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CovidX
Issue 020
April 16, 2020
Building supply chain resilience
In the best of times, our supply chains are extremely efficient. But during emergencies like a global pandemic, supply chains are disrupted and we pay a painful price — from medical equipment shortages to empty supermarket shelves. 

True supply chain resiliency will require redundancy: domestic production and global supply pipelines, strategic reserves in addition to just-in-time manufacturing and fulfillment, local distribution networks as well as seamless international trade. And “supplies” aren’t only goods; to build agility and resilience, we must also consider how the workforce can surge and flex to meet changing needs. 
How we got here
Over the past decade, our focus on supply chain optimization — through minimizing costs and reducing inventories — has removed any buffer or flexibility to respond to disruptions. This just-in-time approach works when the supply chain is operating as expected. But our current crisis has exposed the downside to an increasingly complex global system and lack of strategic reserves.

Countries around the world are running low on PPE and coronavirus testing supplies. Even Australia — a wealthy country with fewer than 100 deaths — is experiencing shortages, and poorer countries are already being crowded out of health supply chains by richer countries competing to stock up.

The United States is also running low on chemicals needed for testing. And since private labs, like the rest of the healthcare industry, rely on nonessential and elective procedures as their main source of revenue, companies like Quest Diagnostics are furloughing employees — that means fewer people and facilities are available to process tests. 

We're also facing medicine shortages; COVID-19 is increasing demand for some drugs and drug production has slowed down or halted in countries around the world. (More than 80% of the drugs marketed in the U.S. are made overseas.) 

When it comes to specialized supplies and equipment, it’s not easy to simply scale up production or shift to another factory. Face masks are just one example: Around half the world’s face masks came from China before the COVID-19 pandemic began. American manufacturing companies are starting to make masks and other PPE, but only a few machines can make the woven material for N95 masks and you can’t simply buy one off the shelf.
What’s at stake
While PPE, ventilators, and other medical supplies have been our most urgent needs for the past month or two, expect to see rolling shortages across sectors as needs surge in different areas at different times.

Trade groups have assured consumers that there would be no food shortages. While the products are available, the pandemic is placing a significant strain on labor and logistics. A virus outbreak shut down one of the nation’s largest meat processors, and the pandemic is exacerbating an existing shortage of truck drivers to deliver food. Instacart and Amazon employees went on strike last month, and Whole Foods employees have planned another protest in May. Meanwhile, food that’s normally sold to restaurants and schools is going to waste due to a “disconnect in the food chain.” 

It’s unsettling to think that the richest country in the world may not be able to get food from farms to people. At best, consumer confidence is temporarily shaken. At worst, the most vulnerable go hungry.

Apply this scenario across industries, and the implications become even more profound. Manufacturing lead times doubled last month, and the global economy is rapidly reshaping. We are already seeing regional alliances in the United States — western, eastern, and midwestern states are coordinating efforts to reopen — and 25 Latin American and Caribbean countries are taking steps to ensure the safety of their regional food supply chains.
Opportunities
This global pandemic isn’t “ending” anytime soon — and summer’s severe weather will likely bring additional disruptions. When parts of the economy reopen, pent-up demand for non-COVID goods and services — from medical care and home repairs to haircuts and appliances — will put pressure on the supply chain, including the workforce. We need to proactively prepare for the surge and flex to meet evolving demands. A multifaceted effort to strengthen the supply chain can help the United States address near-term concerns and prepare for inevitable future crises.

Redundancy is key to resiliency. Breakdowns in global supply will inspire more domestic production, but we need multiple sources to ensure adequate supplies when one region is stretched too thin. Because the United States is such a large country, local production and interstate sourcing can combine to serve as another form of redundancy: New York City is purchasing coronavirus testing kits from a company in Indiana while also sourcing from local suppliers. New York State is paying a premium for manufacturers to transition their facilities to produce medical supplies and PPE. But what if those domestic efforts aren’t adequate? We’ll also need policies that allow for seamless international trade so critical supplies aren’t stranded overseas

Supply chains can become more agile, flexing to meet rolling surges, if there are centralized systems to track needs and resources. For example, a national talent database of workers by skill and location would help states hire healthcare workers when (and where) they’re needed most. Projecting and mapping surges could also help the government mobilize stockpiles of medicines and streamline distribution channels during critical shortages.  

Strategic reserves can fill production gaps during minor emergencies, and a thoughtful approach to rationing those supplies can make reserves more useful in a major crisis. It costs more to keep extra reserves on hand — that’s why just-in-time production is so much more efficient — but scrambling for supplies in a crisis is also expensive. Government and industry need to work together to rebuild domestic manufacturing capabilities, shore up stockpiles, and anticipate supply chain disruptions.
OI index
The open innovation index now includes 135+ initiatives addressing COVID-19. The full index is on the CovidX website, in addition to Luminary Labs’ website. The next update to the archived index will include today’s additions and updates:
About CovidX
CovidX identifies opportunities for the government and the private sector to accelerate meaningful innovation that addresses the coronavirus pandemic. We’re focused on: 
  • Data platforms and privacy-preserved tracing 
  • Novel testing for both COVID-19 and antibodies
  • Treatments and vaccine development
  • Decentralized supply chains and open-source hardware
  • Vulnerable populations and protecting at-risk groups
  • Strengthening the safety net to deliver aid and preserve/create jobs
  • Health system and workforce capacity
  • Public-private partnership opportunities
  • Open innovation initiatives
Each day, we will share what’s happening, what’s next, and opportunities to move the needle. As we begin to see results, we’ll also share wins that the larger community can celebrate. It helps to remember that good people are making good things happen.

If you’d like to connect with us regarding frontline needs, potential solutions, or policy ideas, please email covidx@luminary-labs.com.

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