How to avoid future boom and bust Pandemic Procurement

By Mike Hegarty | Global Supply Chain and Logistics Director | 2SAN
Mike Hegarty, Global Supply Chain and Logistics Director of 2SAN, gives us his insights on how procurement can survive future booms and bust scenarios

To mask or not to mask, to test or not to test, may well be the questions asked if the UK is hit with another wave of COVID-19 this winter. Our preparedness and the steps we take now to ensure we have the right arsenal of solutions to test, trace and prevent are of vital importance.

Understandably, health officials want to ensure communities are taking all available steps to protect themselves and their loved ones – especially those in vulnerable groups. It’s a tough environment and COVID-19 fatigue is real beyond just the medical diagnosis. It permeates through health care professionals and many UK households.

Peaks and troughs of COVID-19 continue to prove a nightmare for procurement planning and supply chain management – as the UK Government tries its best to balance ongoing public health demands as well as very real cost pressures to budgets which place constraints on the NHS.

For instance, when COVID-19 first hit, the UK’s national medical stockpile was limited and not prepared for a global pandemic. Masks weren’t readily available and there weren’t enough gloves, gowns or masks.

This placed the UK at a disadvantage. Alongside other governments we experienced an international ‘hunger games’ - first for PPE, then testing (PCR and then lateral flow tests) followed by vaccines.

Commercial consequences of the Pandemic

The consequence was massive inefficiencies and huge spending of public money, in-turn creating both price and supply risk for governments across the globe as they spent billions trying to protect their public. It also resulted in a ‘boom and bust’ procurement environment for the private sector supplying vital medical equipment and solutions.

Various parliamentary inquiries since have highlighted the UK’s critical dependencies on foreign sourced materials – and the exposure of our supply chains.

Much has been discussed about improving the UK’s manufacturing sovereignty, but this does need some balance against the reality that raw materials will still need to be imported, as well as the cost and scalability of local manufacturing in a globally competitive environment.

In my time, I have seen many products quoting sovereignty only to be unveiled as ‘assembled’ in that country. International manufacturing can, and should, play an important role, especially in the near to mid-term.

Alongside the recognised need for improved pandemic preparedness comes the tension no treasury wants, to continue spending at the levels they have been. In many cases, we are facing sizeable deficits and debt recovery tasks.

But there is a way to find the right balance between cost and risk.

A 'between waves' commercial model

One area that provides a win-win, is a ‘between waves’ commercial model that would allow the UK Government to truly prepare at a significantly reduced cost.

At its core it involves committing to a steady ‘base’ state of purchasing and stockpiling health critical solutions over an extended period. This occurs between waves, when no one else is buying tests, removing the competitive tension by moving away from mass ‘just-in-time’ models.

We call this model a ‘pilot light’ approach, and it provides four key advantages:

  1. Firstly, through a consistent procurement model, a government can maintain certainty and security of supply in the event of future outbreaks. Crucially, it also provides a consistent, budgetable, lower cost base and no risk of price gouging. Even more important in today’s inflationary environment.
  2. Secondly, manufacturers are incentivised to sustain product development and R&D. It means quality assurance is maintained at a high level through consistency and experience of staff secured through the knowledge of this reliable supply.
  3. Thirdly, transport providers can provide consistent pricing – and also spread supply chain risk across different transport modes to balance price and environmental sustainability, such as sea freight. 
  4. Finally, and most importantly, consumers win through high quality products; product that is consistently improved and tailored to meet shifts in disease variants, readily available, and competitively priced. No more paying around £2 for a single lateral flow test.

To ensure the best public health outcome, the UK government is seeking controlled and competitive pricing when it comes to ‘pandemic products’ - and the pilot light model is the way to achieve this.

It provides a sustainable approach delivering cost savings, and most importantly, ensures health outcomes are met while providing a standing buffer to cover short term peaks with the ability to scale quickly to meet demand when needed.

Mike Hegarty has over 30 years of Supply Chain and Manufacturing experience including most recently building and operating the end-to-end logistics capabilities for the UK Government’s COVID-19 response as the Former Director of Supply Chain and Logistics, UK Test and Trace Program. The Department of Health and Social Care was one of the largest purchasers of lateral flow tests in the world.

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