COVID 19: Supply Chain Professionals’ Ultimate Reality Challenge

Reality TV has dominated broadcast media in recent years. The subject matter has been absolutely fascinating: bickering housewives, snarky drag queens, Alaskan Bush people, million-dollar real estate, aspiring fashion designers, bake-offs, and romance in real-time both enchanted and entertained audiences.

Then COVID-19 came along, thrusting the world into a surreal reality show that lacked both rules and purpose; in the blink of an eye, all of Earth’s 7.5 billion inhabitants became part of a real-life version of “Survivor.” Life began to imitate art as alliances formed and deals were made in the shadow of an increasingly contentious presidential race and a “Contagion”-like pandemic that was killing tens of thousands daily.

Businesses have been significantly impacted by COVID-19, particularly suppliers. Supply chain professionals have been thrust into the ultimate reality challenge of their lifetimes. Having been a part of the medtech supply chain for 40 years, I can honestly say there has never been a more difficult time for supply chain professionals to do their jobs. Their actions not only have financial repercussions, but curative ones as well.

Supply chain professionals typically manage the elements of Plan, Source, Make, and Delivery of products, many of which are life-saving therapies. A number of professionals utilize an approach I developed called the OE-Tier5 model (see the graphic) which drives supply chain alignment toward a specific business direction. In other words, once a business direction has been determined, the supply chain professional then creates a configuration, develops action plans, creates metrics, and staffs the plans accordingly. Let’s examine how this model played out in healthcare this year.

Tier 1—Changing Business Direction: The business direction and supply chain configurations of numerous companies have been set in stone for many years. Since the pandemic began, I’ve had countless discussions with healthcare executives who are challenging the very business direction their organizations have traditionally relied upon. A business owner recently told me his company was no longer in the “fulfillment business,” but rather in the “COVID-19 emergency response business.” This organization normally supplied items to hospitals but switched its direction amid the pandemic to provide anyone (hospital, school, government entity, etc.) the necessary products to battle the virus. Let’s ponder that for a moment. The supplier that provided hospitals with on-time quality and delivery services now must reconfigure its supply chains to deliver materials to anyone needing products, regardless of forte or geography. Why? The consumer that once was a hospital may now be Uncle Sam, a school nurse, a city’s emergency response department, or a Third World country.

Such pivots are occurring in companies worldwide, wreaking havoc on supply chains. Consider General Motors and Ford, both of which quickly pivoted from automobile production to ventilator manufacturing. It was a smart move, particularly since nobody was buying cars during the lockdown. Imagine the bewilderment of a Ford Motor supply chain professional having to unexpectedly shift his focus from product procurement in China to domestic (medical) ventilator development. It’s the new reality—many companies are indeed changing their business direction.

Tier 2—Configurations Must Change: Once an organization settles on its business direction, whether it’s temporary or permanent, configuration is key. Consider the frustration that occurred when ventilator suppliers were working feverishly to fulfill lucrative government contracts and then suddenly told those machines were no longer needed.

Keep in mind that configuration encompasses how to Plan, Source, Make, and Deliver items. Each of these elements must be planned out very well, which can take lots of time and money. But planning can be next to impossible during pandemics (and, not surprisingly, Presidential election years) as the direction/guidance constantly changes. A supplier that is asked to source (configure) enough components to manufacture 100,000 ventilators at a rate of 10,000 units per month might not need all those parts when they actually arrive. Likewise, items sourced from China or Mexico might be banned due to trade war issues or political squabbles. Configurations have gyrated numerous times so far this year, and more are surely on the way. Welcome to the new reality.

Tier 3—Actions: In the Plan-Source-Make-Deliver supply chain continuum, moving from planning to sourcing is where the rubber hits the road. It’s Tier 3 in the OE 5-Tier alignment model. This is the point where most resources are consumed and generally the most money is spent. In this phase, commitments are inked and cash starts flowing. Changes in this tier can be costly and quite stressful. Many of the world’s healthcare supply chains are multi-leveled supply chains, wherein supplier A buys from supplier B, which buys from supplier C, and so on. This multi-level supply chain configuration has upward and downward ramifications to many suppliers within their chain of chains. Consider for a moment, the ramifications for a supplier that is told their configuration must drop from 10,000 units a month to zero. The actions driving the configuration of 10,000 units per month presumably have been well in play; to suddenly stop that configuration would have a ripple effect throughout multiple level of supply chains. Thank you, COVID-19.

There are many other pandemic-induced realities that are making supply chain planning extremely challenging. I’ve had numerous discussions with Fortune 10 business owners and supply chain professionals who were dumbfounded over dwindling volume (as much as 65 percent). Where did all that volume go? Technically, nowhere. It still exists, but it’s not making its way into the healthcare system right now. Simply stated—millions of people are not only practicing social distancing, but medical distancing as well. The phenomenon has become such a problem, in fact, that a consortium of top tier companies (LabCorp, McKesson, Humana, and others) funded a site called StopMedicalDistancing.org to encourage people to visit their doctors. “Staying six feet away from others may be essential to maintaining your health,” states a message on the consortium’s website. “But your doctor is not someone you should be avoiding. In fact, a good way to stay healthy is to stay in touch with your care providers.”

Fancy the confusion involved in conducting the supply chain planning and material sourcing for an elective surgery center that suddenly closes or is tackling a three-month case backlog. This is a planning nightmare for supply chain professionals, and it doesn’t appear it will end anytime soon. Even when the pandemic finally ends, life is unlikely to return to “normal,” further complicating the already complex medtech supply chain.

Tier 4—Metrics: Successful business owners realize that creating metrics to monitor supply chain performance is critical. But can a moving target best be tracked? A supply chain planner who one day is tracking the progress on 100,000 ventilators at 10,000 per month might be scrambling three months later to stop shipments of raw materials. Metrics are only as good as the target they are designed to track. At one time in my career, I actually created a metric to track how often metrics changed. The bottom line here is that metrics are now very fluid and changing as much as the other tiers.

Tier 5—Talent: This is a very difficult profession. Wise organizations recognize the importance of what supply chain professional bring to an organization. Knowing how important this profession is—especially in times of crisis—made me realize how critical and rewarding this profession can be. It is not for the faint of heart and it’s not always given the recognition it deserves, but world-class organizations appreciate the importance of the supply chain professional. As CEO or president of prior organizations, I relied heavily on the supply chain professionals in our organization, as I truly understood how critical those roles are to a company’s success.

Conclusion
Supply chains in all industries have been impacted by the pandemic, but those servicing the healthcare sector have been affected to a greater extent due to the life-or-death ramifications of the products being sourced. Supply chain professionals, likely hunched behind three computer monitors in a near-deserted office or juggling their roles from home under lockdown, have been navigating the ultimate reality challenge. To say their jobs have been challenging this year is quite an understatement. Like the front line hospital workers, supply chain professionals are healthcare’s heroes too.

It’s mission critical now for all businesses to very carefully re-evaluate their Tier5 model and determine if the tiers are “in order/aligned” for current events and the lingering aftereffects. Although we all wish this was a reality TV show we’ve been watching, COVID-19 is real, and the pain, trauma, and tribulations rocking global supply chains will only continue for the foreseeable future.

Depending on the outcome of the U.S. presidential election, the global sourcing location that supply chains have been built around may or may not be available. Thus, medtech companies and the U.S. government must ensure their supply chain teams are in place so there are no repeats of the PPE or ventilator shortages that hamstrung the healthcare industry earlier this year.  While we hope this ultimate reality show ends sooner rather than later, it behooves us all to find our supply chain teams and give them big a hug, because it’s likely they need one!