Creative Remedies Needed to Secure Vital Supplies

One of the lessons from the Covid-19 pandemic that companies and governments have taken to heart is the need to protect supplies of strategically important products such as microchips.

Personal protective equipment (PPE) also falls into the strategic product category, and there are calls to protect US domestic production of items like masks and surgical gloves. Manufacturing capacity added during the pandemic is now in decline.

While securing these supply chains against another pandemic or catastrophic event makes sense, throwing government money at the problem is not necessarily the answer. To solve the PPE supply problem, we need to heed another critical lesson from the pandemic: conventional wisdom is often insufficient when dealing with exceptional challenges.

Shrinking capacity

As the Wall Street Journal reported recently, the US government invested heavily in domestic PPE manufacturing during the pandemic to counter severe shortfalls in supply. However, the country has since lost much of this capacity. For example, about 70% of the 100 or so US mask companies launched during the pandemic have closed, the WSJ reports. US production of N95 and surgical masks fell by more than 90% in 2023 compared to 2021. Many new plants financed by government money remain unfinished, idle, or operate far below capacity.

A steep fall in demand since the pandemic is one reason for the decline. Another is that US hospitals went back to buying PPE from overseas suppliers when the pandemic-related supply chain disruptions subsided. Many medical buyers are contractually obligated to use foreign vendors. Cost is also a factor. Manufacturers in the US may not be able to compete with low-cost producers overseas, a problem exacerbated by excess production capacity in Asia.

The PPE industry is calling on the US government to provide financial support for domestic producers and establish a stockpile of supplies. There are advocates for this type of support within government, too. According to the WSJ, the US Department of Health and Human Services has asked Congress for $400 million to maintain preparedness programs encompassing an expanded US PPE manufacturing base.

Alternatives to large stockpiles

Using government money to protect the supply of PPE is in line with the changing face of globalization. In the post-pandemic era, the US and other countries have identified supply chains of strategic materials. They aim to make these supply chains more resilient and less reliant on suppliers in foreign countries, such as China, with the help of subsidies and other forms of government support.

Policies like these have become more acceptable since the pandemic disrupted global commerce. However, that does not mean this is the best approach to securing PPE supply lines.

As I describe in my book The New (Ab) Normal: Reshaping Business and Supply Chain Strategy Beyond Covid-19 (MIT CTL Media, 2020), the reasons behind PPE shortages during the pandemic suggest that building a national stockpile with government-supported domestic producers may not be the best way forward.

A detailed OECD analysis of supply and demand for global mask production cited in my book gives an idea of the magnitude of the PPE supply challenge. The study suggested that normal global demand before the pandemic was about 48 million masks per day. Normalized for population, mask consumption during the pandemic was 27 times higher than regular demand, exceeding global production capacity by a factor of 10. The analysis indicated that the world would need a stockpile of 27 years of PPE inventory to handle just one year of a Covid-19 pandemic.

It is easy to imagine how expensive building and maintaining such a stockpile might be. In addition to the initial costs, PPE items deteriorate and must be replaced regularly.

However, the international response to Covid-19 shows that large stockpiles may not be necessary. When the pandemic hit, many companies outside the PPE manufacturing industry repurposed their production systems to bridge critical shortages. Haute couture clothing makers, shoe companies, and T-shirt producers switched to making masks. Car makers made ventilators, and distilleries produced hand sanitizer.

Of course, a minimal stock level may be necessary for industry to “catch its breath” and implement a changeover to PPE production. However, this inventory would not be required to cover the duration of a significant disruption.

For the most part, mask production depends on simple materials and manufacturing steps widely found among various suppliers in various industries. During the pandemic, the exceptions were a special non-woven fabric and treatment systems needed to make a breathable filter layer that electrostatically traps tiny particles in masks. These critical elements were difficult to find.

With this in mind, an alternative to expensive, maintenance-heavy national PPE stockpiles is a response strategy that flexibly uses the vast global production systems for discretionary consumer goods to meet demand peaks. Back-up manufacturing capacity for bottleneck materials and systems should also be part of the strategy.

In this scenario, small PPE inventories are still needed, but the focus of a national stockpile should be on hard-to-get materials, such as breathable filter layer materials. These parts and materials are not only less expensive than the finished products, but they also offer finishing flexibility. The entire stockpile would then be smaller and less expensive.

A different mindset

In addition to providing an alternative to mammoth stores of PPE, this nuanced strategy offers a broader lesson courtesy of the pandemic experience.

The global crisis reminded us that dealing with extreme disruptions requires extreme thinking. Instead of reaching for well-worn solutions – such as government support – we need to be thoughtful about the root causes of such challenges and creative when developing ways to address them.

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