The Convoluted Nature of the PPE Supply Chain in 2020
We've all undoubtedly heard about the struggles the global supply chain is facing in delivering personal protective equipment (PPE) to healthcare workers fighting the COVID-19 pandemic across the world. We know that reductions in shipping capacity have significantly contributed to the challenges, as well as a flood of faulty and fraudulent equipment hitting the market (which has resulted in major recalls across the US, Canada, and Europe).
But how has the problem escalated to this extreme? What are the underlying causes of such a disaster in the modern supply chain? While it would be impossible to capture all of the issues in the PPE supply chain in a single post, there are a number of deeper issues that we can highlight to help shed some light on the ever-changing PPE marketplace.
Brokers and Sourcing Agents
Specialization of skills is a common theme that has led to the modern economies with which we are familiar. Long ago, people realized it was not possible to be good at everything, so organizations began focusing on a very specific portion of the industry in which they could excel. It's the same concept Henry Ford created with the assembly line - have everyone do a small part contributing to the larger overall goal.
In this same theme we saw the rise of brokers and sourcing agents - not just in the medical supply chain, but everywhere. It is very common to have a company or group who specializes in procuring certain goods for organizations who need them. However, brokers and sourcing agents are extremely common in the medical device and PPE ecosystems for a number of reasons, primarily the lucrative amounts of money involved as well as the lack of logistical knowledge present in the purchasing healthcare organizations.
As we've previously written, the pandemic facing the world has forced many hospitals and healthcare organizations to purchase PPE outside of their normal suppliers. And with the rising demand and ever scarce supply of medical equipment, we've also seen an explosion in the number of brokers claiming to offer medical devices and PPE from unknown overseas manufacturers. Dan Harris, of the Harris Bricken law firm, a firm known for their work in the Chinese PPE marketplace, estimates that 98% of the PPE brokers recently entering the market "are crooks or incompetents."
And unfortunately, there is really no tell-tale way of guaranteeing the broker you're working with is legitimate. Harris points out, however, that there are a number of things you can check to help determine the legitimacy of foreign sourcing agents. Namely, 1) requesting documentation from the broker proving their connection with a reputable manufacturer, 2) searching the sourcing agency and manufacturer to ensure they have been in the marketplace for longer than just a few months and that they are licensed to export the products, and 3) ensuring via written legal contracts between you and the broker that the goods you are buying meet your needs and meet basic requirements of your government.
Harris does note, however, the importance of having your own quality compliance team on the ground, at the manufacturers to verify "how your PPE is made and making sure that what is shipped is what you bought. There is no substitute for this step, even and especially in times like this." HyperClear has partnered with the longstanding medical device quality consulting firm Rook Quality Systems to help verify the manufacturers on our platform. Rook QS can also provide boots-on-the-ground consulting services with their team in Asia to validate and audit manufacturers and distributors before you finalize a purchasing agreement.
Manufacturers and Distributors
Somewhat less known than issues with brokers and sourcing agents are the multitude of problems coming from the manufacturers and foreign distributors themselves. While Asian manufacturers overall dominate PPE production globally, China accounts for the vast majority. The Japan Times quotes Chad Bown, a senior fellow at the Peterson Institute for International Economics, who calculated that China provides roughly 50% of the PPE imported into the US and EU.
Recently, China has tightened restrictions on both the import and export of the PPE supply chain in an effort to help step up the quality of equipment and address growing concerns regarding the products coming out of their country. However, many Chinese manufacturers are quickly finding ways around these restrictions in an effort to continue cashing in on the global crisis. Again quoting Harris' article: "It’s common for Chinese suppliers to export a product under one licensed company’s name, but to source their products from second, third or fourth factories, like a chain of Russian nesting dolls, with little to no traceability down the chain of supply."
With decades of focus on low-cost manufacturing and little regard for international intellectual property standards, Chinese companies that make up the backbone of PPE production are now coming under intense scrutiny for the life-saving devices and equipment they are shipping globally. And with an increasingly complex internal domestic supply chain, it is no wonder that the ripples affect the global market as millions of pieces of PPE are exported outside of China.
HyperClear Can Help
HyperClear is a ground-breaking, blockchain enabled platform that ensures traceability of medical devices and equipment throughout the supply chain. Using advanced technology, we gather information from a variety of sources and integrate that data into our safe and secure environment, making it easy to find information about the movement of a specific device.
No longer are manufacturers, distributors, and hospitals/end users operating in a disconnected ecosystem. HyperClear provides the missing link to connect the dots in this increasingly complex supply chain, relying on cutting-edge blockchain mechanisms to ensure accuracy. Get in touch today to find out how HyperClear can solve your medical supply chain challenges!