The coronavirus pandemic has resulted in a severe lack of personal protective equipment (PPE) to protect Americans from disease. This crisis shows the excessive dependence on imported materials, especially those imported from China. Now, American manufacturers are working hard to establish reliable sources of necessary materials in the United States. In a dialogue with SupplyChainBrain Editor-in-Chief Bob Bowman and Pilot Freight Services Executive Vice President Tom Pelliccio, he detailed the progress and prospects for permanent and reliable domestic PPE supply.
Pelliccio: The answer is yes. The speed of its development and the degree of anger is another matter, but we have seen the shift from China to Southeast Asia, then from Southeast Asia to Mexico, and purchase near the United States, and then back to the United States. Technology is here. The machinery is running. The facilities have been selected, and today we have loaded and unloaded goods by truck and transported them to customers and hospitals.
Pelliccio: Absolutely. At least for the next 24 to 36 months, due to the need to import raw materials, I will not see any place. In today’s environment, 80% of nitrile medical gloves come from Malaysia. I don’t see the United States disrupting the market and producing it locally. Other items, such as three-layer masks and medical pajamas, have different properties. I have seen the chemical grade plastic medical suit made here. So I think there will be a balance. We will always see things from China, Southeast Asia and Turkey, which are also very powerful in medical clothing.
Pelliccio: We are beginning to see house price increases in Thailand and we have some initial interest in Cambodia. Vietnam is also very strong.
Standard Chartered Bank: To what extent will these professional manufacturers become those that temporarily do not produce other products?
Pelliccio: Most manufacturing is dedicated, especially in gloves and face shields. I think it will remain in this state for a long time. We have alcohol producers who specialize in hand sanitizer production lines, which will continue to be effective, but if they want to make more money by producing alcohol, they will change these production lines back. Up to now, I see that the hand sanitizer production line is still here in the United States
Standard Chartered Bank: What are the challenges faced by US manufacturers in reassembling equipment to increase production?
Pelli Josio: Two things are the timing and certain types of equipment they want to introduce. The equipment is from Germany, but the manufacturer is not sure that this will last three months, six months or the next five years. They are asking, should we invest in US dollars before we have to re-switch these amounts? Will you stick to it?
Remember, we have been here since February. Many goods have been shipped to the country. The cost of masks has fallen. Due to the demand for nitrile and the shortage of raw materials, the cost of gloves has risen. However, manufacturers are looking for surplus products and whether prices will continue.
SCB: It is difficult to adjust so quickly. I can’t imagine you risking to stand up an entire production facility in the country and only see a decline in demand after the pandemic is over.
Pelliccio: Absolutely. risky. But I have seen other companies that have long-term contracts with customers. Regardless of whether the US uses COVID-19 or not, we will use medical gowns and nitrile gloves in the US. And their use in food processing has increased. The general public may not wear them, but I think the gloves will be used for a long time.
Standard Chartered Bank: I guess that in such an uncertain period, one thing we can count on is that in all these materials in the future, we will rely less on China.
Pelliccio: In today’s environment, tariffs on certain goods bring people to other parts of the world. The lowest cost. Therefore, underdeveloped countries will face greater challenges in this regard. I believe that China will always occupy a part of this market. That will never dry up. This is too big. There is too much coming in, too much risk. In today’s era when our strategic inventory is extremely low, I believe China will still play an important role. But you will see a shift, we saw today.
Pelliccio: Before COVID-19, they need to be earlier than this. You must follow the customer and understand what they are talking about today. In the past few years, when they moved to Southeast Asia, logistics providers had to ensure that their business in the region was very strong. More importantly, they must be prepared to bundle services. Today’s customers want to know that you are a carrier from cradle to grave, and you can ship it directly from the end of the production line to the customer’s shelf. You not only need to be an air freight forwarder, but you also need to be an excellent general carrier for non-vessel operations. You must cover international transportation, customs clearance, warehousing and domestic distribution. In order to be successful with today’s customers in the long term, you must touch the product three to four times.
Standard Chartered Bank: When there is a sudden demand, how can we prevent future shortages? Do we need to build buffer stocks and inventories, or even government-regulated reserves?
Pelliccio: We have seen this in customer contracts. They hope to provide end customers with 90 or even 120 days of storage and timely management, while traditionally they usually have 30 days of inventory. Therefore, our logistics and warehousing opportunities continue to grow. You will see higher inventory, and there are items going into strategic inventory. Whether it is COVID-19 or the next pandemic, when it comes to vaccines and all types of products, not just PPE, we must all be prepared at the national level.
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Post time: Oct-29-2020