by Ric Esarey, CMRP
Senior Consultant, Supply Chain Operations
07/14/20

Global shortages of personal protective equipment (PPE) supplies during the COVID-19 pandemic exposed a number of weaknesses in the Assurance of Supply principle. To prepare for subsequent resurgences of cases, many health care organizations (HCOs) have begun planning to build safety stock caches of PPE supplies to mitigate future shortages.

Building emergency stock is nothing new. In Southern coastal areas of the U.S., HCOs have been preparing emergency stock during hurricane season for years. These facilities typically sequester sufficient stock to sustain clinical operations until the supply chain can resume normal operations; a recovery planning period that can range from one to three weeks.

But COVID-19 presents different challenges than hurricane season. The supply need isn’t regional, it’s global and the duration period is undefined. Planning is further complicated by the lack of clear direction on the quantities and types of supplies needed to provide quality patient care AND properly protect the frontline caregivers.

The stages of supply chain response

While there is no proven playbook for dealing with the impact of COVID-19 from a supply chain perspective, a crisis typically plays out over three stages: reaction, recovery and preparation. Where are you in the continuum?

Reaction: Sudden supply shortages and changes in supply and demand forced many organizations to modify their inventory strategies to project PPE product burn rates and supply availability. Global shortages led to creative solutions such as cancelling elective procedures, reprocessing products indicated for single use and substituting products when available. Organizations like the FDA, CDC, FEMA and your GPO mobilized resources to support these efforts.

Recovery: As the number of COVID-19 cases goes down in parts of the country, so does the demand for PPE products. Back orders may begin to be filled slowly as production outpaces usage. Many HCOs are also resuming “normal” operations with elective procedures, effectively shifting PPE demand to pre-COVID levels. Some organizations may now have sufficient on-hand inventory and be shifting away from a “shortage” mentality. On the downside, having sufficient PPE stock on hand may lull inventory planners into being unprepared for a potential resurgence of COVID-19 patients.

Preparation: Until a vaccine or cure for COVID-19 is available, HCOs must prepare for potential future runs on PPE supplies. Proactive HCOs are developing strategies for utilization, financial approach, strategic sourcing and inventory management of this safety stock.

Prepare now for future resurgences 

Though your organization may still be in the response or recovery stage, it’s never too early to begin thinking about the future. Given the complexity of the pandemic and lack of a vaccine, organizations should prepare for sudden, unexpected increases in COVID-19 cases and optimize PPE stock now. Here are some considerations:

Utilization
Guidelines for PPE use were modified during the initial wave of COVID-19 shortages and conservation of resources was considered clinically acceptable. It is appropriate to challenge your nursing and infection control departments on reusing items indicated for single use.

Disposable items that had reusable options were one of the solutions for bridging the shortage gaps. In addition to alleviating the global shortage, reusable products provide a green alternative to disposables in raw materials, manufacturing waste, transportation, packaging and, ultimately, landfill reductions.

Financial approach
Supplies for seasonal use like flu or hurricane season are needed for a defined period. These supplies have probably been included in the budget and are consumed at the end of the season. They may have been expensed in the normal course of business assuming that the eventual use will result in a reduction in expense in the period following the season.

Building long-term (at least 90 days) emergency PPE stock for an unpredictable event such as COVID-19 could require a significant investment. In order to defer the expense and impact on the financial statements, create a perpetual inventory location for these supplies and carry the value of the stock as an asset. The only caveat is to estimate the total investment and work with your chief financial officer to ensure cash flows and asset accounts are reviewed and approved by finance.

Strategic sourcing
The first tenant of sourcing strategy is assurance of supply. Neither price, quality nor service matter if product is unavailable. Availability of supply, free of geopolitical influences or unstable markets, has to be the primary go/no-go conditional requirement.

To understand risks, strategic options and contingency plans, evaluate supplier relationships and contracts using PEST (political, economic, sociological and technological) forces for critical or target categories. Also, identify potential market disruptors and develop early indicators and action plans to mitigate supply shortages. We may not be able to identify all events like the COVID-19 pandemic, but having emergency plans in place is a first step toward adapting your supply chain in an agile manner.

Participate in a cloud-based control tower solution, such as the Vizient Supply Chain Resilience solution, to gain greater visibility into your HCO’s inventory, as well as participating supplier and manufacturer inventory. Real-time visibility into inventory is essential to respond to a crisis or systemic supply disruptions in the future. Knowing who has stock available, in real-time, provides the flexibility required to locate and purchase available product.

Inventory management
If the PPE items are already in your perpetual inventory (warehouse or main storeroom), the simple solution would be to adjust your minimum and maximum quantities up to provide the emergency stock levels desired. If sufficient storage space is not available, you will still need to designate a secure overstock location at your facility. 

A more accurate solution would be to build the overstock space as a separate, perpetual asset inventory space that would essentially be a redundant inventory location. To ensure proper stock rotation, use this separate location to transfer stock to the warehouse or main storeroom, then place replenishment orders in the redundant emergency inventory location, thereby avoiding stock expiration.

Finally, we must remember this is one event in a series of supply disruption events. Having a model for managing this (and the next) supply shortage crisis is important. Remember to also include an exit strategy to use up existing stock. When using up emergency stock, keep your distributor or manufacturer informed on your stock status to qualify for future allocation quantities or avoid starting a bullwhip effect and causing future shortages.

To reduce the impact of demand surges and supply shortages, read how Vizient is improving supply resiliency.

About the author. A senior consultant on the supply chain operations advisory solutions team, Ric Esarey possesses extensive experience in multiple facets of supply chain operations, including strategic sourcing, inventory and distribution management, clinical quality value analysis, system implementation and upgrade, and supply chain process optimization. Prior to joining Vizient, he served for nearly two decades as a supply chain executive with a national HMO and an additional two years as an independent health care supply chain consultant. Esarey is a member of the Association for Health Care Resource and Materials Management.