During the first months of the Covid-19 pandemic, the supply of protective equipment (masks, gloves, visors, gowns) was a daunting task for almost all health networks in industrialized countries. The shortages have proliferated all over the world. In this race against time, everyone snatched up products from the same suppliers, mainly located in Asia. These products were not, moreover, not always of high quality, when not downright defective.
In the process, local manufacturers, working in other sectors of activity such as textiles, for the manufacture of gowns, or pharmaceuticals, for disinfectant gel, have invested in the production of personal protective equipment (PPE). However, several of these manufacturers were unable to support this production, due to a lack of purchase contracts, access to raw materials or due to a limited capacity to meet the demand of different customers
And if the solution to avoid such a situation during a future crisis was precisely to develop local production now?
We have been interested in purchasing and supply management in the healthcare sector for several years. The immense challenges experienced at the start of the pandemic for the purchase of PPE motivated us to study in depth the resilience of the supply chain of this equipment. One of the solutions that we explore in our research work is precisely local procurement.
The advantages of local production
PPE is purchased by multiple organizations, particularly in the health sector (hospitals, clinics). This equipment is purchased from suppliers, who produce it or distribute products from other manufacturers.
When we talk about local procurement, we can refer to local distributors, who buy from factories located abroad, or from local manufacturers. In our research, we focus primarily on local production, although local distributors also contribute to the local economy and supply chain resilience. Once purchased, PPE is distributed within organizations to all users who need it.
(Martin Beaulieu), Provided by the author
Local production mainly contributes to secure supply. It also reduces the risks and logistical costs associated with international sourcing, which have been exacerbated by the pandemic. Port congestion, container and labor shortages and high fuel prices are among the pitfalls that must be avoided in order to ship goods from remote regions.
Local sourcing also reduces the negative effects of freight transport on the environment and makes it easier for buying organizations to manage suppliers. Thus, geographical proximity allows for stricter control, on the part of buyers, of workers’ conditions in order to avoid, for example, manufacturers who are suspected to use forced labor. The proximity of purchasing organizations to manufacturers also promotes the joint development of products that better meet user needs and sustainable development criteria.
A local production? Yes, but…
But sourcing PPE locally is no small task. Before the pandemic, there were very few local producers. PPE production is concentrated in Asia, especially in China, which met half of the demand when the pandemic started in 2020. The reason for this Asian domination? The preponderance of the lowest price as a purchasing criterion in calls for tenders, and this, for many many years.
For local production to be viable, it is necessary that the location criterion can be taken into account during the selection of suppliers by buyers. Another option is to reserve part of the contracts for local suppliers. However, we should ensure that local production remains competitive.
Indeed, prices that are too high in comparison to foreign producers would be difficult to sustain in the long term, in the perspective that much more economical options would be available. Investments in production technology and automation can help local production become less dependent on cheap labor to be competitive.
Moreover, in the case of Quebec, where the local market is relatively modest, the challenge remains to maintain a strong local industry, with a sufficient number of players to guarantee healthy competition. The interviews we have carried out with local producers reveal that they do not want subsidies to maintain the production of PPE, but a predictable demand through supply contracts.
Indeed, one-time government assistance through subsidies does not guarantee that manufacturers can find customers for their products and thus survive after the subsidy runs out. On the other hand, the possibility of obtaining long-term purchase contracts would allow producers to sustain their activities over time.
Local production, but above all green and fair trade
When we talk about local production, we must also ask ourselves the question of the origin of the inputs (raw materials, packaging). If key inputs all come from abroad, local production will be too vulnerable to the effects of a pandemic or other global crisis.
The fabrics used to make face masks, for example, were highly coveted during the onset of the pandemic. Naturally, a local manufacturer would have to stop production, due to a lack of fabric stocks. The origin of the inputs should therefore be part of the supplier selection criteria.
Organizations’ purchasing decision should also consider the environmental impact of PPE. For example, biodegradable and reusable PPE, although more expensive, could become interesting during calls for tenders, in the context where environmental criteria are considered. Governments are already beginning to change their purchasing criteria to promote responsible local purchasing.
Part of the solution
However, it would be naive to believe that only local production could ensure the supply of PPE during the next pandemic. Since the start of the current pandemic, forecasting the demand for PPE has been a constant challenge. Very clever is the one who can predict the magnitude and impact of the next health crisis on PPE needs.
Local suppliers will never be able to respond to a sudden increase in demand, such as that observed at the beginning of 2020, nor to the successive and abrupt variations in demand associated with changes in health guidelines.
It will therefore be necessary (1) to maintain reserves at different levels (national, local, institutional) of finished products and raw materials, (2) to maintain good relations with foreign suppliers capable of withstanding significant variations in demand and (3 ) rely on a sufficiently efficient logistics system to be able to anticipate and respond quickly to PPE needs of the next pandemic.
But local production, greener and more equitable, is undoubtedly part of the solution.