In COVID-19 vaccines and economic recovery, supply chains loom larger than ever
By Jag Srai
The global coronavirus pandemic has challenged the modern global supply chain like never before.
Supply chain resilience has conventionally focused on protecting largely against single point failures — for instance, identifying a key component and dual sourcing to ensure continuous supply. But COVID-19 has had a truly global impact, where many supply chains have faced multiple fractures — at component suppliers, at manufacturing sites, and in the ‘last mile’ to the customer. It is difficult if not impossible for firms to have redundancy across all those operations and still maintain efficient supply chains.
Which makes it ironic that we are relying on a particular global supply chain to get us out of the crisis — namely, that of the COVID-19 vaccines.
In terms of time from the beginning of work on the vaccines to jabs being made available to the public, they have operated faster than ever before. But it is natural to expect that the actual journey from development to manufacturing to patient would encounter some obstacles.
We’ve seen obvious examples of this in the first months of the rollout, like capacity expansion impacting short-term supply of vaccines. However, there are multiple stages throughout the vaccine supply chain that all have the potential to cause disruption.
Vaccine supply chain challenges
The first is product development. All of the vaccines so far approved for use, and most of those under development, require multiple doses to be fully effective. Others require ultra-cold supply chains. These product design aspects have had huge implications downstream, as health agencies and governments work out the best way to distribute, administer and schedule follow-up doses.
Issues of manufacturing and distribution are perhaps the most obvious disruption to supply chains — but even here, many have been caught off-guard.
A few months ago, the emphasis was on vaccine approvals, and few were talking about component supplies such as shortages of glass vials to hold the doses. The conversation has moved quickly onto vaccine production rates, and how factory investments in capacity expansion required short-term postponement of deliveries.
As manufacturers allocate volumes to their various production sites, the question on international distribution has become controversial — about whether, with vaccine stock moving across borders despite local demand not being met, national distribution will be prioritised on price, contract timing, or need.
Despite projections of a global production capacity of some 2 billion doses in 2021, it is unclear whether deliveries will keep up with changing demand. New variants of COVID-19 may have significant implications on infection rates and severity — and will influence vaccine rollout strategies and whether new vaccines will need to be developed.
On distribution, there were a number of, in retrospect, outlandish reports about ex-factory shipments and air freight, including the idea that there would be a need for up to 8,000 jumbo jets to deliver the vaccine around the world.
This discussion quickly cooled. Aeroplanes, of course, are not single use, and vaccines are continuously in production — not all of them ready on Day 1 — so these journeys are over a period of months rather than days.
But there were other initial uncertainties, like the number doses per vial, viable transport modes and cold-chain requirements. These might seem obvious points, but they speak to the unprecedented nature of distribution at a truly global scale.
These same issues are true at the point of delivery, as health services look to build their own ‘last mile’ capacity. There have been a number of choices — between using existing primary care networks and creating new centralised vaccine centres, for instance, or around vaccine availability and which vaccine to deploy to which patient population (and hence, whether ultra-cold chain or other specialist supply chain logistics are needed).
This design of the ‘last mile’ matters a lot — it became clear very early on in the UK rollout that different regions were achieving very different vaccination rates, due to product availability, priorities and geography. It is complex, and needs careful planning and governance — as well as adaptive delivery models that can manage uncertainty to ensure valuable time-critical stocks are not wasted.
There were many lessons drawn from recent global experiences with the SARS, MERS and Ebola outbreaks. The Ebola vaccine, for instance, required an ultra-cold chain (like the Pfizer/BioNTech COVID-19 vaccine that must be stored under -70C), and was distributed effectively across neighbouring countries despite limited infrastructure.
But the global scale of COVID-19, and the specifics of its vaccines, means that for much of the supply chain, we do not have the essential ingredient of modern efficiency and supply chain management — data.
That’s why adaptability and visibility have become essential. At the beginning of a process like this, it is impossible to see everything straightaway, so quickly evaluating the effectiveness of the supply chain at critical points upstream and downstream is key, as is the flexibility to adapt when necessary.
The UK government made an early decision to move from distributing two doses of the vaccine at a three-week interval, per the manufacturer’s original recommendation, to maximising the number of people receiving the first dose of the vaccine. Setting aside the medical arguments for this approach, this sort of adaptability to changing supply-demand scenarios will be a key feature going forward.
A final part of a resilient supply chain is forward planning. Many of those countries hit hardest by SARS, MERS and Ebola have taken planning for the next pandemic as a priority, and have been better prepared to respond to COVID-19. For those countries who did not plan as extensively, can they use the current experience to plan for the next one?
The issues here range from maintaining the manufacturing and distribution infrastructure once its original reason for being has passed to analysing bottlenecks in materials. For instance, can those glass vials that became an initial supply problem be standardised, and can more suppliers be incentivised to maintain capacity?
The mission to ‘vaccinate the world’ is just beginning — and all of these issues will continue to be in play as the rollout spreads across the globe.
The new supply chain landscape
So, what are firms to make of all this?
While the vaccine will enable many economies to eventually re-emerge from lockdowns and a dramatic fall in economic activity, the global picture is likely to remain uncertain for some time. For all the supply challenges the vaccine faces, one thing it does not have to worry about (on a global scale) is demand.
For many industries, in contrast, the demand side will continue to be unpredictable, and perhaps the most disruptive factor in their supply chain.
In sectors where demand has collapsed, companies will have to work out how much they expect purchasing behaviour to return to pre-pandemic levels, and when it will bounce back. For example, will the demand that has collapsed in the food service industry return at 100%? What about sectors where consumers may have simply delayed purchases, like automotive sales? Indeed, evidence from the US suggest an early bounce-back here as commuters move away from public transport.
There will also be new sources of competition. Not everyone has suffered in the COVID-19 downturn. Home furniture and cleaning products have soared whilst many other sectors faced sustained decline. E-commerce has grown more swiftly — many people who hadn’t shopped online before, or used online retail infrequently, have moved their most regular purchases, like groceries, online.
Many consumers are unlikely to return to their old routines. This was a trend before the pandemic, but it is now a semi-permanent, accelerated shift.
At the same time, these online retailers will have to guard against a ‘snap-back’ or drop in demand if some of their customers return some of their business to brick-and-mortar stores.
It is also important to remember that the international picture is mixed. In the aerospace sector, in China, the number of flights and passenger numbers have been back at pre-pandemic levels for many months, while in some Western economies, travel restrictions have rendered these a small fraction of their 2019 levels.
So, the watchword is adaptability. Where supply chains can adapt quickly, it will be important for firms to retain visibility of the evolving market demand and supply landscape so they can respond quickly. Sector-specific supply chains where inventory and stockpiling are not possible — for instance, in the food sector, or in cost-prohibitive, bespoke high-value products — will particularly need to invest in agile, reconfigurable supply chains.
Advanced manufacturing and digital technologies and infrastructure will play a vital role across manufacturing and supply, along with digital platforms and their ability to mediate between supply and demand. These will have to come together with a flexible workforce and remote working, critical mechanisms for scaling up and down. This in turn will require innovation in operating and business models, powered by these advanced manufacturing and digital technologies.
For many, this means there will be no return to ‘business as usual’, but there will still be opportunities for those who can adapt and navigate the uncertainty.
Engage with IfM research
Dr Jag Srai leads the IfM’s Digital Supply Chains Consortium, involving leading multinationals collaborating on digital supply chain transformation, and also teaches on the course Digitalisation of End-to-End Supply Chains.
Organisations can engage with and benefit from supply chains research at the IfM through its knowledge transfer arm, IfM Engage.