Research Analyst Harry Bevan sat down with the ARC’s Vice President and Chief Procurement Officer, Thomas Nash, to find out just how his team managed to ensure the continuous supply of Personal Protective Equipment (PPE). Here’s what surfaced from their interview.
The COVID-19 pandemic has disrupted all walks of life and is a continuing issue across the world. Many industries are still working at less than full capacity, supply chains are still disrupted and a “new normal” has emerged with remote working and reduced social contact.
One main issue with supply chains has surrounded PPE, because the demand for good quality products, such as face masks and gloves, initially far exceeded the supply. This created such extreme shortages that aircraft transporting PPE often had to be redirected at the last minute every time a new customer outbid the original purchaser! No country has been immune from this problem!
With an annual revenue of approximately US$3.1 bn, the ARC association, a division of the International Committee of the Red Cross, divided into three areas of service:
- blood donation accepts blood donated by the public and supplies customers (such as hospitals) with blood bags;
- humanitarian and disaster relief serves people in need; and
- training provides services like lifeguard training.
In response to COVID-19, ARC accelerates its supplier relations
Prior to Covid-19, the International Red Cross’ risk management planning strategy for a pandemic was to react when such a pandemic occurred,.
But Tom Nash of ARC did not wait. From the outset, he moved quickly to procure the severely needed PPE. The first case of COVID-19 had been detected in the United States on January 21 2020,2 and within a few days, by February 4, Tom had submitted his initial proposals to ARC for obtaining the PPE.
Once ARC decided to buy the PPE, Tom moved quickly. He had to first ensure there were sufficient suppliers to meet the demand of ARC. Because domestic suppliers were struggling to meet the heavy demand, ARC decided to directly purchase some supplies from overseas. This required strenuous vetting to ensure compliance with the quality standards required in the United States. Specifically, it was vital to meet the standards set by the United States Food and Drug Association (FDA).
At first it seemed unimaginable that the frontline workers of the ARC were willing to risk working without proper PPE if necessary to get the job done. The ARC was already using 30,000 masks each month before the pandemic, so they knew a huge increase of masks would be needed and the demand could hit like an avalanche! Moreover, ARC still did not have a coordinated approach for quantifying the demand!
The solution was to create a business plan called a “Continuity Supply Dashboard” to give ARC management real-time visibility into inventory supply and ensure that this effort would be managed correctly. Specifically this meant keeping everyone informed of supplies available, potential supply shortages, alternative supplies, and recommendations to resolve all related issues.
In handling finances for all of this, ARC paid cash upfront for the supplies instead of using other payment options that could delay delivery. As a result, ARC never ran out of supplies, thanks to Tom and his team.
Using one executive only throughout the process
Tom explained that once the seriousness of the pandemic became evident, he and his team decided they needed one executive to be in charge of all issues as they arose. This made decision making much easier and faster.
Constantly monitoring the Continuity Supply Dashboard was critical to being prepared to handle situations. In March 2020, the ARC reevaluated their manufacturers and finally consulted with the executive levels of the three largest medical suppliers: Cardinal Health, Medline, and Owens & Minor. They agreed to use the “take or pay” contracts that promised delivery of specified quantities of PPE and payment upfront --making it easier to obtain them.
In spite of suppliers not being able to produce sufficient quantities of PPE right away - and it took time to increase the quantities - ARC and the various suppliers held regular progress meetings in complete transparency (what is working, what is not). This helped them to anticipate requirements ahead of time which ended up saving costs.
A total success story despite COVID-19!
ARC’s relationships with suppliers had traditionally been solely transactional but are now more strategic, because they now have improved the management of these suppliers. Suppliers explained to Tom that the ARC was one of the first organizations to request a high volume of PPE quickly. This trend quickly picked up across the health sector.
Today the ARC is now prepared for subsequent waves of COVID-19 and has adopted the same approach as was used during the first wave. This time however, they are buying 1.5 times more PPE.
Lessons Thomas Nash learned from the pandemic
During our interview, he cited five:
- Be early and be quick
Monitor the supply environment but also make early proposals to the business, detailing the pros and cons of each proposed solution. Time is of the essence during a pandemic and having a single executive point of contact who can make decisions quickly, without the need to confer makes procurement faster and more effective.
- Ensure visibility of supply and demand
Have a tool, such as the Red Cross’ Continuity of Supply Dashboard, for evaluating how much supply will be needed to match the demand.
- Engage senior executive level of suppliers
Engaging with the decision makers rather than waiting for the supply chain to react will save precious time and resources.
- Focus on supply risks and solve business problems
Ensure quality. Despite needing to move fast, the quality of PPE you purchase needs to match FDA and industry standards. You can achieve this by providing a robust supplier vetting process for all new suppliers. Also, use “take or pay” contracts to ensure your suppliers will not only obtain the requested PPE, but will improve relationships as well.
- Balance: admit mistakes and celebrate successes
Act quickly. When a pandemic strikes, you need fast action, but this can lead to mistakes that need to be analyzed with lessons learned. But, even within that you will have room to celebrate and congratulate when things work out.
- REF https://pixabay.com/photos/red-cross-international-red-cross-19494/
- ABC News article: Timeline: how coronavirus got started, by Erin Schumaker
ABOUT HARRY BEVAN
Harry is a research analyst with World Commerce and Contracting and a part time lecturer at the University of Grenoble in France. Harry studied both in Grenoble and at the Moscow State Linguistics University. He holds a degree in foreign languages and a Masters in Trilingual Negotiation (English, French, and Russian) in International Trade. Harry lives in Grenoble and holds both French and UK citizenships.
ABOUT TOM NASH
Tom is the Vice President and Chief Procurement Officer, American Red Cross. He is accountable for ensuring a safe, responsive, cost-effective, and reliable supply chain for the ARC. He has led Procurement and Supply Chain transformations to better practice in three diverse industries (manufacturing, consumer services and health care). Tom holds an Executive MBA from Louisiana State University and a B.S. degree in Production Operations and Supply Chain from Arizona State University. He is also a Board Member of the National Minority Supplier Development Council (NMSDC) and the Center for Advanced Procurement Studies (CAPS).