Yahoo Finance The lesson coronavirus taught companies about global supply chains
The coronavirus pandemic has dealt a heavy blow to the global supply chain, as a wave of lockdowns triggered shortages of critical items, and forced entire industries to scramble to meet those needs domestically.
The U.S. health sector has not been an exception. Ventilators, protective gear and testing supplies are temporarily being manufactured by companies that had to halt normal operations in order to meet surging domestic demand, and alleviate rationing in some of the world’s richest countries.
Severe shortages of protective gear for frontline health workers have had a knock-on effect on testing, which has been scarce as the crisis gained a foothold in the world’s largest economy. As a result, doctors have limited equipment to treat the most severe of COVID-19 patients.
There are growing jitters about a second wave later this year that could push back the timetable for a recovery. Meanwhile, strained supply chains and a scattershot policy remain top of mind for public health experts.
However, Quest Diagnostics (DGX) is applying lessons learned from the outbreak to pivot its strategy. The existing supply chain relied on one manufacturer in the U.S., one in Lombardy, Italy, and others in China.
Dr. Jay Wohlgemuth, chief medical officer at Quest, told Yahoo Finance recently that the company has been interested in what startups and ventures are doing, and is working with partners to diversify for its supply needs. That includes 3D-printed approaches, which are scalable, and increasing self-collection options.
“I think we’ve learned our lesson, this time, that we need to diversify the supply chain and make a more convenient way to get a nasal swab,” Wohlgemuth said.
The company has also been able to use the virus as a testing ground for self-administered swabs. Quest was involved in a study with the Gates Foundation, United Healthcare and Everett Clinic in Seattle to determine if self-swabbing was as accurate as a medical professional swabbing.
“So we’re heavily investing and have a lot of irons in the fire on new ways to swab and new supply chains around swabs,” Wohlgemuth said.
In addition, Quest has also been supporting Walmart’s (WMT) 10 drive-thru testing sites around the country. They are self-swabbing, which means the medical professionals are preserving personal protective equipment. It also addresses a major issue of testing for vulnerable populations — which have been disproportionately affected by the outbreak.
“It also has allowed us to validate this approach of consumer self-collection and kind of figure out what works and does not work,” he said.
Ending the dependence problem
The U.S.’s dearth of manufacturing capacity for key goods — especially the medical variety — has been a recurrent theme since President Donald Trump first declared his candidacy. The president has famously called out carmakers for producing outside the country, who are are now helping to crank out thousands of ventilators for the national stockpile.
However, amid the COVID-19 crisis even Democrats have been critical of the issue. Last week, New York Gov. Andrew Cuomo said that the outbreak has exposed just how reliant the country is on China for critical supplies.
“We’re wholly dependent on China for masks, gowns, gloves, ventilators— everything came back to China. That all has to change,” Cuomo said.
“We have to be able to make this equipment right here, and be able to turn up the volume when something like this happens. The entire supply chain has to be brought back to this country. Period.”
Separately, distilleries and craft breweries are being repurposed to produce hand sanitizer, and U.S. clothing and other companies are producing personal protective gear, or 3-D printing them.
Last month, Sen. Chris Murphy (D-CT) and other Democrats crafted legislation that would federalize the medical supply chain— blaming the private sector control for the rationing.
But Dr. Howard Forman, Professor of Management and Public Health at Yale University, told Yahoo Finance that the federal government doesn’t really need to take on a central role. He argued the private sector response is sufficient to meet the needs.
“It’s not like we don’t make these thing, we just don’t make enough,” Forman said.
“I have a tremendous amount of faith in the markets,” he said. “In the short run, we’re seeing the price gouging and bad behaviors that has led us to have shortfalls, but in the long run...you’ll see 3M and others step up.”
In addition, China is now in a better position to turn on production that it was when it was in the middle of the outbreak. That capacity will stay intact through the summer, he added.
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Anjalee Khemlani is a reporter at Yahoo Finance. Follow her on Twitter: @AnjKhem
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