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Michael Einhorn, chief executive officer of medical supplier Dealmed, explains how the healthcare purchasing system frustrates attempts to diversify sourcing of personal protective equipment and head off future shortages in times of emergency.
The emergence of the Delta variant of COVID-19 has caused sales of PPE to soar in recent months. And while current supplies aren’t especially tight, there are signs that significant shortages of essential products might be looming.
The collapse of the PPE supply chain in the early weeks of the pandemic in 2020 apparently hasn’t taught the healthcare industry about the need for a fresh approach to meeting unanticipated demand. For one thing, the industry remains heavily dependent on overseas suppliers, despite calls for the development of a domestic production base. “There hasn’t been the very significant change that we thought we would see at this point,” Einhorn says.
The problem lies with the way in which the industry’s purchasing system is structured. It relies on a small number of distributors and manufacturers, and there is little incentive to broaden the supply base or purchase product of superior quality. Most purchasing is tied up in long-term contracts, with an emphasis on low-inventory, just-in-time stocking strategies. JIT methods have proved inadequate to meet sudden demand such as that triggered by the COVID-19 pandemic, but there has been little effort in the healthcare industry to adopt a new model that can mitigate supply risk.
Adding to the problem is congestion in the supply chain, causing severe delays and a shortage of product in multiple industries. Bottlenecks at Southern California ports have combined with soaring freight costs and a shortage of truck drivers to create “a perfect storm for potential issues down the road,” Einhorn says. “We’re starting to see the first steps today.”
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