Medical providers throughout the United States are experiencing critical shortages of vital supplies and pharmaceuticals. Lack of supply chain visibility has left healthcare organizations unprepared for the impact of world events such as China’s zero-COVID policy on our healthcare supply chain. But now that the policy is easing and China faces yet another fast-spreading outbreak, continued supply chain disruption for U.S. healthcare organizations and the people they serve are here to stay.
Add in the war in Ukraine and escalating tensions between China and Taiwan, and it’s clear that the global geopolitical risk landscape is increasingly volatile. Now is the time to modernize risk management practices. Enabling radical supply chain visibility can help healthcare leaders prevent future shortages and disruptions, and most importantly, ensure continued optimal care for patients.
Alarming Pharmaceutical and Medical Component Shortages
As of mid-December, the United States Food and Drug Administration (FDA) published 31 different medical devices and supplies on its shortage list — including general hospital devices, anesthesiology, dialysis-related products, testing supplies and equipment, ventilation-related products and more. Largely due to sudden demand increase, shipping delays, and manufacturing compliance issues, these disruptions have placed U.S. healthcare in a perilous state.
For example, shortages of several high-profile prescription drugs including antibiotic amoxicillin and ADHD treatment Adderall are making headlines. Patients are being forced to ration pills, while parents are hunting for over-the-counter pain and fever reducing medications for their sick children due to kids’ ibuprofen and acetaminophen being in short supply.
Back in June, hospitals were even rationing supplies and backlogging procedures due to a critical shortage of IV contrast dye, a key component for crucial imaging tests such as x-rays and CT images. The American Hospital Association estimates thousands of patients had medical scans delayed because of the shortage from Shanghai-based GE healthcare operation, which about half of the hospitals in the U.S. rely on. Today, an increase in magnetic resonance imaging (MRI) procedures has one in two (55%) radiology professionals concerned about the availability of gadolinium-based contrast agents (GBCAs) for use in MRI procedures.
Container Crisis: Backlogs and Delays
With many pharmaceutical products requiring refrigeration during transport, healthcare organizations across the U.S. are forced to rely on suppliers in China for the safe transport of medical supplies, as the country produces 100% of the world’s refrigerated containers.
In the U.S., China’s lockdowns impacted the timely receipt of temperature-dependent pharmaceuticals such as COVID-19 vaccines. In fact, the Centers for Disease Control data estimated that 20% of COVID vaccines were lost in early 2021 because of cold chain issues.
Shanghai – which is home to one of the world’s busiest ports – was on full lockdown for two months this past spring. The trickle-down impact of Shanghai’s port lockdown was felt for much longer as the delays wreaked “havoc on ocean carrier scheduling,” according to a statement from the port. Just this August after a worker tested positive for COVID-19, China shut down the Meishan terminal at the Ningbo-Zhoushan port – the world’s third-busiest container port. This one terminal accounts for over a fourth of the total container cargo volume processed at the Ningbo-Zhoushan port. As shipments are diverted to other terminals, the backlog from extended wait times is expected to increase.
It’s clear that the consequences of relying on a single location for both supply and logistics are compounded when said location experiences disruptions. Although China has recently relaxed some of its zero-COVID restrictions, as of this writing, the country is currently facing what is likely the world’s largest surge of the pandemic. In fact, China’s public health officials predict possibly 800 million people could be infected over the next few months. This means we should anticipate major supply chain impacts throughout 2023, if not longer.
Why Reducing Our Reliance on China Isn’t the Cure
Legislation designed to encourage diversification of our medical and pharma supply chains away from China is anticipated in the near term. While this is a step in the right direction, it won’t end these supply chain disruptions on its own. It’s unrealistic to think onshoring or nearshoring will completely remove the risk of supply chain disruptions.
It is actually very likely that we will see many companies that boasted plans to nearshore and source out of locations like China and Russia go back on their promises, as making this leap will prove to become impossible for large enterprises without severely impacting the bottom line. While there are mixed opinions on whether or not the United States will face a recession in 2023, no company, large or small, is going to make a major change that could negatively impact their bottom line to this degree.
From manufacturing capabilities down to raw material availability, we will always have to rely on others. The piece that’s missing – the antidote to supply chain disruptions – is radical supply chain visibility and proactive vigilance.
Radical Supply Chain Transparency: Forewarned is Forearmed
Today minimizing or avoiding supply chain disruption requires rapid informed decisions for agile intervention. Informed decisions are built on current intelligence, a clear and deep view, and early warnings of trouble. Unfortunately, most healthcare organizations are relying on legacy risk management practices such as periodic assessments. This quickly stale data is counterproductive to effective risk mitigation and leaves supply chains vulnerable to disruption. What happens when risks of disruption inevitably occur between assessments?
A modern approach to supply chain risk management enables continuous, always-on monitoring for emerging risks and real-time notification of potential trouble. But it’s not enough to continuously monitor the traditional risks of financial and cyber. Healthcare supply chains are vulnerable to a much more diverse range of risks. Therefore, a modern approach needs to cover a full spectrum of risk that includes location factors such as geopolitical and environmental and climate risks as well the supplier factors of operations, compliance, ESG, and Nth party risks – all of which have the potential to disrupt healthcare supply chains.
Proactive Vigilance through Automating Supply Chain Risk Management
With the ability to foresee risk events such as a lockdown and the cascading impacts, agile intervention is possible. Healthcare organizations can leverage real-time supplier and location intelligence to proactively find alternate suppliers or order supplies in advance of shortages. Better yet, it’s possible to operationalize this risk intelligence and automate risk mitigation actions based on preprogrammed triggers or thresholds that align with an enterprise’s overall risk mitigation strategy. In this way, organizations can realize significant improvements in risk management efficiency and effectiveness while reducing costs.
By modernizing supply chain risk management to harness the power of radical supply chain transparency – real-time, full-spectrum risk intelligence and alerting – no threat will be left unseen, supply chains will be secure, and most importantly, optimal patient care can be maintained.
About Atul Vashistha:
Atul Vashistha is the Founder and Chairman of Supply Wisdom. Founded in 2017 as an early warning service for business disruption risk, today, Supply Wisdom® is the market-leading patented supply chain and supplier risk and resilience solution.
Atul is recognized globally as a leading expert on supply chain risk and global business services. He has authored three best-selling books: The Offshore Nation, Globalization Wisdom, and Outsourcing Wisdom.
Atul serves on boards on the US Department of Defense Reserve Forces Policy Board,IAOP, Cozera, and Shared Assessments. He has also recently served as Vice-Chair for the US Department of Defense Business Board.