Sep 22, 2020

McKinsey: Five ways to manage pandemic-driven demand

McKinsey
Manufacturing
medical
Pandemic
Scott Birch
4 min
COVID-19 has resulted in exposing the weaknesses in medtech product manufacturing. We look at five solutions that are fixing the problem.
COVID-19 has resulted in exposing the weaknesses in medtech product manufacturing. A McKinsey report looks at five solutions that are fixing the problem...

According to a recent McKinsey study, demand for medical supplies across hospitals in the US reached unprecedented levels in 2020. Orders for isolation gowns increased fivefold, nasal swabs, sixfold, and respirators, a massive 17-fold. As a result, manufacturers were faced with the unexpected challenge of delivery. Some failed and others floundered. But even more were successful. 

Five interventions have helped manufacturers ease supply constraints for medtech products during the pandemic. Important lessons have been learned along the way too. McKinsey isolated three stages of challenge that manufacturers met. These were:

  • A rise in demand causes inventory delays, shortages and a build-up of back-orders. This results in manufacturers placing restrictions on distributors in terms of allocation.
  • Bottlenecks occur when production increases, leading to a shortage of supplies and logistical services.
  • Supply chain issues continue to dwindle as a result of extended lockdowns and production plant closures. This leads to product supply and manufacturing shortages spilling into other industries. 

To combat these problems, five strategies can be implemented, which support short-term and long-term supply challenges. 

undefined

Redeployment of stocks from other sources

Protective equipment is not only used in medical supplies. It is also found in the construction and engineering industries in the form of face shields, respirators and PPE-style overalls. While the spec might not be completely aligned with medical needs, production need only be tweaked, to make the products fit the purpose. 

Maximise allocation and supply

Logistically speaking, fair distribution of supplies is essential. A real-time view on which hospital is receiving what, is the best way to assess and re-distribute medtech. The Advanced Medical Technology Association (AdvaMed) advised that a single body should be in charge of distribution of equipment, so that each care provider received the order it required. 

Increase current capacity

Streamlining the production process by making the most of existing capacity, has, in some cases, resulted in production supply, meeting demand. However, quality of goods can be compromised if this is not carried out efficiently.

According to McKinsey, by modelling the supply chain processes and evaluating where the weaknesses are, processes can be improved so that bottle necks, poor quality manufacture and delays are less likely to occur. This can be achieved through ERP (Enterprise Resource Planning) software platforms. Identifying the key problem areas is paramount. But getting bogged down by data, rather than fixing the weakness won’t be helpful, the report concludes. Instead, manufacturers must concentrate of two to three areas that will make the biggest impact on production delivery.

Extend manufacturing capabilities

When producers decide to extend their production, the process of carrying out such modifications can take years to be realized. However, speed is of the essence when you are facing a pandemic, and as a result, many manufacturers have found ‘work-arounds’ that have resulted in extending their capabilities in record time.  

Firstly, they have called in contractor companies to fulfull if not part, then all of the additional end-to-end production required. Secondly, they have reached out to industries with similar technical ability (such as the construction and engineering industries) where skills are transferrable. Ventilator production is a prime example of this. 

Consider a redesign design

If your current product is taking too long to manufacture, due to supply difficulties or even equipment being overwhelmed, modification to design within reason, is a sensible option to consider. The McKinsey report cites, among others, ventilation production as a prime example. It states; “Numerous organizations, including academic institutions and manufacturers outside the medtech industry, have suggested ways to manufacture emergency supplies of ventilators. Those machines might be basic compared with the usual ventilators, but by using a simplified bill of materials composed mostly of off-the-shelf, easily sourced components, they can be produced quickly and at scale. In some cases, rapid-innovation laboratories and universities have partnered with certified medical-device manufacturers so that regulatory compliance is ensured and production can begin without delay.”

Sharp learning curve

Ultimately, manufacturers have required flexibility and out-of-the-box thinking to handle the excessively large fulfillment of medtech required since the beginning of the pandemic. They have achieved this through a combination of solutions, not least, with the help of real-time supply modelling and monitoring, which has assisted in streamlining the process. Those that risen to the occasion have also learned valuable lessons which will aid them in future growth and success. 

Share article

Apr 30, 2021

The challenges to vaccine distribution affecting everyone

covid-19vaccine
vaccinesupply
Supplychain
Blockchain
Jonathan Colehower
5 min
The challenges to vaccine distribution affecting everyone
Jonathan Colehower, CEO at CargoChain, describes the COVID-19 vaccine distribution challenges impacting every country, organisation and individual...

While it is comforting to know that vaccines against COVID-19 are showing remarkable efficacy, the world still faces intractable challenges with vaccine distribution. Specifically, the sheer number of vaccines required and the complexity of global supply chains are sure to present problems we have neither experienced nor even imagined. 

Current projections estimate that we could need 12-15 billion doses of vaccine, but the largest vaccine manufacturers produce less than half this volume in a year. To understand the scale of the problem, imagine stacking one billion pennies – you would have a stack that is 950 miles high. Now, think of that times ten. This is a massive problem that one nation can’t solve alone.  

Production capacity 

Even if we have a vaccine – can we make enough? Based on current projections, Pfizer expects to produce up to 1.3 billion doses this year. Moderna is working to expand its capacity to one billion units this year. Serum Institute of India, the world’s largest vaccine producer, is likely to produce 60% of the 3 billion doses committed by AstraZeneca, Johnson & Johnson and Sanofi. This leaves us about 7 billion doses short. 

Expanding vaccine production for most regions in the world is complicated and time-consuming. Unlike many traditional manufacturing operations that can expand relatively quickly and with limited regulation, pharmaceutical production must meet current good manufacturing practice (CGMP) guidelines. So, not only does it take time to transition from R&D to commercial manufacturing, but it could also take an additional six months to achieve CGMP certification. 

The problem becomes even more complex when considering the co-products required. Glass vials and syringes are just two of the most essential co-products needed to produce a vaccine. Last year, before COVID-19, global demand for glass vials was 12 billion. Even if it is safe to dispense ten doses per vial, there is certain to be significant pressure on world supply of the materials needed to package and distribute a vaccine.

It is imperative drug manufacturers and their raw material suppliers have clear visibility of production plans and raw material availability if there is any hope of optimizing scarce resources and maximising production yield.

Distribution requirements

It is widely known by now that temperature is a critical factor for the COVID-19 vaccine. Even the regions with the most developed logistics infrastructures and resources needed to support a cold-chain network are sure to struggle with distribution.

For the United States alone, State and local health agencies have determined distribution costs will exceed $8.4 billion, including $3 billion for workforce recruitment and training; $1.2 billion for cold-chain, $1 billion vaccination sites and $0.5 billion IT upgrades.  

The complexity of the problem increases further when considering countries such as India that do not have cold-chain logistics networks that meet vaccine requirements. Despite India’s network of 28,000 cold-chain units, none are capable of transporting vaccines below -25°Celsius. While India’s Serum Institute has licensed to manufacture AstraZeneca’s vaccine, which can reportedly be stored in standard refrigerated environments, even a regular vaccine cold chain poses major challenges.

Furthermore, security will undoubtedly become a significant concern that global authorities must address with a coordinated solution. According to the Pharmaceutical Security Institute, theft and counterfeiting of pharmaceutical products rose nearly 70% over the past five years. As with any valuable and scarce product, counterfeits will emerge. Suppliers and producers are actively working on innovative approaches to limit black-market interference. Corning, for example, is equipping vials with black-light verification to curb counterfeiting.

Clearly, this is a global problem that will require an unprecedented level of collaboration and coordination.

Disconnected information systems 

While it is unreasonable to expect every country around the world will suddenly adopt a standard technology that would provide immediate, accurate and available information for everyone, it is not unreasonable to think that we can align on a standard taxonomy that can serve as a Rosetta Stone for collaboration. 

A shared view of the situation (inventory, raw materials, delivery, defects) will provide every nation with the necessary information to make life-saving decisions, such as resource pooling, stock allocations and population coverage.

By allowing one central authority, such as the World Health Organization, to organize and align global leaders to a single collaboration standard, such as GS1, and a standard sharing protocol, such as DSCSA, then every supply chain participant will have the ability to predict, plan and execute in a way that maximises global health.

Political influence and social equality 

As if we don’t have enough stress and churn in today’s geopolitical environment, we must now include the challenge of “vaccine nationalism.” While this might not appear to be a supply chain problem, per se, it is a critical challenge that will hinge on supply chain capabilities.

In response to the critical supply issues the world experienced with SARS-CoV-2, the World Health Organization, Gavi, the Vaccine Alliance and the Coalition for Epidemic Preparedness Innovations (CEPI) formed Covax: a coalition dedicated to equitable distribution of 2 billion doses of approved vaccines to its 172 member countries. Covax is currently facilitating a purchasing pool and has made commitments to buy massive quantities of approved vaccines when they become available.  

However, several political powerhouse countries, such as the United States and Russia, are not participating. Instead, they are striking bilateral deals with drug manufacturers – essentially, competing with the rest of the world to secure a national supply. Allocating scarce resources is never easy, but when availability could mean the difference between life and death, it becomes almost impossible.

Global production, distribution and social equality present dependent yet conflicting realities that will demand global supply chains provide complete transparency and an immutable chain of custody imperative to vaccine distribution. 

The technology is available today – we just need to use it. We have the ability to track every batch, pallet, box, vile and dose along the supply chain. We have the ability to know with absolute certainty that the vaccine is approved, where and when it was manufactured, how it was handled and whether it was compromised at any point in the supply chain. Modern blockchain technologies should be applied so that every nation, institution, regulator, doctor and patient can have confidence in knowing that they are making an impact in eradicating COVID-19.

Share article