Supply Chain Frontiers issue #55
I’m no fan of Big Government, but there are some cases where a system-wide view is much more efficient than a localized, distributed view. An example in the supply chain space is US maritime policy. A broader and more topical example is managing the Ebola crisis.
Americans have an almost visceral dislike for large, centralized government, and for good reason. Who wants to rely on the feds to provide local services such as trash collections or trust the authorities to spend local tax revenues wisely?
But like it or not, large-scale management challenges often require large-scale government.
In the maritime example I cited above, the lack of a centralized management strategy for our nation’s port system puts us at a competitive disadvantage. One manifestation of this problem is that multiple ports on the east coast are deepening their approach channels in order to attract bigger cargo ships. The widening of the Panama Canal to enable larger ships to pass through the trade artery will generate this traffic. However, not all US ports will benefit from the Canal’s expansion, and at this point deciding which east coast facilities will gain (if any) is something of a lottery. As a result, huge amounts of investment dollars that could be put to better use, such as funding urgently needed infrastructure projects, will be largely wasted.
There are many other areas where a centralized strategy is needed. Imagine the chaos that would ensue if every state in the US had its own air traffic regulations or currency, for instance.
The Ebola outbreak is another case in point. Responding to a crisis on this scale requires the resources and system-wide scope of national government. The results of combating the virus via a patchwork of local responses can be disastrous.
We have a glimpse of such an outcome courtesy of the states of New Jersey and New York. These states impose strict quarantine requirements for travelers arriving on US shores from West Africa, even when the individuals show no signs of contracting Ebola. Such hastily introduced local measures are ultimately counterproductive, and don’t work anyway. What is to stop individuals from using other gateways in the region such as Baltimore or Washington DC to enter the country? And by protecting their own citizens, are NJ and NY putting the populations of neighboring states at greater risk (and ultimately people in NJ and NY)?
My colleague Dr. Jarrod Goentzel, Director of the MIT Humanitarian Response Lab, has identified other supply chain related problems caused by local knee-jerk reactions to the crisis (for more on this read his Humanitarian@MIT blog post Travel Bans and Stockpiling Can Cripple the Ebola Response Supply Chain).
An issue he highlights is how the local hoarding of personal protective equipment (PPE) that is critical to health workers can seriously disrupt national and international relief programs.
As the demand for PPE has soared, manufacturing capacity has become constrained, and some distributors are citing supply concerns. The situation is exacerbated by local stockpiling. The State of Ohio, for example, is buffering its PPE inventories.
Fighting the Ebola outbreak requires coordinated planning and prioritization. Two international organizations took the early lead in matching PPE supply and demand. Médecins Sans Frontières has led Ebola treatment on the ground in West Africa from the beginning, determining the standards for care and health worker safety and quantifying needs. The UN agency UNICEF is coordinating with key suppliers. Manufacturers have responded to these efforts by stepping up the production of PPE.
However, a few more high-profile cases could rapidly escalate stockpiling efforts in the public and private sector and across geographies, points out Goentzel. With manufacturing already running at peak capacity, supplies may begin to fall short.
Supply chain professionals know that risk pooling – where vital global inventories are co-managed as a common resource – is critical in maximizing the impact of a scarce commodity. For example, if Ohio is stockpiling PPE and Arizona gets hit with Ebola infections, Arizona may not have enough resources to fight the virus, putting the state and all other states – including Ohio – at risk. Under risk pooling, resources from central inventories flow to the region most in need to nip the outbreak in the bud.
As an alternative to stockpiling locally, decision makers in the public and private sectors should consider a pooled procurement process, says Goentzel. The effort should be led by the World Health Organization consulting with health departments in affected countries that allocate stocks to health workers most at risk.
Again, the message is clear: the Ebola outbreak is so wide-ranging that governmental organizations with the resources to combat the virus globally need to be on the front line.
That doesn’t mean we should give these organizations a blank check; there has to be accountability. And they need to be effective, a lesson that we learned recently in the US.
The United States Centers for Disease Control and Prevention (CDC) is spearheading the American response to the Ebola virus. But in the early days of the crisis, the CDC’s credibility was damaged by an inept response and the lack of a well-defined strategy for dealing with the situation. The situation was exacerbated by conflicting messages from the White House.
The lesson is that while governments are indispensible in large-scale emergencies, they also have to be credible. If they are not, local authorities will take the initiative, and who can blame them?
This article was written by Professor Yossi Sheffi, Director, MIT Center for Transportation & Logistics, and published as a Linkedin Influencer blog post.