Supply Chain Resilience

On February 24 President Biden signed an Executive Order aimed at encouraging Supply Chain Resilience. There are two parts, first, a 100-day Supply Chain Review focused on semiconductors, batteries, rare earths, active pharmaceutical ingredients, and closely related flows. Then, second, a set of six Sectoral Supply Chain Assessments: defense Industrial Base, public health and biological preparedness, information and communications technology, energy, transportation, and agriculture/food. These six assessments are to be completed by next February.

As with any significant Executive Order there are several motivations playing out and a variety of purposes being pursued. There has been plenty of insightful commentary. There have already been several efforts to influence how the EO will be implemented. There will be more.

Indirectly, the Executive Order calls-out several conundrums that challenge effective policy-making related to supply chains.

Four urgent vulnerabilities are plucked from six very full baskets of strategic risk. These four have been recognized (by some) as urgent for a few years. The 100-day window suggests some solution paths have been conceived. The tasks between now and Memorial Day are to confirm or deny (and refine) what has been conceived. If confirmed, this window in time will also be used to gin-up support for moving forward.

The one year schedule for the six assessments is, almost certainly, an initial down-payment that, if successful, will start a multi-year process of sustained strategic engagement in crafting meaningful Supply Chain Resilience. In Washington DC a one-year schedule for anything is generous. But tension persists between the real need (practically and politically) to do-something-soon and the temporal components to do-something-substantive.

The Executive Order gives diversity and security equal — uneasy — equivalence in its recipe for resilience. Diversity innately resists being secured. Security and resilience are often in tension precisely because systemic diversification and independent self-organization makes securing much tougher. Too much security results in rigidity instead of resilience.

Authentic sources of dissonance between national security and economic vitality are another uneasy (and inescapable) relationship baked into the Executive Order. The national security shop and the economic policy shop are given co-ownership of the whole Supply Chain Resilience process. Similar dual touch-points persist across the effort, for example when the Department of Homeland Security and the Department of Commerce are given joint custody of the Information and Communication Technology (ICT) industrial base.

Does anyone know if President Biden is a fan of Arnold Schoenberg? Or maybe Stravinsky? Some say dissonance is as All-American as Gershwin and jazz. Whatever the sound-track, this Executive Order explicitly embraces persistent tensions involving time, turf, technique, targets, interdependencies, freedom, risk, and how the real world works, especially at global scale. The Executive Order leans into these tensions, but it is not yet clear how — if — they will be resolved. Schoenberg’s stubborn non-resolutions are very different from Miles Davis.

Over the next year each of the big six or seven players will have the chance to strut their stuff. I expect a policy line-up that ranges from Sousa marches to the coolest jazz. Then the EO outlines how, “as soon as practicable following the submission of the reports required,” the national security and economic policy shops will provide to the President recommendations to “strengthen the resilience of America’s supply chains.”

I’m guessing that the President’s senior folks are guessing — even depending upon — that six honest assessments will (despite dramatic differences) unveil a Venn diagram where — miracle of miracles — all the essential “industrial base” supply chains share about 80 percent of the same problems (and opportunities?) that can be strategically addressed as a network-of-networks. I’m guessing they are correct. For this fusion to be practically reflected in policy and strategy, I am betting on — hoping for — something more jazz-like than march-like.

Late in his career Miles Davis put aside raw improvisation. But even his most composed performances preserve tensions purposefully deployed as creative strength. Herbie Hancock remembers, “What I realize now is that Miles didn’t hear it as a mistake. He heard it as something that happened. As an event. And so that was part of the reality of what was happening at that moment. And he dealt with it…. Since he didn’t hear it as a mistake, he thought it was his responsibility to find something that fit.”

Great attitude — the only realistic attitude — for engaging the dynamic realities of contemporary demand and supply networks. In Kind of Blue and much more, the great jazz trumpeter resolves tension by embracing dissonance. Not easy to do, but possible.

Here’s a brief new synthesis of which non-pharmaceutical interventions work best and why (sometimes, where) they work. It was published on February 22 in the Journal of the American Medical Association.

Investigations of COVID-19 outbreaks have shown that the factors influencing the risk of transmission vary across settings. However, these local factors occur in several well-established patterns that can be prevented when identified. For example, compared with well-ventilated outdoor spaces, the risk of infection is higher in poorly ventilated indoor spaces when there is prolonged duration of close contact (within 6 feet of someone for ≥15 minutes over a 24-hour period coupled with limited physical barrier to viral transmission because of inconsistent use of masks. The context and intensity of exposure are key in the spread of SARS-CoV-2. Large outbreaks or superspreader events have generally been characterized by a confluence of these factors, such as crowded indoor spaces combined with lack of mask use.4 Living and working environments that are characterized by such factors may also contribute to the greater incidence of COVID-19 associated with race/ethnicity, poverty, and zip code.

Nothing new.  But a helpful integration of findings and research citations.  Just to be explicit: from a Supply Chain Resilience perspective, viral transmission is an important element of demand dynamics.  Non-pharmaceutical interventions are a form of demand management.   We want to avoid excess demand for services by hospitals and, especially, intensive care units.  Sudden and sustained demand beyond existing capacity is one of the most dangerous threats to any supply chain.

To converse is to turn-with or turn-over. Gently, warmly going back and forth together can open a topic, might open a mind (or two), and may even open conversationalists to each other. I once spent more than two-hours with my mother’s father saying, perhaps, a dozen sentences altogether. He reported to his daughter, “Phil is a marvelous conversationalist.” Well, questions and listening can unlock conversations. Conversation can unlock mysteries.

Over the last few months I have mostly focused on vaccination issues. Below are some of the issues that emerged. As I write this post I am finishing five very full days working issues related to the impact of the polar vortex on a whole range of demand and supply networks. Topics abound. Mysteries abound. Opportunities for conversation abound.

With the online publication of He Looks at the Earth, I will from time to time post on Supply Chain Resilience. I welcome your questions, suggestions, commentary, and more. I hope that from time to time we may end up in real conversations.

Governors, mayors, health commissioners and others are complaining about a “vaccine shortage.”

Los Angeles County Public Health Director, Dr. Barbara Ferrer, recently told CBS-Los Angeles, “The only thing standing between us and doing more vaccination is actually getting more vaccine… We’re ready right now today, at the drop of a hat. If somebody said ‘here’s 400,000 more doses,’ we would get them into people’s arms next week.”

I’m sure that is true. It is, however, a statement that obscures rather than illuminates our current situation.

So far in 2021, roughly 10 to 12 million doses of the Pfizer and Moderna vaccines have been filled, finished, and distributed each week across the United States. By most counts, about 14 million doses per week is the upper limit of current production capacity. (I have seen one credible estimate of 18 million doses, but this is an outlier.) During the third week in February a flow of 13.5 million doses is being projected.

Efforts are ongoing to increase this capacity. Some current constraints could be loosened (update).  Some additional production lines might be opened.  There are credible reasons to anticipate that new capacity from Johnson & Johnson and perhaps, Novavax will deliver several millions of doses by this summer. All of this is well-reported by the media and often-referenced in official statements. It is also consistent with production capacity projections originally laid out at least as early as October 2020.

There is a huge gap between the vaccine doses available today and the demand (need) for vaccinations today. Is this a shortage?

If you mean there is a deficit, then yes there is a deficit of supply. There is a scarcity of vaccines. There is a lack of vaccines to fulfill demand.

In English there is a subtle suggestion that a shortage is caused by a reduction in prior abundance. An English-speaker will hear that something has been shortened, cut, curtailed that has now resulted in a shortage. With the coronavirus vaccine, this is not true. Rather there has been an amazing production of millions of doses from absolute scratch only a few months ago. We are well on our way to having plenty in just a few more months.

Is this etymology or hermeneutics?  What I am sure about is that in discussions with both senior policymakers and vulnerable people looking for vaccinations, there is a sense of shortage that, in my judgment, unnecessarily complicates thinking about demand and supply.

We have a fairly accurate sense of demand. We have a fairly accurate sense of supply. We can be certain of a continuing but narrowing deficit of doses for the next several months. This reality should frame our expectations, preparations, and actions.

On January 6, according to data available that morning, the national Vaccine Utilization Rate (VUR) was 30.7 percent. As of January 30, the national VUR was 59.2 percent. The US rate of vaccine consumption has basically doubled in three weeks time. As February begins the number of vaccine doses distributed in the United States will cross the 50 million threshold.

Recent outbound flows of the two currently available covid-19 vaccines have been averaging 1.2 million-plus doses per day. Given availability of upstream inputs and throughput at the finishing plants, current upper-end North American production capacity for these two vaccines is estimated to be about 2 million doses per day. (The highest credible estimate of current capacity that I have seen is 2.5 million doses per day.) To consistently achieve maximum capacity for a never-before-produced vaccine is unlikely this early in production, but flows are projected to more consistently achieve full capacity by the end of March.

Improved Vaccine Utilization Rates are due to several factors including, moving beyond holiday-related friction, accumulated vaccination experience, reformed procedures and processes, more person-hours spent jabbing, expanding the size of priority populations, enhanced flexibility serving priority populations, and increasing the number of access points. Larger-scale drive-through vaccination venues have received significant media attention. Here is a report on the quick standup of a “Vaccination Superstation” in San Diego County.  Data are not yet available to assess which method or combination of methods have been most helpful to doubling the consumption rate.

As higher velocity vaccinations are achieved, it will be even more important that planning and execution reflect effective demand management. (The linked WSJ report is consistent with Supply Chain Resilience TA principles.). Late Friday, January 29, the editors of the Journal of the American Medical Association published an editorial on demand management  very similar to the approach the TA program has outlined since October.  For this virus, better risk prioritizing also advances greater equity. 

The Kaiser Family Foundation reports that the American public is demonstrating increasing confidence in — and demand for — vaccinations.   As demand signals — population pull — increases, it will be even more challenging to effectively target available push. Most outbound flows are not yet structured to support variable demand. Over the weekend a colleague also commented, “The most obvious concern to me is burning out human resources as we poorly manage supply and demand of product. We will continue to need so much from [medical staff and volunteers] in the coming months. That is why making their time as productive as possible now, not slowing them down with paperwork delays [and other distractions], is important.” 

Despite current supply limitations, up to twenty-million doses (about 40 percent of flows) are reported to be “deployed” but not yet administered. The improved VUR is encouraging, but there are also increasing concerns to vaccinate as many risk-prioritized populations as possible before more contagious variants of the virus become dominant. The authors of a variant study released last week conclude, “this virus is traveling in a direction that could ultimately lead to escape from our current therapeutic and prophylactic interventions directed to the viral spike. If the rampant spread of the virus continues and more critical mutations accumulate, then we may be condemned to chasing after the evolving SARS-CoV-2 continually, as we have long done for influenza virus. Such considerations require that we stop virus transmission as quickly as is feasible, by redoubling our mitigation measures and by expediting vaccine rollout.” The more quickly risk-prioritized vaccinations are administered, the more this threat is mitigated.

Potential expansion of production capacity for current vaccines is being explored. But realistic options are unlikely to produce more flow before late Spring if at all. The distribution-friendly Johnson & Johnson single dose vaccine seems likely to receive an Emergency Use Authorization in coming weeks.  J&J anticipates having the ability to produce 100 million doses by the end of June.  Some virologists expect one or more variants to be dominant by the end of March.