Following a well attended PASA CONNECT virtual Roundtable on 27th May, PASA hosted a FREE webinar on 3rd June, introduced by PASA managing director Nigel Wardropper, which highlighted the current issues surrounding the sourcing of PPE and suggested practical ways to manage this volatile category both now and in future.
Both sessions were facilitated by the Infosys-Portland consulting team, who have been running a category desk for their clients since the Covid-19 crisis began, led by their Brisbane office Lead, Geoff Brown, supported by his colleagues in Sydney and Melbourne. Jonathan Dutton FCIPS summarised the key messages for PASA.
Personal protective equipment (PPE) has suddenly become the most important category and a crucial supply security risk for many organisations, especially in the health sector but also in a widening range of industries in which PPE has suddenly become mission-critical.
What are the key PPE challenges today?
Throughout the Covid-19 crisis, horror stories abounded of a raft of sourcing issues around PPE including
- mass shortages
- questionable new suppliers
- substandard equipment
- failed deliveries
- price hikes and surcharges
- bidding wars
- geopolitical tensions
- overwhelmed distributors
- limited air freight capacity
- international shipping (and docking) problems.
Buyers quickly confronted the most obvious PPE problems in relation to masks (sheer volume & four grades of quality), medical gowns (specialist need and worth maybe 50 masks), hand-sanitiser (huge quantities needed, new suppliers and long shelf life) and rubber gloves (sizes). On top of this are less newsworthy PPE products including safety boots, disposable overalls, hygiene products, wipes, disinfectant, janitorial supplies and lab consumables.
Challenges cited by attendees of our recent roundtable were widespread. One procurement manager, for example highlighted that they did have a pandemic business continuity plan (BCP), but it did not go to the level of detail required by such a depth of crisis as Covid-19. Other buyers suffered from low range in their catalogue and early stock-outs while another experienced a supplier ‘closing their catalogue’ due to sudden unavailability.
A common fear among procurement managers was new PPE suppliers often demanding up-front payments to secure promised equipment. Many instinctively preferred local vendors over international ones, some of whom were accused of late factory-switching, which affected quality standards.
In many ways, added one contributor to the roundtable, “all roads here led back to China, at this time” and “being on their ‘white-list’ was essential.” Many at the roundtable felt this exacerbated the challenges they faced. Price increases of 300% for fairly common items were further complicated by Australian dollar rate fluctuations. Vendors were sometimes only guaranteeing prices for 48 hours at the time, demanding fast buyer decisions, all of which led to more volatility. A perfect storm, almost, for stressed buyers.
Sourcing outside China brought other complications, including TGA sign-off. Some have reduced the lead-time for therapeutic goods administration (TGA) certification, but this process cannot be taken for granted and can take longer . CE approval was perhaps easier to achieve but not always appropriate and needed its own due-diligence standards due to reported counterfeiting in some instances. FDA approval is never easy to achieve and is structured to US needs rather than this region’s needs.
PPE solutions for tomorrow
New PPE suppliers were an early option for many. One buyer for a dental chain explained sourcing outside normal PPE channels worked well for them. Others said that an early sourcing decision in adopting and sponsoring a new vendor worked well.
Many said that having meaningful relationships with their suppliers was key. Some organisations have been able to leverage existing strong supplier relationships. One world-class healthcare company relied on “supplier relationships and text book SRM” to secure and grow their regular supplies throughout the process. “Without those, we might not have received any supplies” the CPO added. Loyalty certainly counted for those who had invested in SRM previously.
Accessing the national stockpile of PPE proved easier for some than others – advice included not relying on the government stockpile, but certainly applying for access was worthwhile for qualifying organisations.
Key learning points were to be wary of new entrant vendors and overpromising, never underestimating therapeutic goods administration ‘TGA’ certification needs, considering likely rouge behaviour (by suppliers and buyers) and being prepared to properly scrutinise test results on new products, that are often not articulated in English. Test certificates should always be demanded by buyers.
Future PPE trends will see ongoing requirements that are rising but are also far more forecastable. Trusted suppliers will become clearer much more quickly, yet more suppliers will likely be needed to meet the demand curve of the ‘new normal.’ Supplier appraisal processes will be key. As will exactly how we accomplish these goals.
The bottom-line learning for procurement professionals is the need to apply an extraordinary level of due-diligence in buying PPE at the best of times, never mind during a global pandemic. Taking calculated risk out of fast sourcing is the key goal during pandemics and similar crises.
The procurement teams that were successful during the crisis had planned ahead, used detailed BCP’s and had process mapped supply chains, certification and multiple-sources of supply. Those that had invested early in new suppliers and had made quick purchase decisions certainly benefited as “chewing on purchase options for days” led to missed stock opportunities and delayed supply. Agile firms succeeded.
Most of all, those that had previously invested in SRM (supplier relationship management) benefited the most. Ultimately, their friends did not let them down when it truly mattered.