Public-Private Partnerships - Leanshoring Supply Chains in the Post-Pandemic Economy

The United States is battling a global war on the COVID-19 pandemic that has revealed the downside of offshored supply chains. The coronavirus outbreak has exposed the United States’ dangerous dependence on China for pharmaceutical and medical supplies, including an estimated 97 percent of all antibiotics and 80 percent of the active pharmaceutical ingredients needed to produce drugs at home.

While the United States remains a global leader in the creation of new products, drugs, and medical supplies, much of the manufacturing capabilities have moved offshore. The time has come to launch a strategic repurposing of the industrial base to revitalize the economy and a growing middle class like was achieved following World War II.

Public-Private Partnerships

In times of war, public-private partnerships proved to be indispensable in helping to win wars. As U.S. hospitals were in search of the medical supplies needed to fight the war on the COVID-19 pandemic, the federal government worked with private companies to produce and bring massive amounts of medical supplies from other countries to the United States.

In response to the COVID-19 pandemic, General Motors, Ford, and other companies have mobilized to manufacture essential medical supplies and devices. In the span of a few weeks, manufacturers have repurposed some of their factories to produce medical face shields, masks, respirators, and ventilators in collaboration with healthcare companies.

In addition to repurposing the industrial base, the global supply chain was leveraged and mobilized in “Project Airbridge.” Project Airbridge was an unprecedented historic public-private partnership program using innovative thinking to help overcome logistical hurdles to supply the nation’s 4,700 hospitals and other front-line responders with needed critical supplies. FEMA and the State Department coordinated commercial flights to bring supplies to the U.S. in two to three days, rather than shipping them by sea, which would take 20-40 days.

While the repurposing of companies and expending global supply chain resources are short-term solutions to dealing with the medical supply chain demands, a longer-term approach must be adopted and deployed to bring critical manufacturing capabilities and jobs back home permanently.

To achieve these long-range goals the Biomedical Advanced Research and Development Authority (BARDA) has long focused on expanding pharmaceutical manufacturing infrastructure in the United Sates. BARDA’s support extends funding, technical assistance, and core services, including a clinical research organization network, Centers for Innovation in Advanced Development and Manufacturing, and a fill-finish manufacturing network.

The Center of Innovation in Advanced Development and Manufacturing is one of three centers established as public-private partnerships with the US Department of Health and Human Services to develop and manufacture countermeasures. BARDA’S cooperation with Phlow Corp. is a prime example of a public-private partnership designed to avoid future supply chain disruptions. BARDA signed a $354 million four-year contract with Richmond Virginia based pharmaceutical company Phlow Corp. to increase American production of medications that may help treat Covid-19. Phlow Corp. is contracted to developing a domestic supply of pharmaceutical ingredients by using advanced manufacturing processes to lower drug costs.

Leanshoring Supply Chains

Sen. Marsha Blackburn (R-Tenn.) and Sen. Tom Cotton (R-Ark.) echoed fears from experts that America is too dependent on China to produce crucial medicine and said the COVID-19 pandemic has threatened critical supply chains. “We need to end Chinese control over our health and wellness in this pharmaceutical supply chain,” Blackburn said on the floor of the Senate, calling for an increase in domestic production.

Offshored supply chains – remote supply chains with key component manufacturing that happens on distant soil – cause long-distance transportation, increased communications obstacles and unpredictable delivery times, resulting in the loss of manufacturing capacities and increased environmental pollution. Consequently, a trend known as reshoring or nearshoring – moving supply chain production to domestic or nearly domestic facilities – is gaining acceptance.

Domestic manufacturing costs are typically 20 to 40% higher than offshore due to higher wage rates and tougher regulations. Reshoring and leanshoring are used together to overcome the cost gap.

Reshoring focuses on quantifying the “hidden” costs and risks associated with offshoring, typically 15 to 25% of Ex Works price. Leanshoring reduces domestic manufacturing cost in a manner that eliminates waste, i.e. anything that does not provide value to the end customer while driving an enterprise wide continuous improvement process. The key to leanshoring is doing a total cost analysis to insure using lean manufacturing practices as opposed to using the same wasteful practices that allowed the work to be offshored, in the first place. If leanshoring can produce an additional 10% savings, 30 to 40% of what is now offshored can be profitably reshored, about four to five million manufacturing jobs.

The coronavirus pandemic has created an urgency to weigh the efficiency and cost benefits of shifting to a more robust domestic supply chain. By revitalizing the advanced manufacturing base we can reduce dependence on an increasingly fractured global supply system. For decades companies have been shifting production supply chains offshore, impacting the loss of manufacturing capabilities and jobs and increasing environmental pollution coming from China.

Harry Moser, founder of the Reshoring Initiative is collaborating with the Association for Manufacturing Excellence (AME) to promote reshoring and leanshoring as part of its “Manufacturing Renaissance” initiative. “We are committed to changing the sourcing paradigm from ‘offshored is cheaper’ to ‘local reduces the total cost of ownership’ said Moser. To learn more about the challenges of the coronavirus pandemic on the supply chain go to The COVID-19 Supply Chain Wake Up Call.

To help businesses become more competitive and address the challenges of a post-pandemic economy, AME has consortiums, clusters of local companies (20 +/-) that collaborate for broad, deep, accelerated, lean-continuous improvement processes that are better, faster, cheaper, and easier than they can do it alone. These dynamic practitioner-to-practitioner networks are designed to support small to mid-size companies in their efforts to sustain and refine their continuous improvement journey.

As a strategy, more companies are shortening their supply chain, which reduces cost and risk. By working together in public-private partnerships, these actions will provide companies and their communities with a distinct competitive advantage; together we can boost their productivity and improve their sustainable resilience in this fast-changing competitive world.

Together, We Can Do It!

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Glenn Marshall, Newport News Shipbuilding Career Pathways (retired), member of the Association for Manufacturing Excellence (AME) Management Team initiative for leading a “Manufacturing Renaissance” and the Jobs Creators Network. For more information contact him @ marsh8279@aol.com or go to www.ame.org

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