Supply Chain Challenges of Covid 19 Masks
The nationwide shortage of N95 masks is becoming harder and harder to fill and has multiple causes including major issues with the global supply chain. Before the pandemic, China produced almost half of the world's face masks, but when infection in China exploded, their exports came to a stop. As infection rates in China decline, they have begun to reopen their exports, however, the US has not been a major recipient and the shortage of masks in the United States has been an incredible supply chain issue to watch emerge.
These shortages have not been without consequence forcing organizations to scramble to secure masks. News outlets have shown many stories of first responders reusing their personal protective equipment against guidelines. According to a survey by healthcare company Premier, 40% of responding hospitals are forced to reuse PPE such as N95 masks, and 33% of hospitals are currently using expired PPE. Due to the lack of PPE, some hospitals have been advised to only use face masks during certain procedures and to save their masks for when they are treating infected patients.
To try and react to shortages, hospitals have reached out directly to the federal government as well as directly to suppliers to secure masks. The actual flow of masks into the USA from China (a major supply source) has been remarkable. Anecdotally, many small firms (including us at Stock precision) have received masks sent directly by vendors from China trying to curry favor or make money exporting masks. Ultimately, the United States needs to look carefully at the sourcing of masks & consider the strategic aspects of securing PPE for both this Pandemic and any future ones.
It's worth noting that the US has historically had stockpiles of PPE including N95 masks. A relatively unheard aspect of N95 masks and Covid-19 was essentially a Quality concern of mask efficacy over time. Some of the masks maintained by the USA may have outlived their shelf life & government officials have struggled with decisions on if they should be used during the COVID 19 response. A significant portion of the stockpiled masks was made between 2003 and 2013, and though they were tested- there were still questions if the masks provided a sufficient level of protection.
From a combination of the surging Demand for masks, about 3.5 billion according to the Department of Health and Services, insufficient initial supply, and complex Quality questions - balancing Supply with Demand forces a tough question on how many masks are needed.
Balancing supply & demand for masks in the USA
So just how many masks does the USA need? And how are these estimates calculated? How will these estimates be revised? What's the process for creating a USA Demand Plan so that a Supply Plan can be even calculated? These have been some of the tough challenges of COVID 19. As mentioned above, the USA could need as many as 3.5 billion masks in 2020. This was a staggering number which also referenced the strategic stockpile as only 12 million N95 respirators and 30 million surgical face masks (roughly 1% of what was needed). But why so large? This is a classic demand planning problem with an extremely complex independent demand calculation. How long does a mask last? Is that according to a guideline? Is that guideline dependent on the number of patients? If so, how do you estimate the number of patients during exponential growth? Undoubtedly these have been the questions government officials have struggled with along with the politics of "stocking out" during a global pandemic.
Even if you could nail the Demand Plan above, the problems of Supply Planning are just as challenging. First, you have the Strategic Stock Pile + local hospital On Hand. This calculation could get you close to a total USA On Hand. From there, you have to consider the number of units you could Import + the number of units you could make in the USA. The Defense Production Act would allow the president and state governments to direct private companies to help produce face masks and other PPE. For example, the Colorado governor announced his partnership with Honeywell, a technology production company, which entailed a 17-month contract that called for the production of over six million N95 masks. These kinds of partnerships would be both extremely helpful as well as add another entirely new dimension (mask Capacity Planning) to this discussion. With demand being so much greater than the available supply of N95 masks and other personal protective equipment, companies such as 3M Co and Honeywell are doubling their usual production. Even though 3M dominates the market, there is also a significant growth in smaller companies as well.
The big question around masks is China: what's their capacity, will they share it & will the USA administration & China "play nice". China currently produces 110 million masks per day, this is twenty times more than what they previously produced in February and it still isn’t enough. While China appears ready & willing to supply masks as needed, N95 masks are surprisingly hard to make and very expensive. The material required to make the mask is called melt-blown fabric. It is a thin mesh-like material that makes the mask good for filtration. And of course, with so much manufacturing, there is now a global shortage of this "key raw material" making production even more challenging. Last but not least in this discussion is the Tooling required for masks. The machine required to make melt-blown fabric cost upwards of $4.23 million, and making the machine takes roughly five to six months!
There is no quick and easy fix, the need for personal protective equipment is only growing. The best solution is greater visibility to what the true Demand for masks is now and will be 3rd / 4th qtr of 2020 as well as how quickly the USA + China Imports for masks can meet that need at the N95 standard.