has 12 glove manufacturing facilities on five campuses producing 35-billion disposable gloves and exports to 160+ countries. Ventyv is a full line of disposable hand protection products, including Polymed, one of the longest-standing global brands in the hand protection category.
NDC is a leading global provider of both upstream and downstream healthcare supply chain products and support. By offering unique solutions and services, NDC helps their healthcare distributor partners compete in an increasingly complex marketplace. They partner with over 700 manufacturers to bring operational efficiency through customized supply chain solutions.
While it’s certainly no surprise that the global supply chain was facing to approximately $30,000 at the height of the pandemic. Additionally, there is a significant infrastructure compromise with serious labor constrictions and exploding demand. Many organizations do not have the resources to support the new demand levels.
a lot of challenges, Seitz and Harris went into detail on the global challenges that emerged with the pandemic. Harris said, “This pandemic has been different from the bird flu, swine flu, Y2K, SARS and anything else that can create any kind of disruption in the supply chain. This was a world issue.”
Seitz explained that during the pandemic it became harder and more expensive to secure a shipping container. Prior to COVID, the average cost for a shipping container was $3,000; however, that cost increased
For Sri Trang, glove production skyrocketed. “We experienced a similar situation back in 1988, which was when the FDA issued universal precautions and said, ‘If you come in contact with bodily fluids, you must glove, gown, and mask,’” Harris explained. “That was all related to the AIDS virus. Between then and current day, there have been 20 other events that have occurred. In 1980, we would estimate the US market was about 15 billion gloves – disposable and exam – that were probably used. In today’s market, we’re looking at about 70 billion.”
With a massive spike in manufacturing, it creates tension throughout the supply chain. Additionally, the shortage of containers to get gloves to the US further complicated matters. Harris explained how the AIDS epidemic in the 1980s affected glove production, saying, “What happened during the universal precaution days, we had two factors to account for. The demand came suddenly because of the regulations that the FDA was enforcing. And the second part of that was manufacturing was migrating to other parts of the world. So, if you went from a basis of having a supply nearby to now you are having to deal with lead times that most of the buyers were not prepared for. It took the market about four years to recover.
For NDC, they are experiencing a surge in backorders that can’t be fulfilled. Seitz said, “We usually run about $5 million in back orders, it’s fairly consistent. Right now, we have $28 million, on average, back ordered. At one point, backorders were as high as $65 million.”
Are there any remedies that can address the current state of the medical distribution supply chain? Seitz broke down several methods that could potentially remedy the current situation. Legislative initiatives and tariff exemptions could simplify and expedite the international shipping processes, which have been a significant part of the problem. Reshoring efforts would relocate the international production operations back to the United States, making it cheaper to produce, assemble, and distribute the materials. Additionally, an expansion of the supply chain infrastructure would allow for more movement of the high demand goods that healthcare systems so desperately need.
Even with these remedies in place, it seems unlikely that we could return to the normalcy of pre-pandemic operations. Seitz said, “There won’t be a new normal, but there will be new standards and it will be more expensive to get products into this country.”
Commitment to a less lean supply chain
What can we do to make a difference? Seitz believes we should commit to a less lean supply chain with respect to all the goods and services the economy depends on. “I’ve heard some supply chain leaders say, ‘Never again will we be caught in a situation where we don’t have those fundamental products for our healthcare providers’.”
Safety stock is a great way to ensure that your products don’t fall out of circulation in the supply chain. Keeping a safety stock handy could help your customers get out of a quick bind and provide some very much needed relief. Diversifying sourcing and manufacturing capabilities could greatly benefit the supply chain by not relying on the same suppliers for everything you need, which can relieve pressures on suppliers. Additionally, factories could find ways to manufacture items that you wouldn’t normally focus on. Diversifying manufacturing capabilities gives your team new opportunities to keep the supply chain moving.
Seitz said, “Historically, we’re a master distributor. We really were at the mercy of what’s happening with independent distributors and markets.”
At Sri Trang, Harris and his team adjusted their methods and focused on serving their customer base. “What we did is we shifted to a communication focus with our customers about every single purchase order, especially on the logistics side” Harris said. “These were different Zoom calls, spending time doing nothing but identifying every single line item on every single PO. We wanted to identify what we’re going to ship, whether you buy a pallet of gloves or whether you were getting a container of gloves. It’s all about credibility because there was so much misinformation along those lines.”
That push to slow down and focus on Sri Trang’s customer base also allowed his team to address the counterfeit gloves that suddenly appeared in the market. “People were coming into the space because the dollars were so attractive. One of the byproducts of the disruption was something that I never personally participated in. I certainly didn’t think that I would ever encounter counterfeit gloves. We had this very swift acting group of people that took packaging of popular brands, stuffed that packaging with bulk purchased gloves, shipped them here in the US and sold them at premium prices. They were using our packaging and we had people calling to authenticate that it was our product.”
Maybe the best way to commit to a less lean supply chain is to watch our innovative tendencies. Innovation saves times and money, but how many of these new tools are addressing the problems they were created to fix? Seitz said, “Are we getting carried away as an industry with how we innovate? How many new products are really addressing the problem?”
At the end of the day, it comes down to whether the customer is being served or not. Healthcare systems are having to ration items that were once taken for granted. Once the worst of COVID and the supply chain disruptions are in the rearview mirror, let’s make sure not to forget the hard lessons we’ve learned along the way.
