What the covid-19 pandemic has revealed, at least as far as the US is concerned, is how delicately balanced the supply and distribution systems are. As long as things are normal, everything appears to run smoothly. But given a large enough disruption, the system can not only not cope, it cannot reconfigure itself quickly enough to meet the challenge. In this case, we have discovered that the supply of goods and services is highly dependent on a just-in-time supply chains for each item that are finely tuned for maximum efficiency and eliminate the need for costly stockpiling of supplies. But the sudden change in the way people live and work has resulted in shortages in some areas along with gluts in others, with no means for quickly redistributing the resources to reach a new equilibrium.
In an article in the May 4, 2020 issue of the New Yorker magazine titled What the Coronavirus Crisis Reveals About American Medicine, Siddhartha Mukherjee looked at how the US was unable to not only cope with the sudden and immediate large demand for masks, gloves, gowns, ventilators, and other personal protective equipment (PPEs), it was not able to do so for months after the initial deficiencies were exposed. Because so much of production of these items was in China, when that country found itself needing all its production output to deal with the domestic problem, there was little left for the rest of the world.
He argues that the tight but efficient supply chain networks need to have a certain amount of built-in slack to cope with disruptions. Slack does not necessarily consist of stockpiles of a lot of important stuff that can be drawn upon in an emergency, though some stockpiling is necessary. It also means having a plan to repurpose sources of supply in other areas to meet the needs in one area that suddenly is in need. US automakers switching to making ventilators is an example of what slack could be. But because there had been no prior planning for such a contingency, the effort has been stumbling and slow. This kind of slack should be planned for in advance and kept in reserve.
He gives an example of what happened in 1997 when a fire broke out in a company that was the sole supplier of a small but key brake system component for Toyota automobiles. The sudden loss of that item brought Toyota car production to an immediate halt. Panicked executives immediately went into emergency brainstorming mode and what happened next was extraordinary. Because Toyota’s success is a source of national pride in Japan, other companies quickly rallied round to support it and within just three days they had repurposed their factories to provide Toyota with the necessary part. Within a month, the company had rebounded and only suffered the loss of production of an astonishingly small number of 70,000 vehicles.
The point of the story is that this experience taught Toyota management a lesson, that they needed to build slack into their production supply chains so that if there was a similar disruption anywhere else for any other part, the company had a plan to deal with it. And they have done so.
Toyota’s recovery from the Aisin factory fire in 1997 can sound like a story of triumph, as, in many respects, it was. But the company’s executives realized that it was also a story of failure. The company shouldn’t have been so vulnerable to such an event. The fire, along with a later disaster—the 2011 earthquake, which cut off its supply of a crucial microchip—taught Toyota the value of redundancy and risk assessment. It modified its just-in-time system to allow for at least a month’s worth of specialized components, building strategic slack into its operation. It created a database, called rescue, with dozens of companies organized into tiers, their risks regularly evaluated under conditions of adversity, and information on sixty-eight hundred parts continually updated. The company maintains constant communication with its suppliers under “ordinary operating conditions.” But it also trains employees to operate during disasters, and evaluates the risk to the entire company if nodes in the network should falter. No enterprise is truly disaster-proof, but in cultivating networks of mutual loyalties the company has engineered resilience.
Mukherjee points to entire areas in the medical system in the US that are fraught with weak links and roadblocks that are unable to respond quickly to crises. What the US needs is a system that is structured similarly to what Toyota did, that will enable the country to respond nimbly to future pandemics that will inevitably hit the system again. The necessary resources, both material and human expertise, exist for doing so. What is needed is a commitment to long-term planning.
Slack can be costly. As Greninger put it, “Right now, I have machines and reagents to test tens of thousands of patients for sars-CoV-2. That’s basically all the clinical virology lab is doing. What will happen when the epidemic is over?” Once the incidence of covid-19 subsides, so will the sense of urgency when it comes to building infrastructure, or stockpiling equipment—masks, ventilators, reagents—that might sit unused in warehouses for a decade or more. We need purchasing procedures that control costs without creating conditions in which critical supplies vanish during a crisis. We need a Strategic National Stockpile that has sufficient inventory to ease temporary shortages. But, most of all, we need an identified capacity—a network that can be activated on demand, repurposing manufacturing lines, recalibrating agency protocols.
The question is whether the experience of this crisis will lead to such a radical reconceptualization or, as has happened so often before, once this crisis passes, all the lessons that have been bitterly learned will be forgotten or ignored. Given past experience, I am not hopeful.