Manufacturers are able to quickly adapt their operations to help meet changing consumer demands during the COVID-19 pandemic, but supply chain issues may create a bottleneck. By staying abreast of government mandates and staying connected to others in the industry, manufacturers can mitigate these supply chain issues.
Key insights
- The resolve of the U.S. manufacturing base has never been stronger than during the COVID–19 pandemic.
- Manufacturers have been flexible in adapting their operations; however, supply chain issues are still prevalent.
- There are several improvements to supply chain that manufacturers can use to keep operations running smoothly, including rethinking distribution channels, staying up to date with new legislation, and connecting within the industry.
Supply chain issues can create roadblocks for manufacturers
In the midst of the COVID-19 pandemic, manufacturing companies are using their ingenuity, resources, and will to ensure they’re receiving and delivering products. The resolve of the U.S. manufacturing base has never been stronger.
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The stories of manufacturing companies retooling their factories to support the production of essential medical products, such as masks, ventilators, and respirators, demonstrates manufacturers’ willingness to step up. The ability of manufacturing companies to be flexible and adjust production keeps them “essential” during this time. Sometimes, this readiness to help is stifled by a company’s inability to access materials or deliver goods to the customer. Any break in the supply chain stops the flow of business and help.
The Life Science industry (medical device, bio-tech, and pharmaceutical companies) in particular faces complex supply chain issues. The domestic and international demand for life science products has created a surge in the supply chain. Coupled with stringent FDA compliance requirements limiting the number of approved vendors and materials, the ensuing havoc in the supply chain seems insurmountable.
Practical solutions to supply chain problems
There are several ways manufacturers can impact the supply chain. Here are some practical ideas:
- Coordinate directly with the end-customer for your product. Critical products can be caught in bureaucratic red tape, stalling the flow of business to the end consumer. Sometimes bypassing the middleman in the supply chain is the most effective way to get product to its destination. Focus on the end customer. For example: Contact the purchasing agents at the hospitals and clinics using the end products, instead of connecting with each respective state government.
- Understand the impact of tariffs on the products you’re purchasing. There has been speculation and media coverage on potential tariff changes, including deferrals of tariffs. Don’t let this drive your decisions. In the last month, the government has granted exclusions to tariffs on certain medical supplies directly related to the COVID-19 response (see table below for more information). Understanding facts rather than making assumptions based upon rumors is crucial.
- Understand restrictions on exports. For life science companies, the government is looking to keep domestic production of personal protection equipment (PPE) in the United States. The Federal Emergency Management Agency (FEMA) has recently stepped in and issued temporary rules, giving the agency the ability to block exports of certain PPE products including:
- N95 Filtering Facepiece Respirators
- Other Filtering Facepiece Respirators
- Elastomeric, air-purifying respirators and appropriate particulate filters/cartridges
- PPE surgical masks
- PPE gloves or surgical gloves
Keeping up with these evolving mandates is critical to ensure shipments of your products are not held up due to recent government restrictions.
- Although it may not seem like an opportune time to venture into a new market, now is the time to use your capacity and ingenuity to support a new product line or industry. With high demand for medical products, be creative and find ways to enter this supply chain. Stay connected with your industry. Some of your competitors may become your customers if you have capabilities or capacity they need. Trade associations are also a good outlet to understand demand in the market and how you can get connected as a potential vendor.
- Follow developments of Section 3101 from the CARES Act, which directs the National Academies to study the manufacturing supply chain of drugs and medical devices and to provide Congress with recommendations to strengthen the U.S. manufacturing supply chain of such items. It could be a great time to diversify your company’s revenue concentrations with industry sectors and enhance the overall value of your business. See our discussion on the Value Triangle for more on this.
- Stay nimble. The benefit of small to mid-sized organizations is their ability to make decisions and change course. Reacting quickly to these changing times is critical to support your customers and to maintain the continuity of your business. Allow your management team to act versus react. The trust you give your teams to make decisions on purchasing, sales, and operations will build a culture that will strengthen your company in the long term.
Manufacturers are resilient. Finding creative ways to work through the ever-changing supply chain is critical. The ability for the U.S. manufacturing base to lead the way in the battle against and ultimate economic recovery from this global pandemic will not be lost on history. Remember, where there’s a will, there’s a manufacturer.
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Responding to COVID-19
Unforeseen disruptions — from the coronavirus (COVID-19) to natural disasters — can create many uncertainties. CLA has developed resources to help you lay out a strategy to put your organization on its toes versus its heels. Bookmark our financial management and disaster relief resource page to stay current on these issues.