Perspectives on Various Issues of Interest

Supply chain integration for improving performance of not-for-profit organizations

Food banks are not-for-profit organizations that aim to alleviate the hunger problem in the society by working with donors on the upstream and member agencies on the downstream of their supply chains. These organizations operate in highly complex environments due to the uncertainties associated with supply and demand. In order to cope with the uncertainty and to be able to deliver food to the underserved communities, food banks need to utilize information and coordinate well with their partners so that the donations can be matched with demand in a timely manner.Therefore, effective and efficient supply chain management approaches become critical in this resource-constrained setting, where it is unknown which resources are available. Based on what we know from the previous research on for-profit firms, and given the complexity of food bank supply chains along with the necessity of food banks to work with partner firms, it is natural to contend that supply chain integration is a key determinant of performance. Exactly how the constituent parts of supply chain integration relate to each other in humanitarian organizations, however, is an open research question. Three common integration dimensions that have been investigated in the supply chain management literature include internal integration, demand integration and supply integration. Demand integration and supply integration are also referred to as external integration in some studies. Collaboration between functions and information sharing processes within an organization determines the internal integration. Some indicators of internal integration in the literature include intra-firm functional team activities between functions, such as operations, marketing and logistics, to achieve the goals of the supply chain. Moreover, demand integration relates to the collaboration activities and information sharing with key customers to meet their expectations and improve supply chain performance. Similarly, supply integration involves coordination activities as well as information sharing with key suppliers to achieve supply chain performance by enabling better planning, forecasting and process design. We study the three key dimensions of supply chain integration – supply integration, demand integration and internal integration and empirically examine how each is related to the others and how they impact food banks’ ability to create basic programs that help in delivering food to the underserved communities.

 

 

Managing the medical oxygen supply chain in India

Managing the medical oxygen supply chain in India

Debjit Roy and Anand Nair June 15 | Updated on June 15, 2021, 

 

 

 

 

India faced a significant liquid medical oxygen (LMO) shortage when there was a sudden onslaught of Covid-19 crisis and most infected patients needed LMO support. Requests for oxygen cylinders flooded the social media. Government organisations, NGOs, and private sector quickly jumped to arrange LMO for the distressed victims.

The requirement for LMO grew multiple times than the standard usage leaving many stranded due to an inadequate supply of this essential product. What makes the whole LMO supply chain so complex and challenging? It appears that a combination of factors interacted in creating a ‘perfect storm’.

These factors range from the contextual environment surrounding LMO supply chain in India, the unique set of bottlenecks created by the prevailing demand and supply situation, the need for additional resource commitments, and the approach adopted towards allocations. It is important to reflect on these aspects to come up with a road map for averting the crisis and being prepared for future needs.

The LMO supply chain context in India is relatively structured on the upstream production end but is highly fragmented in the downstream end where the produced LMO needs to reach the point of use at hospitals. The first bottleneck occurs at the point of production where there is insufficient capacity to cover the needs of heightened demand created by Covid-19.

Production capacity

The production capacity of LMO in India is currently at around 7,000-8,000 tonnes per day. With demand approaching 9,000-11,000 tonnes per day, there is a capacity shortage of available LMO in the country. A major portion of production of LMO (about 2,000-2,500 tonnes per day) occurs in captive units within large steel plants that need oxygen to enrich the blast furnace. Currently, 33 steel plants in India supply LMO. Out of the total gaseous oxygen produced by these steel plants, only about 5-10 per cent can be converted into LMO that is meant for the health sector.

The LMO is transported in cryogenic tankers to the bottling plant where cylinders are filled with oxygen that then can be distributed to the hospitals. In some cases, tankers from steel plants are directly sent to the hospital. The point of intersection between the supply chain of LMO and the supply chain of cylinders presents the instance of second bottleneck. The mismatch between the cycle time, and hence the capacity, of LMO and cylinders results in constraints that inhibit the ability to address the demand.

As compared to the capacity shortage of LMO production, there is an even greater shortage of cylinders. Inventories of cylinders are running at extremely low levels (1/5th of demand days in comparison to LMO stocks). This is particularly evident in tier-2 and tier 3 cities where several of the bottling units are operated by ‘micro’ units in the unorganised sector that have very less filling capacity per day.

Our conversation with professionals in this domain indicates that cylinder manufacturers are completely booked (in terms of their production capacity) and import of cylinders is being explored as an option to fulfill the demand. The closed loop supply chain of cylinders is witnessing a turnaround of 3 times per month, which will need to be increased to 10-15 times a month.

The allocation of LMO to States also acted as a bottleneck and may not have considered the volume of infections, among many others, in the estimates. In addition to these bottlenecks, the ground realities also revealed a shortage of skilled personnel who could administer LMO to patients.

Lack of infrastructure

Since LMO is administered in hospitals, the lack of infrastructure such as beds within hospitals and healthcare facilities acted as additional constraint in the LMO supply chain. Reports also surfaced about trading of LMO cylinders in the gray markets at higher than usual price points and allocation of LMO to patients that was prioritised based on monetary favours. These behavioural factors also presented themselves as major bottlenecks in the supply of LMO to needy individuals.

To address this multifaceted problem, it is important to devise a short-term and long-term strategy. In the short term, it will be necessary to supplement the LMO produced in the country with imports to address the impending demand situation.

The bottleneck created by the intersection of LMO and cylinder supply chains need to be managed by more effectively coordination –

(i) the supply chain of LMO from the point of production to the point of bottling and then from the bottling unit to the point of use,

(ii) the forward and reverse supply chain of gas cylinders used for bottling.

To do so, innovative logistical processes such as consolidation centres, cross docking, and hub and spoke network management need to be explored for increasing the turnaround time of cylinders.

Possibilities of converting industrial cylinders to cylinders that can be used in the healthcare context need to be explored. Our conversations with industry professional suggest that currently, 50,000 industrial cylinders have been converted with another 80,000 being converted, which seem to be steps in the right direction to ease the capacity constraint.

The LMO cylinders used in India are made of steel alloys or aluminium and there might be potential short-term solutions of using alternative material to address the capacity shortfall. The ability to use the line flexibility of some of the sites to manufacture cylinders could be investigated. For addressing the bottleneck of allocations, the recent special taskforce comprised of doctors and policy makers can help in setting up an equitable distribution of oxygen to various states. Involving business leaders and supply chain experts could further strengthen the mission.

Skilled personnel shortage could potentially be addressed by cross training and uptraining some of the personnel currently operating in the healthcare sector who may not currently be directly involved in patient care. Additionally, possibility of utilising volunteers to manage logistical issues could also be explored.

Hospital bed capacity shortage could be alleviated by allocating dedicated Covid wards and by establishing make-shift hospitals (e.g., schools, community centres etc.) to address the surge in demand.

In the longer term, radical innovation options need to be considered. For instance, novel technologies that can help in converting gaseous plants into LMO plants should be considered. Infrastructural investments should be made so that LMO can be transported via pipelines from the point of manufacturing at plants to the point of use at hospitals.

(Debjit Roy is a professor at IIM Ahmedabad and Anand Nair, a professor at Michigan State University)

Technical issue resolution in open-source software development projects

Open source software (OSS) development platform is one of the most popular software development environments that organizations use to source high quality information system products. For example, the most popular open source product, the Linux kernel powers world’s largest stock exchanges; and Apache, the most popular web server was developed in open source platform, powers 52% of all websites globally. Projects are increasingly being conducted in OSS platform due to increased interest from the organizations. For example, major IT companies including Google, Microsoft and Facebook have increased their reliance on software development initiatives on OSS platforms . These developments have important implications for service operations management, particularly in terms of how projects should be managed within these contexts. OSS provides an Internet based virtual community-like software development venue where software developers collaborate voluntarily toward the goal of developing unique information system products. Such voluntary participation is important for sustainability of the OSS projects as inadequate participation has resulted in 80% of the OSS projects being canceled in the development phase. OSS developers stay motivated to participate in OSS because they enjoy the coding process and value the sense of unity with fellow developers while interacting in the software development project.

Traditional software development in firms differs from OSS development in three important ways: first, for OSS development volunteers the source of motivation is different than pay or career incentives; second, the lack of formal governance structure in a OSS development team excludes managers from exerting project control mechanisms; and third, in contrast to traditional software development, the ability of volunteers to coordinate work among OSS developers is contingent on effective information exchange over the Internet. To that extent, OSS platforms have been created that facilitate information exchanges among project members by means of mailing list or thread communications relating to a software code. However, the effect of increased interaction among members in unregulated virtual environment on project performance in terms of its quality and service delivery is unclear. A lack of synchronous interactions in virtual software development environment may weaken flow of information which may, in turn, impact project performance adversely. Higher interactions present teams with increased overhead which lowers team productivity. However, interactions among team members help members to self-regulate to distribute project activities and enhance productivity.

It seems that some form of interaction in self-regulated OSS teams is necessary for efficient information flow within team and to keep members motivated. On the other hand, beyond a certain threshold it may bring in overload to weigh down team performance. Communication frequency in a cross-functional team in traditional projects may have a curvilinear relationship with project goal achievement. Given the increasingly virtual nature of project management and its implications for operations management, it is important to understand how team member interactions related to performance in projects that are not governed within the traditional project context. To the best of our knowledge, no previous empirical work has considered how team member interactions influence project performance in alternative project context such as OSS development that are characterized by their virtual setting and voluntary participation by team members. The first research objective of this study is to address this gap.

Proactive planning for problem resolution in the traditional software development context is challenging. Given the additional complexities of self-regulated OSS teams including, but not limited to, absence of governance structure in a team, independence of members to contribute to projects, geographical and cultural dispersion of volunteers and keeping volunteers motivated in project activities without traditional incentive mechanisms, proactive project management is even more challenging for a project manager responsible for an OSS development initiative. Traditional project management process, which allows physical interaction among members and offers associated visual cues for managing projects, will fall short in the case of open-source projects. Virtual project venues and online knowledge communities, such as OSS platforms, further accentuate these challenges since team members do not interact in person with each other.

 
To enforce project control, managers of OSS projects often engage actively in discussion threads to remove information asymmetry involving team activities. Such participation helps project team members to access critical knowledge resources that generally much experienced managers bring along. Project managers exploit their connection to other projects to bring critical knowledge resources that enhance project performance. In the OSS development context, as managers are unable to pick up visual and verbal cues, active participation in project discussions becomes all the more important. However, we do not know how self-guided OSS development teams respond to such project control mechanism. Additionally, participation increases information processing overload for team members. Understanding the impact of project managers’ active participation in OSS projects on project performance is relatively understudied and forms the forms the basis for the second research objective of our study.

Project manager’s active participation may not only directly affect project performance but may also affect performance by influencing team member interactions. Effective and efficient ways of enabling information exchanges within team have been a cornerstone of project management research. With decreasing performance the motivation of project members, the glue that binds them to OSS platform, starts to wane and OSS projects may see higher dropouts. Inadequate participation has resulted in 80% of the OSS projects being canceled in the development phase. Project manager’s active participation may help with establishing formal structural coordination mechanisms in OSS development projects, thereby enabling participants and projects to reach their goals. Enforcement of process structure by means of effective project management in virtual software development context can alleviate conflict and enhance performance. The importance of project managers’ active participation in managing team interaction in a self-organizing OSS team structure is notably understudied and warrants research attention. Our third research objective aims at contributing to this need for further research.

We draw on social network theory and task familiarity literature to guide our research. Social network theory posits that ties among entities in a network generate social capital that translates to performance. We use this theoretical lens to understand the impact of team member interactions in a project network on project performance. To examine this relationship, we consider project team member interaction networks for 1842 open-source software development projects on the GitHub platform. For each of these projects we collect panel data that include evolving network measures and other project characteristics for two years (104 weeks) from the time of project initiation. Specifically, within each week we consider the project team member interaction network formed by actual comments and replies by software developers in response to an open issues and pull requests for these projects. Open issues refer to bugs reported in the software bugs management system of OSS platforms such as GitHub. Project members work toward resolution of these bugs by making necessary code changes. The changed codes are then merged in the source code by issuing pull requests.

We draw on task familiarity literature to explain how project manager’s active participation impacts project performance. Task familiarity literature suggests that familiarity with team member activities enables the manager to be aware of the flow of information in the project, which enables effective project management. We build on this reasoning to study the impact of manager participation in the OSS context. To study the relationship, we collect data on project manager’s participation in the network formed by team member interactions in response to the open issues and pull requests. In the GitHub platform closing an open issue is an indicator of completion of a specific project task. We consider the number of closed issues in a given week as our dependent variable and examine how this performance measure is impacted by the direct and interaction effects of network characteristics of team interaction and project manager’s active participation.
The results obtained from analyzing 133,023 observations of unbalanced dynamic panel show that as the density of the network formed by communication instances among project team members increase, the number of weekly closed issues in an OSS project initially increase but then decrease. We find that project manager’s degree centrality in the team interaction network has a direct effect of increasing the number of weekly closed issues as well as a moderating effect of flattening the curvilinear relationship between team interaction and weekly issue closure rate. In essence, project manager’s active participation alleviates the reduction in weekly issue closure rate once the density of team interaction goes beyond the inflection point.

Source: Pal, S., Nair, A., Zhou, Z. XXXX. Managing Projects in Virtual Settings: Information Exchange Networks and Project Performance. Journal of Operations Management.

COVID-19 Testing - Some reflections on assigning swabs to labs and segmenting patients

Testing is one of the most effective lever in managing pandemics. The recent experience of Coronavirus disease 2019 (COVID-19) is a case in point where the disease was  first reported in December 2019 in Wuhan, China and since then it had spread across the world. As a measure to address this pandemic, testing helped with keeping track of the status of the disease and in planning for other measures such as stay-at-home orders. The need for accelerated testing along with social distancing was soon felt to control the outbreak of infections. Americans need access to rapid diagnostic testing. The sooner clinicians, patients, and public health officials know whether someone is infected with the novel coronavirus, the sooner they can take action to mitigate the spread of COVID-19," said the Director of Biomedical Advanced Research and Development Authority, Department of Health and Human Services' Office. Hence, both building testing capacity via augmenting capacity at public and private laboratories (labs), and improving speed of obtaining test results are critical for early testing, diagnosis, and patient's path to recovery. In an ongoing research my co-authors and I aim to understand how to manage testing strategies by accounting both testing-site specific and human-behavior related factors. In particular, we consider testing site factors such as type of swab analysis site (public vs. private), relative analysis capacity, distance between collection and testing sites. Human-behavior related factors include social interactions vs isolation during the waiting times. Healthcare policy makers can leverage our research insights in developing testing guidelines, which would enable rapid response to swab processing. In addition, the results of this study are instrumental to control the spread of infections during pandemics.

Typically, treatment for a pandemic is not immediately available to all patients; hence, early diagnosis and then quarantine is the best known strategy to control the spread of diseases. This approach was followed globally during the recent COVID-19 pandemic. Early diagnosis necessitates the e cient management of the limited testing availability. In an effort to address the testing requirements, the United States has authorized their public labs (operated by local government) and private labs (operated by private companies including pharmacies and medical practices or not-for-profit organizations) to undertake manual, semi-automated and automated testing for COVID-19. In addition, drive-through sampling facilities and mobile testing units are also put in place that prioritize sampling for symptomatic individuals that are part of the highest risk population, such as those who have been in close contact with a positive case, health care workers, nursing home employees, and  rst responders on the front lines. These drive-through testing sites help reduce density and the potential for spread by keeping people who are sick or at risk of having contracted Coronavirus out of healthcare facilities. This system of labs creates a diagnosis network that has similarities to early infant diagnosis (EID)/network (EIN) that has received some research attention. Considering the case of COVID-19, we note that the testing process forms an important part of pa- tient ow. A typical flow of patients that begins from the onset of COVID-19 symptoms until the post- hospitalization stage (in the event of getting infected) is shown in the following Figure.

In the event of suspicion of COVID-19, the patients consult with primary care physicians. Based on the patient symptoms and the Cen- ters for Disease Control and Prevention (CDC) guidelines, physicians recommend to perform a COVID-19 test on the patient. The physicians can also categorize the potential state of the disease (mild, moderate and severe) by combining the patient's symptoms and medical history. After the swabs from the patients are collected, the swabs become the ow unit through the remainder of the process. Depending on the stage of disease, the patients' swabs are directed to either public or private analysis sites for further investigation. The transit time involved in collecting the test swab, batch preparation, and transporting the swab varies depending on the type of lab. Typically, it may take more than 48 hours for the swab to reach the large private analysis sites. Depending on the backlogs and capacity at the swab analysis site (lab), the test batch samples may wait for analysis. Testing delays can be significantly high, especially when the pandemic is in the initial phase and testing capacities are low. For example, in Arizona, patients report a delay of 6-8 days to receive the test analysis results. The delays in testing could be attributed to several factors such as swab analyzer capacity constraints, shortage of supplies to perform the testing etc. Once the test results are obtained, the patients are recommended to either stay at home or undergo hospitalization.

One of the possible approaches to manage testing is the intelligent assignment of testing to the labs. Private labs typically possess greater testing capacity due to high degree of process automation. While private labs have more testing capacity, the transport delays and other congestion can take more than 5-6 days for the results to be known. If the patient tests positive, the disease may have progressed to the next stage. While local testing may be more responsive, it has its own capacity limitations. Hence, in this research, we attempt to estimate what percentage of the swab samples should be dispatched between private and public labs that can lead to effective management of testing capacity, speedy testing and contain the disease spread, thereby resulting in minimizing the number of secondary infections.

In addition to testing assignment to appropriate labs, the preferential testing policy can also be employed. The CDC in the US developed prioritization guidelines for testing, so that individuals likely of developing a quick infection receive early testing and diagnosis. According to Gandhi et al. (2020), about 20% cases of COVID-19 are severe or critical. This characteristic of COVID-19 underscores the need for a priority-based testing to diagnose infection in the early phase of progression. The priority-based testing enables early initiation of the treatment and lowering the spread of the disease. Hence, we analyze the effect of patient priority on the volume of secondary infections.

The need of effective testing policy is more profound for COVID-19 because undiagnosed patients could potentially infect others during the time elapsed due to delay. While it is known that an early diagnosis can help patients isolate and reduce secondary infections, how to manage segmented patients (high and low priority) to effectively control secondary infections is unclear. There are several operational strategies that control the spread of infections, such as assignment of the test swab to a public vs a private lab. Private testing labs that are typically larger may be located farther from the test swab collection site as compared to relatively smaller public labs. Further, CDC has mandated certain categories of patients be given a high priority for testing. High priority could be based on patient age, profession, or the degree of symptoms. While prioritizing certain high risk symptomatic patients seems natural, the effect of priority on the secondary infections induced by low risk symptomatic patients is unclear. We argue that delaying test results for low risk symptomatic patients (younger patients) can affect large masses through social interactions than high risk patients (older). Hence, developing an understanding of the testing priority dynamics on the overall infection volumes is crucial. This delay could be a result of prioritization policy as well as the site assignment decision.

Source: Roy, D., Gupta, A., Nair, A., van Ommeren, J.C.W. 2021. Managing Testing during Pandemics: Considerations of Site-specific and Human-behavior Related Factors.Working Paper.

Implementing emerging technologies in Sourcing

In a recently concluded project my collaborators and I draw from previous studies conducted by Center for Applied Purchasing Studies (CAPS), relevant academic and trade journals, as well as case interview data from relevant organizations to investigate use cases and practical applications of implementation of emerging technologies in supply management. Emerging technologies such as Artificial Intelligence (AI), Robotic Process Automation (RPA), Internet of Things (IoT) and Blockchain are increasingly being deployed in organizations to execute and facilitate supply chain and procurement activities. Yet knowledge is still lacking with respect to the effectiveness of these technologies.  Our study provides insights into the justification, use cases, implementation process, barriers to implementation, critical success factors for implementation, and overall assessment of the effectiveness of Blockchain, Internet of things, Descriptive, Predictive and Prescriptive Analytics, Robotic Process Automation, Contract Analytics, Procure-to-Pay, Spend Analytics, Optical Character Recognition and Radio Frequency Identification technology.

As new technologies continue to emerge in supply chains and in procurement in particular, the adoption and implementation of such technologies will continue to evolve. Our conversations with several procurement leaders help in shaping our perspectives on the future of supply technologies. Overall, we believe that procurement professionals will need to have a clear business case preceding an organization’s technology choice. Niche technologies ranging from spend visibility, track and trace and spend analytics are more likely to solve many of the problems in sourcing as compared to an end-to-end solution. Technology can act as enablers but it is important to first identify the problem, identify potential solutions and upgrade the skill set needed to onboard a specific technological solution.  

Companies are leveraging emergent technology very cautiously. There are a few companies that have clients who embrace the technologies significantly but a large majority are just sort of dipping their toes in the water.The primary reason is that many organizations have been burned by these technology implementations. Oftentimes a technology which looks great on PowerPoint does not turn out to be as promising when delivered. After a lot of expenditure, business cases were made to realize the true value of the technology. Given the budget constraints, many companies are now implementing technologies more cleverly by working around some of the limitations.

There is a lack of clarity as to which technologies should be classified as ‘emerging technologies’ in procurement. One way to think about a technology as ‘emerging’ is to consider the founding or relaunching year of a technology. Around 2014 there were some structural changes to older technologies in terms of API driven methodologies and analytics based tools. Big data was 2014 technology. However, over time, technologies have gotten smarter due to some industry influence and disruptors.  These emerging technologies are in their evolutionary phase and are becoming more prescriptive with a specific focus on a particular sourcing problem. Technologies delivering true value to an organization are typically aimed at doing a particular set of activities and not at doing everything. Managers want very deep solutions in areas such as spend analysis, risk, sustainability supplier relationship, and, hence, technology needs to be best suited to deal with certain situations and has to bring precision to the required solutions.  For example, a sourcing tool that is right for a high volume low complexity environment may not be appropriate for a low volume high complexity environment. A completely different tool might be needed. Similarly, sourcing tools in the manufacturing context could differ substantially from technologies used in the services context.

Emerging technologies in the risk management domain will need to consider lessons learned in the COVID-19 pandemic.  Technologies will need to account for event based risk, cyber risk, financial risk, sustainability risk, etc. The emerging technologies should bring in better insights for risk management. Similarly, technologies dealing with sustainability or relationship management will need to cover additional nuances that organizations will be facing in the sourcing domain. Notwithstanding the need for new models for risk management, sustainability, relationship management etc., before implementation it is still important that organizations have a goal of how to fix the most basic things. The emerging technologies must help organizations in spend visibility, payment centralization, governance mechanisms, and contract analytics and tied to these are some good supplier information management systems. This should get the company doing a basic level of sourcing. Implementation of any emerging technology has to happen in parallel to the basic buildup of functions because if the organization waits to build on the stages they may fall behind exponentially and lose the competitive edge. An organization should find the top three critical points and go ahead using emergent technology to fix them in parallel. The business case for implementing technologies needs to be precise and should unravel the critical need of increasing sourcing velocity. Then the organization should use technology to address the need. The savings the company incurs should be used to fund the next steps.

Although technology implementation needs to be planned by considering specific technologies, it is important to note that as technology usage evolves in an organization these technologies start to get highly coupled with each other. A forward looking implementation plan that considers the coupling and integration between technologies would serve organizations well when decision makers may want to change course. While a long term technology roadmap is effective in planning for technology implementation, such roadmaps should have a certain degree of flexibility to incorporate changing business conditions and requirements.

Source: Goke, A., Nair, A. 2021. Compelling Applications of Emerging Technologies in Supply Management. CAPS Report. (Research assistants: Sukrit Pal, Ashok Gopalakrishnan)

COVID-19 costs could push hospitals to rethink billions of dollars in wasted supplies

COVID-19 costs could push hospitals to rethink billions of dollars in wasted supplies

With hospitals under financial pressure from COVID-19 and medical waste volumes even higher, the pandemic could finally trigger a much-needed reset in how health care organizations and hospitals think about supply-related waste. That includes how they reuse supplies, how they plan for surgeries and what they look for in prepackaged surgical supplies. Click the above link to read the entire article that I have published in The Conversation.

 

Analyzing Supply Market Conditions

Analyzing supply market conditions is an important activity within sourcing. As part of this activity organizations need to understand what does the supply market look like and what are the current conditions. Organizations should develop strategies regarding what they are going to do, given the supply market conditions, in order to avoid supply risk and make a good deal with a supplier.

Here are some of the important aspects to be considered:

• The number of capable suppliers in the market and where they are located.
• Is it primarily a domestic market, or are suppliers located all over the world?
• Are there certain regions where the suppliers tend to be clustered?
• The number of suppliers might be important because oftentimes, the more suppliers there are in the market, the more competitive the marketplace is
• The concentration of the supply market
• Understanding how concentrated the market is and the trends in concentration over time is extremely important. In many supply markets, buyers are finding that over time, there are mergers and acquisitions that are reducing the number of available suppliers and concentrating the market much more significantly
• Who the market leaders are?
• The levels of capacity utilization for the companies in that supply market
  • Knowing this information is important because oftentimes, if suppliers are operating at or near full capacity, they are less interested in new business. On the other side of that coin, when companies have excess capacity, they probably compete a lot more strongly for new business
• Who the other major buyers are in the marketplace
  • Organizations are going to compete for the attention and capacity of the suppliers in a supply marketplace. Hence, it is necessary to have some understanding of who the organization is competing against and whether or not the organization is going to be an important customer for these suppliers.

The Effects of External Auditors and Certification Bodies on the Operational and Market-Oriented Outcomes of ISO 9001 Implementation

There are a number of practical implications drawn from the findings of our study. First, our study confirms once again that quality implementation is the key determinant of the operational outcomes of ISO 9001 adoption. At the same time, however, the findings also confirm the important role of external auditors in enhancing the effect of implementation on the operational outcome from ISO 9001 standard. This result is instructive in that it is the quality of auditors rather than the reputation of certification bodies that help firms in gaining the operational outcomes. For many firms, however, this finding could raise a practical problem: how to find good auditors? The answer to this question is not straightforward because, unlike certification bodies who have certain brand equity, auditors are employed by certification bodies and their quality is somewhat hidden from the customers and is only revealed after they are engaged after the ISO 9001 certification is over. Indeed, this problem is exacerbated by the fact that firms cannot simply resort to reputable certification bodies in order to find good auditors. The positive correlations between quality of auditors and reputable certification bodies only show a medium strength and, hence, this does not provide a strong assurance that reputable certification bodies will always send quality auditors. Therefore, while engaging reputable certification bodies is recommended, firms should request that they are served by experienced and quality external auditors whose characteristics are partly captured in this study. At the same time, however, the findings also infer that high quality auditors are not necessarily always employed by reputable certification bodies; they could also be part of less reputable certification bodies. In this regard, our findings also provide a ray of hope for firms who cannot afford to engage reputable certification bodies that normally charge higher costs than their counterparts. In particular, smaller firms with limited resources still have a chance to engage high quality auditors and to benefit from their services.

Our findings show that the reputation of certification bodies (rather than the quality of external auditors) helps firms improve their market-oriented outcome, including broadening their market scope and winning more customers. This finding suggests that customers still rely on “brand image” of reputable certification bodies. Customers perceive ISO 9001 certifications issued by reputable certification bodies to be of higher value than others. While this may be true to a certain extent, it is important to balance this notion with our finding, which shows that certification bodies do not have a direct positive effect on operational outcomes. Instead, firms ought to seek high quality ISO 9001 implementations that are then vetted by high quality auditors so as to obtain operational outcomes. The operational outcomes in turn exert a positive effect on market performance. This result therefore sends a strong message to firms that are trying to attain market-oriented outcomes solely from compliance to the standard’s requirements without internalizing the implementation process. More importantly, since it is operational outcomes that are mainly desired by customers (rather than the certification), simply signaling high quality ISO 9001 implementation by tapping into the reputation of certification bodies could be a misleading strategy to gain market-oriented outcome.

COVID-19 and the Healthcare Supply Chain

The COVID-19 situation resulted in a sudden and unprecedented peak in global demand. This led to inventory shortages and capacity constraints. Healthcare organizations experienced congestion and resorted to demand substitution. The supply chain for pharmaceuticals and medical devices were impacted by disruptions. Pharmaceutical manufacturing companies get their supplies from more than 2000 active pharmaceutical ingredient suppliers as well as from other suppliers. Several of these inbound supplies were constrained during the pandemic. Close to 6,800 branded, generic, and biologic pharmaceutical manufacturers supply to traditional and specialty distributors who account for about 92% of sales. Distributors supply to retail and non-retail pharmacies amounting to more than 180,000 in numbers. The link from pharmaceutical manufacturers to distributors and retail pharmacies also experienced disruptions resulting in shortage of several medicines. The globally dispersed medical devices supply chain is very complex involving several to-and-fro cross border movement of supplies.

 

 

In 2019 the global annual demand of ventilators was 77,000 new ventilators. However, 2020 saw an unprecedented increase in the demand for ventilators. 5000-7000 ventilators were required per week in April and May of 2020. Some ventilator manufacturers boosted their production by 30-50% but, by themselves, could’t deliver the 500 or 1000% growth in production required. Top ventilator manufacturers in this tightly regulated market include Becton Dickinson, (Vyaire Medical), Philips, Hamilton Medical, Fisher & PaykelHealthcare, Dräger, Medtronic, GE Heathcare, Gelinge, Mindray, Löwenstein, and Hill-Rom. About 700 parts go into making a typical ventilator and these ventilators cost about $25,000 to $50,000 each. Some innovative inter-industry tie-ups (e.g. GM and Ventec Life Systems; Ford and GE Healthcare) helped in alleviating some of the pain. Under Defense Production Act, an order was issued to help U.S. ventilator manufacturers by removing "obstacles" to their accessing parts and materials needed to ramp up production of the breathing devices in response to the coronavirus crisis.

The root causes of disruption within the healthcare supply chain are a result of the global dispersion of supply base, supply chain complexity, lack of visibility and delayed response. To address the situation it is important to manage capacity (including labor), understand lead-times for suppliers, and be aware of the interdependencies (e.g. interdependence between testing capability and hospital capacity). Cross-industry collaborations by involving industry partners in automotive, consumer goods and cosmetics was helpful, but more of such collaboration will be needed to address the future needs. Developing new products and finding substitutes is critical to effectively manage the 'bottleneck' supply market. The process of creating private-public partnerships should be streamlined so that quick response to disruptions can be achieved. COVID-19 had taught an important lesson of developing responsive/adaptable supply chains, assessing current allocation/coordination approaches in response to the pandemic, and considering possible supply chain structural and/or regulatory changes.

 

COVID-19 and Implications for Manufacturing, Reshoring, and considering Total Cost of Disruption

• Organizations have considered offshoring as an attractive option based on their  “total landed cost” and “total cost of ownership” calculations. However, in recent years organizations have started looking at reshoring as a viable competitive option after factoring in the roles of reduced transportations costs and faster inventory turns in offsetting higher labor costs. In a survey conducted in 2019 by the Reshoring Institute, 97% of the respondents indicated that they would consider a domestic source for parts if the price and quality were competitive to foreign suppliers. In addition to the growing attractiveness of U.S. markets, the unpredictability of tariffs and trade regulations leave companies conducting international business wary of unexpected cost increases. The survey found that from 2017 to 2018, the number of companies operating in multiple global locations decreased by 10%.  
•  Covid-19 has brought to the fore the ability of reshoring to not only offer these advantages but also help in mitigating supply chain risk. According to a study conducted by the Coalition for a Prosperous America, during 2000-2019 imports of medical supplies related to the managing the Covid-19 crisis has increased by 368%, which was more than three times the increase during the same time-period experienced for all the goods that are imported by the United States (105%). 
• The pandemic exposed United States’ vulnerability with regards to the supplies of personal protective equipment (PPEs). Almost 60% of the disposable rubber gloves came from Malaysia, where these Malaysian manufacturers were unable to produce the required quantities due to their own supply shortages. An investigation by the Associated Press found a 40% reduction in the shipments from China of hand sanitizer, swabs, and N95 facial masks from early to mid-March as compared to the shipments during the same period during 2019. This was attributed to the fact that the Chinese government had instructed its domestic producers to meet China’s demand before exporting products.  In the wake of the pandemic other countries also took such measures. During April – May, some of the products such as thermometers were being sold on Amazon at almost four times their price during normal times. 
• Such experiences call attention to consider the “total cost of disruption” while using traditional cost calculations for making decisions on the location of supply sources. In addition, reshoring can also help with alleviating some of the unemployment crisis created by Covid-19. According to a research publishd on MarketWatch, extensive reshoring of pharmaceuticals and medical supplies alone could potentially create more than one million new jobs and inject more than $250 billion into the GDP. 
• Organizations and policy makers need to take appropriate steps to do reshoring and multishoring right.  

GUIDELINES FOR POLICY MAKERS 

• It might be the right time to determine manufacturing sectors that are critical for public health, economic welfare and national security. These sectors should be categorized as critical manufacturing infrastructure by the Department of Homeland Security and could be candidates for onshoring. 
• Policy makers need to determine the changes to tax, legislative or foreign policy that will be necessary to move manufacturing of pharmaceutical and medical device and consumables back to the United States. For instance, The federal government can make changes to national foreign policy to mandate onshoring of a portion of pharmaceutical or other critical manufacturing sectors as a matter of national security.  
• Tariffs and corporate tax incentives by themselves may not be sufficient in promoting onshoring since companies will consider other countries in the low cost region before onshoring manufacturing capacity to the U.S. It might be necessary to provide opportunities for organizations to make reasonable profits from their investments. As an example, mandating that Veterans hospitals procure their medical supplies in the United States could be a good place to start as it can help in increasing American manufacturing capacity. 
•  The US International Development Finance Corp (DFC), which was created in 2018 by combining the former Overseas Private Investment Corp (OPIC) and part of the U.S. Agency for International Development, can take an active role in spearheading the reshoring efforts for products that are critical for national security (including essential pharmaceuticals and medical supplies). The DFC and the defense department are jointly administering $100 million in supply-chain reshoring funds from the $2.3 billion coronavirus legislation passed in March. There has been some recommendation of leveraging this money into loans equating to billions of dollars by using it as a pool of capital similar to the U.S. Treasury’s backing of Federal Reserve loan facilities.  
• It is important to recognize that concentrating all the supply from one place can be risky. Hence, reshoring should be approach in conjunction with a well thought out diversification strategy that can help in offering resilience against disruptions. In this regard organizations need to consider alternative sources as a backup for the supplies that are essential for national security and public health.  
• If economics prevent reshoring, opportunities for multishoring should be explored such that portions of supply chains related to critical supplies can be relocated to the North American trading partners of the U.S.  
• The reshored capacity can be the source for accumulating inventories of critical supplies similar to the thinking behind the Strategic Petroleum Reserve. 
• From a policy standpoint it is important that the reshoring initiatives are implemented in a genuinely strategic manner that accommodates national security rationale but doesn’t get swayed in terms of promoting the goal of protectionism for some select business lobbies. 

GUIDELINES FOR ORGANIZATIONS 

• Due diligence need to be taken when choosing a supplier (within the U.S. or offshore) such that a comprehensive set of factors are considered. These factors include quality, cost, service level, technology, talent, innovation, infrastructure, automation, QMS/standards, engineering, vertical integration, market proximity, stability, ease of doing business, and risk of disruption. 
• Organizations need to synthesize the existing prior knowledge, say in the pharmaceuticals and medical supplies sectors, to identify gaps, which will constitute new knowledge, that hinder the efficient development and manufacturing of generic drug products within U.S. 
• Instead of seeking low-cost labor, organizations need to investigate if the needs can be served by adopting advanced and innovative manufacturing tools (e.g. 3-D printing, robotics, automation) that are served by a highly skilled and highly productive workforce. Once again the total cost of ownership after a comprehensive consideration of various factors mentioned above would help in getting a better understanding of the relative merit of alternatives. 
• The reshored manufacturing capability could be spearheaded in such a way that organizations build manufacturing facilities in more flexible ways so that they can be repurposed if need be.  
• Organizations can use the Assess Costs Everywhere (ACE) Tool developed by the U.S. Department of Commerce tool in partnership with the NIST-MEP and with support from various agencies within the U.S. Department of Commerce to assess total costs by identifying and considering 10 cost and risk factors. These include: labor wage fluctuations; travel and oversight; shipping time; product quality; inputs such as energy costs; intellectual property protection; regulatory compliance; political and security risks; and trade financing costs.  
• Organizations can utilize the National Excess Manufacturing Capacity Catalog (NEXCAP), a resource developed by the University of Michigan to get an understanding of vacant manufacturing facilities as well as critical data on skilled workforce supply, community assets and other information pertinent to making location decisions.