Ensuring availability of critical goods

Balancing production capacity requires incentives

The Covid-19 outbreak changed the world with very little notice. The demand of especially critical PPE skyrocketed and the search for already suitable medicines led to increased demand in cases where positive early results were declared. The acute shortage of PPE in the face of the pandemic is food for thought. How can society prepare better for future pandemics to ensure the availability of PPE, medicines and other critical goods? There are two main viable methods: storage and changing production volumes.

During the pandemic, the change in demand for PPE masks of higher FFP3 quality with relatively low production capacity left many hospitals and the general public without masks. Few companies where able to change production to FFP3 masks at short notice. By comparison, the demand for hand sanitizer also increased rapidly. It was, however, much easier for many companies that typically handle bottling of other types of fluids to change to producing hand sanitizer.

Overall, the change was of a magnitude that most industries and the public where not prepared for. As it is inevitable for new viruses to emerge, it is critical to know what measures can be put in place to be better prepared next time. The current high demand will subside, either due to natural immunity, a vaccine, or lockdowns that stop the spread of the disease.

Learning from electrical grid balancing

The time between outbreaks so far has been much longer than common payback times of industrial investments. Additionally, there is uncertainty about when the next outbreak will be and how the world will react to it. This means that industrial investments will go back to the old normal and the readiness for more demanding supplies during outbreaks will be insufficient, unless economic incentives are put in place.

The electrical grid is a similar system for comparison: there are peak shaving plants and discussions and investigations for the future a centred on increasing energy storage. The fluctuation in the electrical grid is much faster, which has necessitated systems where cost sharing for plants on standby is in place. Similar systems will be required for virus outbreaks and demand fluctuations of critical materials (e.g. PPE, APIs, Medicines, IVs, food), even though the cycles are unpredictable.

Ramping up storage and changing production volumes

There are two main methods to secure the availability of critical materials: a) storage and b) changing production volumes.

Storage is a viable option in many cases. For the energy sector, storage will be one of the next big leaps in order to enable full utilisation of volatile green energy such as wind and solar. The scale of fluctuations ranges from hourly to seasonal, but not beyond that. At the same time, there are elements of consumption that can be regulated.

The demand for materials storage between pandemics is quite different from the demand fluctuations of the electrical grid. The electrical grid is more controllable than a pandemic, which is characterised by extreme demand peaks and fluctuations that are far beyond seasonal. Storage dimensioning for PPE during pandemics is, therefore, more challenging.

A stock reserve is necessary to buy time at the start of a pandemic. The difference between low and peak demand is so vast, however, that a stock supply will be difficult to maintain. It will also be challenging to maintain enough material rotation to keep the PPE in usable condition. This will result in outdated materials in stock or the disposal of aged materials.

By comparison, electrical grid dimensioning is aided by the knowledge of when production will start again, i.e. when the sun rises, or the wind starts blowing again. The same principle needs to be applied to pandemic demand; the stock should be dimensioned to last for the extreme peak until production can be ramped up. This means that plans for ramping up production need to be in place.

As noted earlier, the initial shortage of hand sanitizers was handled quite rapidly. Companies were able to rearrange and change production rather quickly. One could say that the market-driven development in this case was fast.

The same cannot be said about some other supplies that were in short supply such as medicines and especially PPEs. Problems were also encountered in increasing the number of hospital beds. Some facilities were very light; tents were used where there was good warm weather, while sports facilities and school buildings were taken into use as hospitals. The planning for these facilities was based more on military demands and it would be beneficial to be better prepared in future. Multi-function use can, for example, already be incorporated in design criteria when schools are designed so they may be used as hospitals should the need arise.

During the pandemic, the supply chain vulnerability of industrial products has been notable. The reason for this is normal global market competition. Here the electrical grid may yet again prove a good guide. Funds need to be directed towards influencing preparedness. The same applies to the readiness to ramp up or change production for peak demand. Such incentives would pave the way for the development of technical solutions to meet the required levels of preparedness most cost efficiently. This will not take place, however, without incentives due to the unpredictable pandemic cycles and the political reactions to them.

The incentives thus need to be managed at the state level, regardless whether it is IV production, PPE, APIs, or medicines. With good models, industry will surely find technical solutions to ramp up production when needed in the same way innovations are being developed for the electrical grid.