by David K Coombs
Leonardo Group Americas Senior Consultant
At this writing, the Covid-19 pandemic is spreading aggressively in the United States, and the timing of its peak remains uncertain. Meanwhile, the health care system is struggling on all fronts to catch up with a huge surge of Americans requiring testing for the coronavirus and, for many, hospital treatment up to and including intensive inpatient care, mass consumption of disposable PPE, and extended use of scarce ventilators. Media headlines shout about mask shortages, price-gouging, staffing crises, delayed production of critical equipment, and overly-extended supply chains. What happened to America’s supply chains, and how shall we re-learn to provide medical supplies which, to be honest, should not be so difficult to produce?
Leaders in both health care and industry know well that their organizations’ work – patient care or manufacturing – is best carried out when the required work load is level and predictable. This condition, a central principle of Lean Process Design, makes it possible to achieve well-designed process flow, optimized quality, and minimal waste. This article discusses five Lean-based strategies to help these leaders and their supply chains to confront successfully, if not perfectly, the wildly fluctuating and unpredictable demands of a dangerous pandemic like Covid-19.
Level the Curve
Since the early weeks of February we’ve heard frequently about the concept of Levelling the Curve, or surge, to reduce the risk of overwhelming our health care organizations. Three things are needed to make this work: 1) Gaining information – testing to determine each person infected, and documenting that person’s recent contacts; 2) Breaking transmission by quarantine and distancing; and 3) Initiating treatment promptly for improved outcomes and hopefully earlier discharge from clinical resources.
Note that of these three key parts of Levelling the Curve, two of them have been directly and dangerously hampered by flagrant failures of America’s medical supply chain. Test kits for determining infection by the virus were for some weeks extremely scarce, and even when available confusion reigned as to how and whom to test. Shortages of PPE and N95 respirators have put clinicians at risk not only while testing people for coronavirus infection, but also while initiating treatment. And as for treatment, intensive care for acute cases requires ventilators, which are also in extremely short supply.
Reintegrate Fractured Supply Chains
For thirty years American manufacturers and their corporate owners have been moving operations to overseas facilities in search of lower labor, tax and environmental costs. In my view, this trend has fostered an “out of sight and out of mind” perspective among many of our business leaders – like a city dweller’s belief that chickens come in plastic packages. Well, those surgical masks and N95 respirators that everyone’s shrieking for – they don’t come from “some warehouse”. They come from China, over 50% of them. And since China’s out of stock right now, a good friend of mine, a skilled and dedicated emergency MD, takes her N95 home every night to clean in the kitchen. To put this simply, it’s time to bring back a significant portion of the work we’ve sent offshore, starting with those products determined to be mission-critical.
We at Leonardo Group, along with our client teams, document and assess lots of health care and manufacturing Value Streams. It’s striking to us how many of them are overly complex and convoluted. Every handoff or physical move – let’s say to gain a few cents’ cost reduction – generates its own costs, hard to see but very real. For example, one U.S. company that manufactures swabs used for the Covid-19 virus test interrupts its otherwise smooth-flowing Value Stream to send swabs to a nearby state for sterilization, and then back to their own plant for packaging and shipping. Bringing a special process like that in-house, whenever technically feasible, can take a huge chunk out of the critical path time line. Time is money – even lives.
Dedicate Resources for Instant Capacity
Think fire extinguishers – you rarely need one, but when you do, you need it now, and it must be 100% functional. For unpredictable but mission-critical needs, consider building a dedicated, on-call line. Design, stage and test the Value Stream required to deliver a calculated rate of units or service, based on x shifts or weeks, with a given ramp-up time.
To illustrate: a Leonardo client firm in the aerospace industry had, among its other business, a ten-year contract for certain service parts, stipulating that orders of any size for any part(s) could be placed with little or no notice for near-immediate delivery. Sounds rather like a pandemic, doesn’t it? To serve this contract, they bought used but good quality machine tools, laid out a dedicated production cell for each family of parts on the contract list, set up the machines, staged material, and trained key operators. When the phone rang with an order, they flexed people onto the line, added shifts and responded immediately. As the parts list changed, they simply resold unneeded equipment and adjusted cells to build the new parts. The instant response of dedicated lines more than repaid their modest investment.
Recent articles describe a similar approach used by American manufacturers of N95 respirator masks. Bloomberg (March 25, 2020) reports on 3M’s respirator plant in South Dakota, which on January 21 ramped up production on a plan pre-determined by the global company’s forward-facing plan “to build surge capacity in its respirator factories around the world.” And Prestige Ameritech, a smaller independent plant in Texas, has brought “previously idle machines online” and recruited additional staff, according to a March 16, 2020 piece in Wired. These and other U.S. manufacturers, however, recall (unhappily, it should be noted) that once the crisis of the H1N1 outbreak in 2009-2010 was over, many large GPOs took their business offshore again – back to China in search of lower prices. The takeaway here is that both parties must commit to the arrangement.
Pandemic Resources: Build Stockpile plus Instant Capacity
A pandemic health emergency poses unique challenges to the supply chain. It is almost futile, if not impossible, to anticipate the next pandemic with even approximate accuracy. As Yogi Berra said: “Forecasting is really hard – especially about the future.” In our Lean view, the best procedure for planning mission-critical equipment and supplies is to combine an on-campus or nearby stockpile with dedicated production capacity standing by (as in examples described above). The key steps include:
- Establish key pandemic families; Covid-19 would fall into the ARDS or Acute Respiratory Distress Syndrome with SARS and H1N1. Presumably, each hospitalized case for this family will consume similar supplies and equipment (as on a preference card), and those items would make up the inventory list for an ARDS stockpile.
- Estimate potential infected patients, growth rate(s) and time line of pandemic.
- Estimate hospital beds assigned to pandemic patients, supplies consumed and average lengths of stay per case.
- Verify availability, production rates and ramp-up times for dedicated production to augment the stockpile.
- Plan stockpile levels to cover pandemic needs until dedicated or “guaranteed available” supplies begin to arrive.
- Monitor stockpile at set intervals and replenish with dedicated production.
- Throughout, manage stockpile for inventory levels, expiration dates, FIFO, etc.
Guard Against Market Failures
America’s medical supply chain is both sustained by, and compromised by, an energetic private (non-governmental) sector. However, technical innovation driven by investment capital in search of high returns may not, in every case, serve the critical needs of public health. Several years ago our hospitals suffered a debilitating shortage of IV solutions – indispensable, but not the most sophisticated or profitable product. Why the shortage? Because manufacturers had off-shored production to Puerto Rico, which was then struck by hurricane Maria.
The current shortage of ventilators, constantly in the news, has brought to light a maddening story of a promising and cost-effective new ventilator design blocked by private interests. Following the H1N1 outbreak in 2009, the government awarded a development contract to Newport Manufacturing in California to build a low price point ventilator – $3,000 vs. the typical $10,000 – which would allow purchase of up to 40,000 units as a national stockpile. By 2012 successful prototypes were in testing with the CDC. But just then, the market intervened.
In May 2012, Covidien purchased Newport along with several other medical device companies. Work on the ventilator, known as Project Aura, languished, seemingly sidelined by other initiatives. And in 2014, according to the New York Times, “ . . . [Covidien] executives told officials at the biomedical research agency that they wanted to get out of the contract . . . and complained that it was not sufficiently profitable for the company.”
This sad story goes on with Medtronic’s acquisition of Covidien for $50 billion in 2015. Meanwhile, the government awarded a new contract for Aura to Dutch company Phillips. There is, reportedly, a ventilator coming from Phillips, labelled the Trilogy Evo, with a delivery date of mid-2020. According to a Health and Human Services spokesperson, “We do not currently have any in inventory, though we are expecting them soon.” Likely too late, however, for the pandemic surge now threatening America’s hospitals.
Our takeaway from this is that we as a nation must assure that mission-critical public health projects (a large fleet of ventilators for influenza or coronavirus pandemic patients) are successfully identified, vetted and deployed – and safeguarded if need be from large corporate or private-equity investors in search of “bigger fish to fry.”