In preparation for a March 4 interview the following questions were sent ahead. To organize my own thinking, here is my written “homework.”
What does the vaccine distribution strategy look like from a supply chain perspective? i.e., How does it differ from other types of supply chains?
The US vaccine distribution strategy has been — basically still is — very supply-oriented, not demand-oriented. It is as supply-oriented as many pre-1970 wholesale markets. This is dramatically different from contemporary high volume, high velocity supply chains. Where today the biggest players compete over who can best understand — and even own — demand. US vaccine distribution has been, at best, a Sears distribution strategy… and Sears before Walmart was recognized to be an existential threat. Today supply chains are demand-driven, data-driven, fluid-dynamic networks. Vaccine distribution, in contrast, has divied up available supply and pushed it out toward counties, cities, and towns, depending on excess demand to do the rest.
In some ways this makes sense. Less than nine months ago there was no scalable production capacity for these vaccines. It was obvious initial demand was going to far exceed supply well into 2021. But as supplies have continued to expand we are beginning to see the limitations of this supply-oriented approach. By the end of June I bet we will be worried about lack of demand for available supply because of various kinds of vaccine hesitancy.
What are some of the challenges identified at the beginning of the process, for example in late 2020, before vaccines started shipping? How has the industry tackled some of these complications? For example, the low temperatures required by the Pfizer vaccine.
On August 27 the CDC asked states and others to begin planning for vaccine distribution as early as November 2020. Planning scenarios and guidance were provided, including the potential need for double-doses and ultra-cold storage. The planning scenarios were obviously, if implicitly, based on the possibility of early approvals for Moderna and Pfizer products. As it turned out, these products were the first to receive Emergency Use Authorizations, but not until mid-December.
Pfizer — already one of the most capable pharma distributors on the planet — decided to deploy its own distribution capabilities. Moderna — a much less mature enterprise — is more dependent on the US Government distribution network managed by McKesson. Both the Pfizer and Moderna distribution efforts involved a number of sub-contractors, including usual suspects like UPS and Fedex, that were involved in detailed preparations since this summer.
At the distribution level — let’s say from the filling/finishing facilities to a hand-off to each of the States — the cold-chain and other novel constraints were expensive and logistically non-trivial, but clearly within the capacity of the contractors and the US national freight network. Vaccine packages are small and uniform. Flow has increased gradually. Certainly distribution has required significant upfront investments, there have been some serious hiccups, and no doubt there have been late nights and urgent interventions. But outputs — outcomes — have largely been as planned and projected at the distribution level.
Then at the wholesale level (retrieving that pre-1970s paradigm), once the handoff to the states happened. outcomes have varied dramatically. The Pfizer vaccine began to ship on December 13. Moderna began shipping seven days later. Three weeks after flows started, we had a national Vaccine Utilization Rate of about 30 percent (more). Some states, localities, and hospital systems were moving inventory much more quickly and others were much slower. Very high demand, but only about 30 percent of available inventory was being consumed. Since mid-February our national Vaccine Utilization Rates have been above 75 percent. But variation is still significant. During the first week in March the National Vaccine Utilization Rate was over 75 percent while one state was at 68 percent and two others had broken 90 percent.
What is needed to ensure the most reliable vaccine distribution?
There are a whole host of requirements for reliable vaccine distribution, just as with any pharmaceutical product and many perishable products of all sorts. But fundamental to reliable vaccine distribution are reliable projections of demand and supply. With reliable projections of demand and supply then the other supply chain inputs can be appropriately secured and sequenced. Without substantial confidence relating to supply and demand, the vaccination network has sputtered and stalled in ways that tend to be amplified across the network. There has been a major effort made to provide states a three-week sure-thing window on forthcoming flows. That was supposed to begin on Valentines Day, but the Polar Vortex had other plans. It is, however, my impression that by late February “guaranteed minimums” were being regularly delivered and, in fact, our “wholesalers” at the state and local level have had challenges because in early March some deliveries exceeded those minimums.
What is Operation Warp Speed and how is it involved in vaccine distribution?
Operation Warp Speed was the name for a public-private effort to accelerate development, testing, and mass production of effective coronavirus vaccines. Many elements of the program are still operating, but Warp Speed is no longer referenced. The recent addition of the J&J single-jab vaccine is another output of the newest incarnation of this effort. I have been told that this effort has also been instrumental in bringing Merck’s vaccination production capacity into the mix to increase flows of the J&J product.
Beyond high-velocity vaccine development, testing, and mass production, OWS also developed a national distribution capacity and capability that has been used to distribute the Moderna product to the states and track all vaccine distribution.
I could, perhaps should, leave your question there, but I predict distribution will be the focus of a great deal of after-action analysis. From where I have sat, from what I have been able to see, it seems to me that the McKesson-plus-Many-Others capability that was put together was successful moving product from filling/finishing to the states. Pfizer did a good job of this too. We should not underestimate the value of this achievement. But after product handoffs to what I have called the wholesale level, Vaccine Utilization Rates have varied dramatically. Should federal, state, and local players — not just OWS — have done more? How could what I call the wholesale level have been better prepared to play a more demand-oriented role in distribution?
For your audience of supply chain professionals, I will share this observation — to which I hope the after-actions will give attention: Contemporary demand-oriented, data-driven, just-in-time supply chains work hard to squeeze out uncertainty, but every new product introduction, every holiday season, every hurricane season generates profound uncertainties to effectively manage. Uncertainty is, in some ways, the reason supply chain professionals exist. You plan and execute to minimize uncertainty. You demonstrate your capacity to respond to uncertainty under duress. You compete with each other on how well you can both minimize and exploit uncertainty. I don’t perceive that this self-definition, this professional discipline, this embrace of uncertainty, this career-experience with uncertainty has characterized the first ten weeks of the vaccine rollout.
How has the distribution strategy evolved since late 2020?
What I am calling the wholesale level — states, localities, public health agencies, hospital systems — have become much more proficient at last-mile supply chain operations and last-inch procedures. More access points are being set up: many more temporary vaccination venues and an increasing number of retail pharmacies are now delivering vaccinations to consumers. The supply chain is not yet demand-driven, but as supplies increase and points of access become more convenient it is much more demand-friendly, like Sears on some sunny day in June, 1971.
How do you think the arrival of new COVID-19 variants will affect current distribution plans?
The increasing prevalence of more contagious variants — and in some cases, potentially more lethal variants — lends even greater urgency to distributing as much vaccine volume as possible and pushing Vaccine Utilization Rates as high as possible. In early March, US data are mostly moving in the right direction. Confirmed coronavirus cases, hospitalizations, and deaths are all down from early January peaks. Most measures of US population mobility — human circulation — continue to be down about 25 percent. Vaccination rates are increasing. But what we have also seen in other places, especially in Brazil, is that the variants can seriously — and very suddenly — disrupt progress. The virus is evolving to outrun our constraints. During the last week in February and first week in March improving US data stalled. Is this a blip, a plateau, or the start of a variant-fueled resurgence? We don’t know. So, given the risk, our best bet is to keep building and using transmission roadblocks — vaccinate faster, reduce population circulation, avoid crowded interior spaces, continue face coverings, and so on — to keep cases and hospitalizations as low as possible until roughly seventy to eighty percent of the population is vaccinated.
On a more recent subject, how has the polar vortex impacted supply chains in the US? Has there been any major outlying impact on the distribution of vaccines?
Many, many supply chain impacts. For example, major disruptions of fresh produce and fuel refining; amazing fluctuations in the natural gas market, and significant shifts in the freight market for several days across several lanes. Vaccine distribution was considerably reduced on February 16, 17, and 18 and then bounced back much higher the next week to make up for what had been lost. This is not a system well-suited for volatility. So yes, there were enormous gyrations in local vaccination flows caused by the Polar Vortex.
So far, we’ve been focusing on vaccine distribution in the US, is there anything you can add about distribution in other parts of the world? i.e. do the strategies differ, how so, etc.
Among the most populous players the United States is well ahead on the vaccination front. As we speak in early March, the United States is administering about 1.9 million shots per day. That’s more than twice the number of vaccinations per day in the European Union, more than three-times the number of vaccinations per day in China, and almost 4 times the number of vaccinations per day so far in India. Israel has done a fabulous job of vaccinating its much smaller population (less than 10 million people). I do not want to claim any special insight on Israel’s distribution strategy. But it is well-known that one of the reasons Pfizer was motivated to maximize flow to Israel was an agreement with the Government of Israel to get fine-grained population health data back on those vaccinated. This benefit is possible because Israel has one of the most sophisticated digitally-facilitated population-health systems on the planet. In other words, Israel has been able to blend demand-oriented, data-driven processes with vaccine distribution.
What do we take away from this for future vaccine distribution strategies?
I take away that demand matters most. Of course there must be supply. But whether supply is insufficient, perfectly aligned, or over-abundant, how that supply is effectively distributed depends on demand-oriented decisions. This is especially the case when what is distributed can mean the difference between life and death. But as supply chain professionals know, this is equally true for any high-volume, high-velocity product: hamburger meat on July 2 and 3 or that fuschia shirt that just sold out in Barcelona, Paris, and New York. The better we understand demand, the more effectively we are able to target whatever volume and velocity is available. The better you understand human need, the more likely you are able to fulfill that need.